Can Petrofac Momentarily Put SFO Issues Aside With Interim Results?
Spreadex | Mar 01, 2019 09:30
For the first few months of the year Petrofac wasn’t doing anything special. The oilfield services firm largely traded between £8.50 and £9.50 from January to mid-April, a period that saw the release of Petrofac’s full year results in February – where the company eked out a net profit of $1 million against the $349 million loss seen the year previous, alongside a 15% rise in revenue to $7.87 billion – and the winning of a chunky $1.3 billion project in Kuwait at the end of March.
While the stock did start to drift below £8.50 towards the end of April, it wasn’t until mid-May that its troubles really began. On 12th May Petrofac plunged 14.5% in a single session, as the Serious Fraud Office announced it was investigating the company in connection with suspected bribery, corruption and money laundering, linked to its ongoing probe into Monaco-based firm Unaoil, who did consultancy work for Petrofac between 2002 and 2009.
Petrofac continued to fall in the days that followed, only for things to get even worst on the 25th May as the company suspended its COO Marwan Chedid. This sparked a stomach-churning 30% drop on the day of the announcement, with further losses in the subsequent fortnight eventually leaving Petrofac at an 8 year low of £3.48 by early June.
Since then there has been a slight recovery in Petrofac’s stock price. A series of contract updates, including most recently a $2 billion Duqm Refinery Project deal in Oman, have lifted the company from its lows, though the dark clouds of the SFO investigation has kept it below £5. Petrofac Ltd now sits at a current trading price of £4.40.
In terms of Wednesday’s interim results, analysts are expecting a 10.8% fall in revenue to $3.47 billion, but with a 2.6% increase in earnings to $0.40 per share. Of course, what investors will really want is an update on the SFO situation, especially since Petrofac appointed top City lawyer Edward Sparrow for the ‘management of, and response to, the investigation’ earlier in the month.
Petrofac Ltd has a consensus rating of ‘Hold’ alongside an average target price of £6.70.
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