Contract in Malaysia helps Petrofac outshine forecasts

The company said it was confident that demand from national oil firms would continue to fuel future growth.

Petrofac, which designs and builds oil and gas infrastructure and also invests alongside oil firms in oil fields, posted net profit of $246.3m for the first six months of the year, a 6.6 per cent rise on the previous year.

This compared to a consensus forecast of $238m from a company-supplied poll of eight analysts. Profits in the FTSE 100 company’s offshore engineering and operations business soared by more than 700 per cent reflecting strong activity levels in Malaysia, where it has a contract to develop oil and gas facilities for the country’s state oil firm Petronas. The company said it was on track to double its 2010 earnings by 2015, a goal it announced in June.

The company believes a recent contract win in Mexico validated its strategy of building up the part of its business which invests in oil fields to help national oil companies develop their reserves.

“We are increasingly seeing resource holders who don’t want to give up the title to reserves but do need expertise to help improve or develop their resources,” chief financial officer Keith Roberts said.

“Whether it’s Malaysia, Petrom in Romania, now Mexico. This is a long-term systemic trend,” he said, adding that the company also saw future opportunities for that part of the business in Iraq and Turkmenistan.

“These positive results follow the potentially transformational production enhancement contract awards in Mexico... which will go some way toward delivering the group earnings growth target,” said Evolution analyst Keith Morris.

He added that Petrofac looks undervalued after recent poor share price performance. Shares in the company have fallen almost 20 per cent over the last month, broadly in line with recent sell-offs across the oil and gas sector. Petrofac also said it was on course to meet market forecasts for the full-year and it expected to deliver like-for-like net profit growth of at least 15 per cent in 2011. Numis analyst Sanjeev Bahl said he believed the company could beat that target given the first-half results.