Financial Analysis of Petrofac: Performance Comparison (2017-2018)

This report provides a financial analysis of Petrofac Limited, a major service provider in the oil and gas industry, comparing its performance in 2017 and 2018. The analysis includes an examination of the company's financial statements, focusing on its Engineering and Construction, Engineering and Production Services, and Integrated Energy Services segments. The report highlights key financial metrics such as revenue, net profit, new order intake, and EBITDA, comparing the performance of each segment across the two years. The analysis uses common-size and trend analysis of the balance sheet and income statement, along with ROE decomposition to understand the changes in the company’s profitability, and how effective the company’s policies are in the areas of operating management, investment management and financing decisions.

INTRODUCTION
The company Petrofac Limited is a major service provider to the oil and gas industry. The
principal business of the company is to build oil and gas facilities, operates and maintains
trains the workers of the company so that the company production can be increased and do
development and investment in infrastructure projects. The company mainly operates its
business through three different segments Engineering and Construction, Engineering and
Production Services, and Integrated Energy Services business. The Engineering and
Construction segment offers wide variety of services like engineering in bulk, to acquire and
construct project related services and provide the same to the onshore and offshore oil and
gas company. The, Engineering and Production Services segment offers all reimbursable
services to the major oil and gas company. The last segment Integrated Energy Services
business is mainly focussed on providing all quality value service to its customers from the
Company's existing asset portfolio. (Reuters.com, 2019)
Comparison of financial year 2017 with 2016
The company business profit is up 7% to US $343 million. In the Financial Year 2017 the company has
reported a net loss of US$29 million post impairment and other items of US$372 million. The
company has new debt of US$0.6 billion which reflects a strong capital management for the
company. The dividend of 38.0 cents per share is also lined up. In the segment of Engineering and
Construction the company has delivered a good performance in operational sector and has delivered
a strong margin.
 New order intake which near to about US$4.1 billion.
 Good progress of many refinery like Sohar Refinery, Khazzan central processing facility
(Petrofac.com, 2018).
 The net profit up in this segment to 10 %
In the segment of Engineering and Production Services the company has delivered a good
operational performance even in a challenging market.
 The company has got many contracts with extension in UK, Turkey, Iraq and Kuwait.
 The company has earned a revenue of US$1.4 billion down by 19% due to low order
received.
 The Net profit also down by 19%. (Petrofac.com, 2018)
In the segment of Integrity Energy Services, the company performance is improving due to
reposition in the portfolio.
 The revenue of this particular segment is down by 16% amount to US$228 million; the
company production is also down by 34% due to sales in assets.
 The EBITDA of the company is also down by 2% with US$97 million.
 The company has benefitted from its lower cost and its net loss also reduced to half.

The company reported a net loss of US$29 million. The company reduction in the capital expenditure
and fall by 44% and the free cash flows at the year end delivered a free cash of US$281 million in a
year. The company also has a good liquidity position of US$1.6 billion at at 31 st December 2017.The
company also refinanced US$200 million of term loan. The company also had a healthy order
backlog. (Petrofac.com, 2018)
Comparison of financial year 2018 with 2017
The company in the financial year 2018 has shown a good performance in all its segment with a net
profit of US$64 million post impairment and with a new order intake of US$5.0 billion with a net
debt 0 and a net cash of US$90 million. The company has also declared a dividend of 38.0 cents per
share. In the segment of Engineering and Construction the company has delivered a good
performance in operational sector and has delivered a strong margin. (Petrofac.com, 2019)
 In this new financial year, the company has started many new projects with a US$3.8 billion
new order intake.
 The company in this segment attained a revenue of US$4.1 billion down by 15%.
(Petrofac.com, 2019)
 In this segment the company net profit also down by 21% to US$285 million.
In the segment of Engineering and Production Services the company has delivered a good result
followed by EPCm growth.
 New order intake with a figure of US$1.2 billion from UK, Oman, Turkey
 The revenue is up by 6% with a US$ of 1.5 billion.
 The segment has strong growth in EPCm projects.
 The segment has a lower overhead cost setoff by higher tax. (Petrofac.com, 2019)
 The segment net profit increased by 7% to US$96 million.
In the segment of Integrated Energy Services, the company has delivered a strong growth in
contribution:
 The segment has delivered a revenue of US$282 million up by 24%.
 The EBIDTA is up by 65% to US$160 million.
 The net profit also increased to US $39 million. (Petrofac.com, 2019)
The Overall company net profit was impacted due to certain exceptional items like sale of assets,
adjustment in the fair value of assets and other net items like leasehold property provisions of
US$18 million. (Petrofac.com, 2019)

References
Petrofac.com, 2018. Petrofac. [Online]
Available at: https://www.petrofac.com/en-gb/media/news/full-year-results-for-the-year-ended-31-
december-2017/
[Accessed 2 MAy 2019].
Petrofac.com, 2019. Results for the year ended 31 December 2018. [Online]
Available at: https://www.petrofac.com/en-gb/media/news/results-for-the-year-ended-31-
december-2018/
[Accessed 2 MAy 2019].
Reuters.com, 2019. Petrofac Ltd (PFC.L). [Online]
Available at: https://www.reuters.com/finance/stocks/company-profile/PFC.L
[Accessed 2 MAy 2019].