Petrofac faces $180 million loss following fraud investigation



Oilfields services firm Petrofac has reported that a fraud investigation is causing it “real and material” harm.

Its annual report also showed a pre-tax loss of $180m, as revenue dropped from $5.5bn to $4.1bn and contracts dwindled during the pandemic.

Chief executive Sami Iskander announced that the company – which has an operational hub in Aberdeen serving the North Sea – was changing its strategy following a series of setbacks, which include an investigation into a former employee.

He conceded this played a large part in the performance, as clients were wary if they could trust Petrofac, although he was reassured by the group’s “uncompromising approach” to “compliance and ethics”.

Currently, the Serious Fraud Office inquiry is looking into Petrofac’s former global head of sales David Lufkin, who pleaded guilty in a London court in January to three charges of bribery and corruption.

This was in relation to $30m worth of payments to agents to influence the awarding of a $3.3bn value deal in the United Arab Emirates (UAE).

Other individuals who work in the company are also a focus of the investigation. Petrofac lost a major UAE client following the probe.

The financial statements showed that the company has also cut $140m from its cost base after the collapse in oil price a year ago took its toll.

It has scheduled plans for later this year to rebalance its order book, with $3bn set aside. This comprises $2.2bn in engineering and construction and $800m in engineering and production services.

It expects the recovery to pick up at the end of this year with a return to pre-pandemic capital expenditure levels by 2023.

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Petrofac also has a pipeline of around $20bn of opportunities it expects to be awarded by the end of the year, with a further $34bn next year.

Petrofac will be looking to expand its services from oil and gas into a range of energy sectors, such as carbon capture and storage, hydrogen and waste-to-fuels.

It will also try to win more business in the Middle East and North Africa, as prospects are better there for low cost oil and gas production.

The company’s recent largest contact win was in its engineering support services for the Seagreen wind array off the coast of North East Scotland.

Its share price fell to 120.70p per share at the close of market yesterday. The company will reinstate dividends to shareholders when it is “appropriate to do so”.

Iskander, who joined in November as chief executive, said: “We need to do better to restore confidence and set the business on a course to grow with existing and new clients.

“This period has also been challenging following the SFO’s announcement in early January, however, I am reassured by our uncompromising approach to compliance and ethics that is consistent with international best practice, independently audited, and critical to our future success.”

He emphasised in the report regarding the SFO investigation that neither the company or any current board members were facing charges.

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