Petrofac expects revenues to shrink amid ongoing fraud investigations

Oilfield firm Petrofac said it expected revenues to decline next year, as fraud investigations continue into its contract dealings in Saudi Arabia and Iraq.

The oil services company said orders for the first half of the year had slipped lower, as the Serious Fraud Office (SFO) completes its corruption enquiries.

Petrofac said the decline in orders would dent profitability in the second half of the year, as it would also be impacted by declining margins and lower oil prices.

The announcement comes after the group said in June that it had failed to win new contracts in Saudi Arabia and Iraq after the key markets were cited as part of the SFO investigation.

Petrofac ran up against concerns from clients after the SFO announced in February that Petrofac’s former global head of sales, David Lufkin, had pleaded guilty to 11 counts of bribery related to making “corrupt offers” to influence the contract offers in the two countries.

Shares in the company have fallen by around one-third since the conviction and dipped further in early trading on Wednesday.

Ayman Asfari, Petrofac’s group chief executive, said: “New order intake year-to-date has been impacted by recent challenges in Saudi Arabia and Iraq.”

Petrofac saw earnings before tax and interest fall 8.6% to $305 million (£249.5 million) over the six months to June 30.

Meanwhile, the company reported a 1.3% jump in revenues to $2.8 billion (£2.3 billion) for the period.

Mr Asfari added: “Petrofac has delivered good results that reflect solid operational performance across the business.

“Looking forward, the group has a busy tendering pipeline with around 13 billion US dollars of bid opportunities due for award in the second half of the year.”

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “So far, Petrofac’s been making the most of a tough situation.

“Revenues have held up despite the ever shrinking order book, and good cost management has kept margins relatively healthy.

“Unfortunately, less business coming down the pipeline is starting to constrict management’s room for manoeuvre, and that’s made for a pretty gloomy outlook statement.”