Petrofac soars on sunny outlook

Petrofac was rewarded with a 5% boost to the share price on Tuesday morning, as the oil and gas group delivered a positive outlook on its half-year results.

The company is on course to deliver a "strong" second half, with "modest" growth to net profit for the full year, the group said. The interim dividend was raised by 5% to 22 cents (14p) per share.

Due to the phasing on project delivery, revenues and profits are weighted towards the second half, the group said. For the first half, the numbers were down on the corresponding period, with revenues of $2.8 billion and net profits of $243 million.

"Operationally, we have made a good start to the year on our portfolio of projects and we have built good momentum in securing new awards," says chief executive Ayman Asfari. "Our high-quality portfolio of existing projects reflects our disciplined approach to bidding and managing risk, which, together with a strong pipeline of bidding opportunities and our competitive positioning, means that we remain on track to achieve our 2015 earnings target."

Petrofac expects to grow its Onshore Engineering & Construction backlog this year, while Integrated Energy Services is seeing a good start to the year, with net profits up more than 50%. The group expects performance here to continue to improve over the rest of the year and beyond.

Also on Tuesday, Petrofac announced it has been awarded a second contract with Gazprom Neft Badra in Iraq, worth $95 million over three years. The deal means Petrofac's Offshore Projects & Operations business will be providing maintenance engineering, maintenance execution and support services.

Analyst view

Malcolm Graham-Wood, analyst at VSA Capital, said careful guidance paid off for Petrofac, with a higher-than-expected order book supporting expectations for the second half.

"There is no risk to the long-term target for earnings and with a high-quality portfolio of projects, secured at excellent margins allaying market fears, Petrofac should be a safe haven in the sector," says Graham-Wood. He remains positive on the stock, with a target price of 1,850p.