(Reuters) - Profits at UK oilfield services provider Petrofac Ltd (PFC.L) rose 20 percent in the first half of 2018 as a recovery in global crude prices drove activity, although the company said it remained some way off being able to raise prices.
The results bode well for a refocusing on core business after a difficult period marred by investments in production that fell afoul of the 2014 collapse in oil prices.
The company’s main measure of profit rose to $190 million (147.39 million pounds) compared to $158 million a year earlier, excluding a $207 million charge for losses on oil asset sales and helped by some of its remaining upstream businesses swinging into the black.
Chief Financial Officer Alastair Cochran told Reuters that Petrofac would continue on a course that has seen it agree sales of $800 million in mostly oil-producing assets this year.
“We are delivering on that core strategic ambition of reducing capital intensity (and) ... the capital-intensive businesses in Petrofac are the IES (Integrated Energy Services) upstream businesses,” he said.
“There is not much left in the portfolio once we complete these divestments.”
Petrofac shares fell 41 percent last year, but have rebounded 30 percent this year as Chief Executive Ayman Asfari delivered on his promise to get back to basics. He has been helped by a tripling of oil prices since 2016.
“Petrofac had a helping hand from higher oil prices in the first half of the year,” said Nicholas Hyett, equity analyst at Hargreaves Lansdown.
“That’s not really how it’s meant to work as a services business, but Petrofac actually has a decent slug of oil and gas assets of its own - $794 million to be exact.”
UK's oilfield services providers vs. crude prices - tmsnrt.rs/2wobWm3
Cochran echoed comments from larger rival Wood Plc (WG.L) last week on weak pricing outside the booming U.S. shale sector, saying Petrofac expected no near-term increase in prices.
The company, which designs, builds, operates and maintains oil and gas facilities, said its order book had risen 22.2 percent to $3.3 billion at the end of the first half. It said it was looking at bidding opportunities of about $34 billion in the next 12 months.
“Where we are seeing a recovery in demand is in ... Southeast Asia, the Indian subcontinent and parts of Africa, where higher oil prices are building confidence for national and state oil companies to increase capital investment,” Cochran said.
Petrofac also said it had won a contract worth $600 million from Algeria’s Sonatrach to provide engineering, procurement and construction services.
The company kept its interim dividend at 12.7 pence per share, unchanged from last year.
Reporting by Muvija M in Bengaluru; Editing by Dale Hudson and Sai Sachin Ravikumar