Petrofac shares suspended amid refinancing plans

Petrofac's shares will be suspended from the start of May, after it delayed the publication of its full-year results by a month until the end of May.

As part of the energy group’s ongoing financial restructuring, an ad-hoc group of senior secured noteholders have made a proposal to provide further credit to the business of up to $300m, comprising $200m of new funds and $100m of credit support to help secure performance guarantees for certain of its existing contracts.

This non-binding proposal is dependent upon, among other things, Petrofac securing these performance guarantees, and would require the conversion of a significant proportion of the group’s existing debt to equity.

It is also in active discussions with credit providers to obtain the required guarantees, which would also release more than $200m of collateral and retentions.

This development comes as Petrofac continues to manage its payment obligations to preserve liquidity, while progressing other components of the restructuring with other stakeholders.

Upcoming payment obligations include amortisation payments due on bank facilities and the coupon payment due on its senior secured notes by 15 May.

Petrofac's lending banks have agreed to a number of rolling short term deferrals of contractual amortisation payments, while it progresses with the financial restructuring.

It does not expect to make the payment of the bond coupon on the due date of 15 May, but this payment has a 30-day grace period. The ad-hoc group of noteholders, representing approximately 41% of the outstanding notes, has entered into a forbearance agreement, which provides an assurance that they will not take any action in respect of the non-payment of the coupon until at least 30 June.

A stock exchange update also noted that "good progress" is being made with non-core asset disposals, with non-binding offers received for the group’s share in a Production Sharing Contract in Malaysia, the process for which could be completed in the third quarter this year.

In a trading update on 20 December, Petrofac highlighted a risk in relation to the timing of the negotiations on the Thai Oil Clean Fuels project. Petrofac and its joint venture partners remain engaged with its client in relation to the reimbursement of additional project costs.

At the time of reporting the full year 2023 results, management does not expect to have progressed discussions sufficiently to recognise the expected outcome of the negotiations in its accounts. As a result, Petrofac expects to recognise an incremental loss of approximately $130m for 2023.

Net debt at 31 December 2023 was $583m, which was in line with interim results.

Meanwhile, Asset Solutions has incurred additional costs on one of its engineering, procurement, construction and commissioning contracts, and expects to report earnings for 2023 which could be up to $15m to $20m lower than previously guided; pending the outcome of negotiations.

Petrofac chair René Médori stated: “The board and management are focused on arriving at a comprehensive refinancing solution as quickly as possible.

“We are encouraged by the engagement with the ad-hoc group of noteholders, which we hope demonstrates momentum in this complex process.”

Group chief executive Tareq Kawash said: “Operational activity continues as expected and our teams are delivering well in the initial phases of the contracts awarded in 2023.

“On the Thai Oil Clean Fuels contract, we are working closely with our client and partners to accelerate delivery of this complex project and conclude negotiations on the reimbursement of costs - while the commercial negotiations will only conclude after our full year reporting cycle, we are making progress.

“Petrofac has a large order book of high-quality projects, strong market positions and compelling future opportunities which are evident from the recently announced awards,“ he added. “We are working to put the performance guarantees and the right capital structure in place, in order to deliver on this potential.”

Petrofac designs, builds, manages and maintains oil, gas, refining, petrochemicals and renewable energy infrastructure.

Its core markets are in the Middle East and North Africa region and the UK North Sea. It also operates in several other markets, including India, South East Asia and the United States, with 8,500 employees based across 31 offices.

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