Shares of Petrofac Limited (GB:PFC) plummeted nearly 25% as of writing after it released disappointing results for the first half of 2024. The company posted a first-half EBIT (Earnings Before Interest and Tax) loss of $106 million, marking an increase from a $72 million loss during the same period last year. The company specifically emphasised persistent challenges in its largest division, Engineering and Construction (E&C), related to its legacy contracts.
Petrofac Ltd. is a services company that offers integrated solutions to the energy sector.
Petrofac Faces Continued Struggles in the First Half of 2024
In light of these results, Petrofac’s CEO Tareq Kawash stated that the first-half performance marked another difficult phase for the company. Specifically, among its segments, E&C reported an EBIT loss of $103 million. This reflected the effects of demanding contracts with no margin recognition and negative operating leverage resulting from low activity levels.
In contrast to the loss, the company’s revenue reached $1.24 billion during this period, which was slightly up from $1.23 billion a year ago. However, a concerning trend emerged as Petrofac’s backlog stood at $8.0 billion as of June 30, 2024, down from $8.1 billion on December 31, 2023. This backlog primarily consists of contracts in core markets, with 87% of the E&C backlog comprising new contracts secured in 2023.
Petrofac Stays Optimistic Amid Challenges
Despite these hurdles, looking ahead, the company expects better operating activity in the E&C for the rest of 2024 as it continues to shift from legacy contracts to more profitable projects. Furthermore, in the Asset Solutions division, the business is expected to witness higher activity levels in the medium term. This anticipated growth will be driven by a focus on late-life asset operations along with geographical expansion.
Are Petrofac Shares a Good Buy?
According to the TipRanks consensus, Petrofac Stock has received a Moderate Sell rating, based on a Sell recommendation from Kepler Capital. The average PFC share price target is 20p, which is 30% higher than the current trading level.
