UK-headquartered oil and gas contractor Petrofac said on Monday that new Engineering & Construction (E&C) orders are likely to remain depressed in 2021 as clients are expected to exercise capital discipline despite recovery in oil prices.

Disruptions to project schedules due to the ongoing Covid-19 pandemic has impacted financial performance of its E&C business in the first half, Petrofac said in a trading update issued on Monday.

"First half revenues in 2021 are expected to be around $1.0 billion reflecting lower levels of activity, a mutually agreed rescoping of the Sakhalin contract and other disruption to project schedules caused by the Covid-19 pandemic," the statement said, though the company also achieved "key milestones" on its HKZ Beta offshore wind project [in Netherlands], the OQ Liquefied Petroleum Gas project in Oman and the KNPC Clean Fuels Project in Kuwait.

"Year-to-date we have secured new awards worth $0.1 billion in E&C (2020: $0.4 billion), comprising the EPC contract for the Marmul Main Production Station Gas Compression project in Oman," Petrofac said.

Engineering & Production Services (EPS) business, on the other hand, has remained resilient growing both revenue and margins with $0.4 billion of awards and extensions.

"We have secured $0.4 billion of awards and extensions in the year to date (first half 2020: $0.6 billion) - principally in the UK North Sea, Iraq and Oman – and are well positioned on a number of other tenders," the statement noted.

Petrofac said it has secured 10 contracts covering carbon capture and storage, blue and green hydrogen and waste-to-fuels in the first half of the year. The company said these early stage concept and FEED contracts have the potential to develop into material project awards.

The Group had an overall order backlog of $4.0 billion on 31 May 2021, which the statement attributed to "low new awards in E&C following recent suspension from competing for new awards in the UAE," and deferring of awards by clients in other markets. It has an active bidding pipeline of $48 billion due for award in the next 18 months.

(Writing by Anoop Menon; Editing by Seban Scaria)

(anoop.menon@refinitiv.com)

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