Stock of the day 19/06/2015 – Petrofac Ltd

It’s been a tough time for the oil industry in the last year, and Petrofac has been no exception; the company releases its latest trading statement on Tuesday.

Petrofac had started 2014 at £12.25 and by May 6th had reached a peak of £14.45. However, it’s first in a string of profit warnings on May 9th dragged the stock down by 15% to £11.77. A gradual decline from this point onwards looked to have recovered nearly £12 by the end of November, but yet another profit warning, almost a year to the day from the November ’13 profit warning that kicked it all off, saw Petrofac caution its investors about an upcoming ‘difficult period’ prompted by the quickly plummeting oil prices and the consequences this was having for the company’s North Sea oil operations.


(Source: IT-Finance.com 19/06/2015)

With Brent Crude reaching a 6 year low in January Petrofac matched this achievement by hitting £5.96, its worse price since July 2009. Yet as oil began its own upswing so too did Petrofac, and by its full year 2014 results at the end of February the company was back to around £8; the day of the actual results saw Petrofac jump by nearly 9% to £8.85 despite downgrading its forecast net profit from $500 million to $460 million due to the company posting a record order book of $18.9 billion after a $3.5 billion increase across 2014.

This news helped push Petrofac up to £10.66 by the middle of April; yet once again Petrofac spoiled its own party with another warning, this time over the state of its Laggan Tormore gas plant project in Shetland. The $230 million losses on the project it announced in February were revealed to be $194.45 million short of the actual figure, news that sent Petrofac tumbling by 13% over two days back down to £8.73. Since then the company has only briefly escaped a trading bracket of £8.40 to £8.70; it is currently trading at £8.66 (19/06/2015, IT-Finance.com).

Yet good news has begun to pick up for Petrofac across June. At the start of the month it was announced that Petrofac had secured a $45 million for North Sea support for Orange-Nassau Energie’s newly acquired Sean gas field. In even bigger news, on June 19th Petrofac secured contract renewals for its operations on the UK Continental Shelf, worth $400 million, the longest of which is for the next 5 years.

Petrofac has a consensus rating of ‘hold’ with an average target price of £9.88.

Friday’s stock news:

There was one clear winner this morning: Colt Group. The telecoms company jumped by over 20% at the end of the week following the news that US fund manager Fidelity offered £1.90 per share for the remaining piece of the company it doesn’t already own. This deal, worth £1.7 billion, pushed Colt’s stock up to the aforementioned £1.90, leaving the stock at its highest price since its spikes at the start of December 2011.

Card Factory tumbled by around 7.5% this Friday as the company announced its management team was to sell 7.4 million shares, worth around £26.6 million. This caused the stock to fall to £3.30 its lowest price since the middle of May in a year which has seen Card Factory climb from £2.84 to an all-time high of £3.74 at the start of June.