I've seen similar inane questions asked - often by either complete newbies or those with next to no posts. But in both cases I think to myself if they are so inexperienced at investing that they can't find answers to such basic questions then A) they are probably a liability to themselves B) why are they doing it? - go get a financial advisor! and C) do I want to encourage them?! (no!)
The other thing that typically happens is the inane question gets answered and the person asking it doesn't come back to say thank you. This was a case in point - 8 days after asking the question Samzin hasn't said 'thank you'. It's not like it costs anything to be polite. This comes across as being self-centred and ungrateful and I think it discourages people from being helpful.
...Anyway, PFC is up a tad more today, so that's good.
Yes, a polite enough question.
The reason for it: 'Haven't seen any announcement', given the FY results and RNS of a few days prior, seemed a bit pathetic to me. If that's an arrogant view then so be it.
Harsh - quite possibly.
The dividend and outlook seem to deserve an sp of at least 520 to me. Meanwhile having reduced my exposure to PFC without actual loss, I'm content to continue holding and may even top up moderately on the lows.
Shame about the ill-starred JSD6000 and associated $176m impairment - I mistakenly thought that project was consigned to history nearly two years ago, this from a Hargreaves Lansdown article at the time (Feb 16)
"Shipyard performance issues" was an interesting term to explain backing out of a billion dollar commitment to build something for which there may no longer be much demand for. How much the group ends up having to write off against the ill-fated JSD 6000 barge project remains to be seen, but right now, we doubt the market for half-built super-size oil rig lifting barges is that strong.
But that may be academic, for it was clear that the JSD 6000 was a product conceived in a different era, which would struggle to earn its keep in a world where new deep water oil fields may not be economic."
The reported results in cash flow terms are better than expected, debt contained, outlook better than feared, dividend as good as we could hope for, brokers happy. Sustaining financials by cutting capex. A harsh reaction then today, is it going to take positive signs eg signifcant new business to reverse the sentiment? Or the shorts to unbunch?
PFC remains acutely sensitive to oil price and has tracked it back from $70 to $63 to where next, back under $60 maybe, but still high enough to support business pipeline.
It's a treaders share at the moment.
Fundamentals matter little for now.
It goes where ever traders push it. Although they do have to grind it hard. Easy target it appears. They dropped it from 470p down to 470p quickly. It should go back there though give it bit of time.
The SP has taken an absolute battering today, yet I'm not quite sure why, other than dividend yield which was pre-announced in terms of their approach to this.
i think there's more positive than negative news:
1. CEO back in the sack - must be a reason why this is now appropriate
2. Good EBITDA
3. Good balance sheet and debt management
4. The P&L loss was all impairment, cashflow remains strong
5. Revenue reduction was project timing driven - not terminal
6. Pipeline remains strong
7. Legacy assets and SFO aside, the business looks robust.
This from the Sky city editor who is terrific at breaking news after the bell when he has been handed the embargoed press release ... the SFO can't get any dirt to stick then?
"A senior executive at the London-listed oilfield services group Petrofac is to return to the company temporarily nine months after he was suspended as part of a Serious Fraud Office (SFO) probe.
Sky News has learnt that Petrofac will announce alongside its annual results on Thursday that Marwan Chedid, its former chief operating officer,‎ is to return to the company in an advisory role.
A source said Mr Chedid would rejoin the business, which operates in 29 countries around the world, for up to nine months but had decided to leave once his advisory role concludes.
The SFO has been investigating Petrofac and some of its top executives as part of a broader criminal probe into Unaoil, a Monaco-based company.
Its inquiry is reported to relate to the provision of local consultancy services and the securing of contracts in countries including Kazakhstan and Syria.
Both Mr Chedid and Ayman Asfari, Petrofac's chief executive, were interviewed under caution by the SFO last year.
Earlier this month, the company said the agency's investigation was "wide-ranging in time and scope, and relates to the activities of Petrofac, its subsidiaries, and their officers, employees and agents for suspected bribery, corruption, and/or money-laundering".
I think as long as it is "stable" with no negative shocks and 2017 performance is as analysts expects then more confidence in the business continuity should return after the battering from 570p to 400p.
That's true Jack, and for one's that are long there are others that are short. However, they are valuable to help the thought process and weigh up the pros vs the cons. Plus they do a lot of the heaving lifting in terms of compiling historic accounts etc.
If I had unlimited time (or could wind back the clock 20 years to Dissertation time) I would love to analyse all of the broker notes for all companies to assess the level of accuracy and any particular trends.
I fear that there would be no positive correlation whatsoever between predictions and outcomes!
"Morgan Stanley downgrades Petrofac to underweight as part of a review of engineering companies exposed to the Middle East gas market. It cited International Energy Agency forecasts for Middle East gas demand to grow 38 per cent to 2030, making the region the second-largest growth area globally for gas behind China.
With around $100bn of outstanding Middle East tenders to be awarded and a further $358bn of planned projects, 2018 should be a record year for the industry, Morgan Stanley said. It named Saipem and Hyundai Engineering among the likely beneficiaries but argued that Petrofac is likely to underperform the sector given the overhangs of a Serious Fraud Office investigation and refinancing worries."
My comparison to RR solely concerned the SFO DPA and the reputational impact etc. - which I felt was more useful as a guide than the food hygiene case (interesting as that was). I understand that RR represented the largest SFO investigation into a UK company and so it should provide some indication in terms of possible penalties for PFC
Although they weren't issues I had in mind, it's perhaps worth responding to some of the other points:
Global oil demand is still rising and it has at least a couple of decades to go, PFC also 'do' gas - which remains vital for the foreseeable. So to say that demand for PFC services will accordingly never increase is very sweeping and quite possibly incorrect. Even to sustain existing oil supplies, requires ongoing maintenance and the development of new resources to replace the decline of 'mature' production fields.
PFC's debt level was certainly a concern last August and, given the rebasing of the divi , progress on that will certainly be expected. A reminder of what was said then:
"The board recognises the importance of a sustainable dividend to our shareholders. Consequently, the board intends to target a dividend cover of between 2.0x and 3.0x business performance earnings as we transition back towards a low capital intensity business model. It is further proposed that the interim payment each year will be approximately 33% of the prior year total dividend,"
The problem Boyo, is that unlike rolls Royce it is NOT business as usual for PFC:
- the new contracts havent been great
- POO has halved and with the US shale has plenty of supply
- generally oil is a legacy technology
- theres more of a risk to a further POO slump
- demand for PFC services will accordingly never increase and there in a new world
- debt is high and was taken on during a POO peak and associated asset strategy
- 1 March results wont be great but reflect a portfolio run off which may not even be sustainable
- SFO: none of us know the truth about the honesty or integrity of PFC employees/BOD. SFO mediocre track record is not an argument that they are wrong in this case.
I guess where Food Hygiene is concerned and large numbers of people could become ill, maybe even die, you get a natural, quick and justifiable reaction from clients, protecting reputation as much as anything.
PFC's investigation by SFO is more about a business hazard that many might think goes with the territory. No one has died, I believe, although corruption does grievously harm a country's economy and citizens. Rolls Royce survived their 'Unaoil Connection', entering into a DPA a year ago, after a four year SFO investigation. At it's worst the RR sp was down around 60% from its peak whilst PFC has been down a maximum of 70% at one point (from 950 to 350) though it's hard to imagine that the scale of wrongdoing can be anything like RR, even in relative terms.
Slightly off topic, but this shows the effect of an investigation where issues and timeframe are unclear:
A meat supplier being investigated by the Food Standards Agency has fallen into administration with the loss of almost 270 jobs. KPMG has been appointed as administrators to Derby-based Russell Hume Limited.
Its meat products were recalled last month and chains including Wetherspoon took them off their menus. The FSA said its investigation concerned Russell Hume's failure to comply with food hygiene regulations.
The firm's directors called the decision to call in administrators "heartbreaking", but said the regulator's action had "created impossible trading conditions for us".
Chris Pole, partner at KPMG and joint administrator, said the recent product recall and halt in operations had resulted in a customer exodus. As there was little prospect of production restarting, he said a total of 266 people had been made redundant.
"Our priority over the coming days will be to work with all affected employees to provide the assistance they need in claiming monies owed from the Redundancy Payments Office," Mr Pole said.
"We will also be seeking buyers for the business and its assets. Any interested parties are advised to contact us as soon as possible."
Russell Hume's directors said they would continue to work with the FSA over the issues it had raised, but added: "We still feel its action has been out of all proportion to the concerns it says it has identified. "The fact that its investigations have become industry-wide and a number of other firms have also had issues strongly suggests there is a lack of clarity in the industry and in current FSA guidelines. "Prior to this, we had a long, unblemished record for supplying quality meat products."
Russell Hume supplied meat to a range of hotels, restaurants and pubs across the UK and had six production sites in Liverpool, Birmingham, London, Boroughbridge, Exeter and Fife.
£3-4M damages springs to mind to compensate the Tchenguiz brothers ....
That particular case may not be a good one to base present day SFO performance on. It drew High Court criticism in 2012, was started under the SFO's previous head and dropped by the current one, David Green, who reportedly said at the time of a settlement with the brothers: "the SFO has changed a great deal since March 2011, and I am determined that the mistakes made over three years ago will not be repeated.
Green is due to step down in April and I guess the handover to the new head would be the time for any review of the investigation's merits. A few recent words on his legacy can be found here:
As far as strain on execs goes, presumably the only ones genuinely experiencing strain should be any that have something to hide. For the rest it should be just an inconvenience, especially if they have adequately increased resources to help deal with SFO enquiries.
In my mind, the RNS is subject to interpretation and to read between the lines of what they have and have not said. They have made a broad catch all disclosure. No more reference to Unaoil. Money laundering was also a new one.
If your logic is true that it added nothing new, then they had no reason to make it or to make it now before the 1 March results. They made it for a reason and that is precisely to meet their disclosure requirements, but they did not or probably legally could not state more but covered off all bases, so whatever comes out they cannot be accused of not having disclosed what they could to shareholders.
I do not know how one can price this now, while before the Unaoil/Kazakh contracts could be priced on a worst case basis.
In this market, this type of uncertainty is not being given the benefit of the doubt of a positive interpretation to the RNS.
My recovery pick for 2018 was PFC so this has been a disappointing crash back down on the news of ongoing SFO enquiries and the oil price slump / global market madness. Until then sp progress reflected a pretty good effort at business-as-usual, oil well above $50 a massive energiser, commentators seeing a brighter future.
The SFO have a pretty poor record of investigating and punishing complex corporate wrong doing, and a history of stringing out fruitless enquiries into an even more expensive one which often ends in the long grass. The latest announcement struck me as signalling the opposite of what has been read into it by some ... having not found smoking-gun evidence against the named co-operating directors, who are backed up by a 2017 report by internally commissioned law firm investigators, the SFO have widened scope to looking in everyone's filing cabinets and e-mail recycle bins. Are they desperate to justify their costly enquiry decision, struggling to evidence presumably what some former insider whistleblower has revealed. No charges after a year. If the SFO did have real dirt on the CEO for example why is he still in office surely the SFO and the PFC board would have had to act. And if not, pretty poor of the SFO not to come out and say so at the first opportunity - Chedid has been suspended but not Asfari, both remain accused.
£3-4M damages springs to mind to compensate the Tchenguiz brothers for wrongful arrest over the raid into Kaput-thing Bank etc. Not the nicest business people (think Presidents Club charity dinner) and tainted by a partially successful but also disappointing SFO enquiry into Cirrus mis-selling to Peverel Retirement a connected manager both owned by a Tchenguiz company at properties owned by a Tchenguiz company. We were all cheering the SFO on but the Tchenguizs had political links and are vigorous litigants in attack and defence, and the SFO were bungling amateurs. By the way Cirrus were excused real punishment for coming clean just as (just after actually) the whistle was being blow, and despite "co-operating" with the SFO over 4 years of enquiry costing the taxpayer about £450K, got away with a largely unclaimed £100K compensation gesture despite admitting the fraud was in the millions.
We all know doing business in those parts of the world where PFC help dig up oil was (is ?) highly lubricated. Viz the documentary about the Sauds and the SFO enquiry into Al Yamamah getting a re-run on the BBC at the moment. Not-so-quietly dropped when it became clear the dodgy dealing was sanctioned by successive UK governments at the highest political level. It is quite possible that Unaoil was the grease-gun used with tacit approval by PFC directors on deals going back 5 and 10 years, when that sort of thing was politically accepted in the interests of all concerned. Whether PFC's deal-making was sufficiently sophisticated to have left a trace to current PFC executives ... I am afraid it is going to take a long time to find that out if we ever do.
The ongoing enquiry hangs heavy over PFC key executives, can you imagine the strain, hard to focus on progress in the business. Results on 1 Mar will reveal how it is going.
So while it is a big bet to hold on, and an even bigger one to reinforce my conviction which I will do if the sp slips to 370, I am not tempted to read any more doom into the recent news than was already there.
I had considered those points Speeder - and if you are correct then PFC have potentially made serious errors of communication.
Your suggested interpretation concludes that the investigation is 'wider' than previously thought because of omissions in the RNS. PFC originally said it 'believed' the case to be connected with Unaoil. If they became aware that that belief was wrong, or that there were other significant strands, then they had a duty to correct the false impression they had promulgated.
The original statement referred to 'officers' of the company, which would include any Director acting on behalf of the company, whether or not their title includes the word 'officer'. Non-execs ordinarily fall outside that category but would they be in a position to make payments etc?
The fundamental point is that, as the RNS was presented as an 'Update' it should have transparently informed shareholders of any material new information which might affect the value of the company, there should have been no requirement on the part of the reader to deduce significant facts by checking for incompleteness against previous statements.
If the Times journalist wrote the story on the basis of such deductions then she should have sought some confirmation and quoted the sources involved, I'm not aware if that happened - I don't subscribe to the Times.
The first RNS in May 2017 was Unaoil and CEO and COO.
" The investigation is related to the SFOs ongoing investigation into the activities of Unaoil."
The most recent was all directors and no mention of a limitation Unaoil at all. i.e. its wider
"The investigation is wide ranging in time and scope, and relates to the activities of Petrofac, its subsidiaries, and their officers, employees and agents for suspected bribery, corruption, and/or money laundering."
Yep - although I don't recall anyone officially trying to put a timescale on the SFO process. There was a lot of speculation at the time ranging from months to years. In any case, for those who have been concerned at the length of it, it could mean that they are having a tougher job building a case. Any fine will be proportionate to the dirty deeds - not the length of investigation.
PFC's RNS appears to have been an attempt to draw a line for the time being and to signal - in the ' quiet period' leading up to the annual results - that nothing further would be reported on the matter until there is something substantive to say. The only problem with that is that they now can't easily pass any comment on the interpretation placed on that RNS by third parties.
PFC may well be regretting that the RNS was issued if it wasn't entirely necessary. On the other hand, maybe the crash has nothing to do with the RNS.....
Being somewhat pedantic, could someone please tell me what Monday's RNS contained that is strikingly different to what PFC announced in May of last year? I refer to the update given by PFC on the 25th of that month (full text on the PFC website):
On 12 May 2017 the SFO confirmed that it is investigating the activities of Petrofac, its subsidiaries, and their officers, employees and agents. The investigation is related to the SFOs ongoing investigation into the activities of Unaoil. Ayman Asfari and Marwan Chedid were arrested, questioned under caution by the SFO, and were released without charge. Since 12 May 2017 the Company has provided large volumes of information in response to very broad requests made under section 2 of the Criminal Justice Act 1987. The Company notes that the SFO will also have access to other information in the context of its wider investigation.
I am curious as to what made the Times journalist feel that the RNS contained a new and newsworthy warning, when it seems to be a fairly straight reiteration of a nine month old statement. I especially note the term 'wider investigation' used in May. Either the Times this week is exaggerating or the investigation must indeed be wider than an already wide thing.
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