FOCUSING ON OUR CORE STRENGTHS… Annual report and accounts 2016 …FOR A RESILIENT FUTURE In 2016 we continued to focus on Petrofac’s core strengths, with a particular emphasis on operational excellence.
We delivered good operational performance, with high levels of activity in our lump-sum business and continued earnings growth in our reimbursable business. Yet, at the same time, we took considerable cost out of the Company and continued to re-shape our Integrated Energy Services business.
With excellent visibility of revenues for 2017, and strong credentials in promising sectors of the market, we have a resilient business that is well positioned for the future.
BUILDING FOCUSING BUILDING ON OUR CORE ON OUR CORE ON OUR CORE STRENGTHS MARKETS CAPABILITIES See page 08 See page 10 See page 12 Strategic report
We are an international service provider to STRATEGIC REPORT the oil and gas production and processing 02 Group performance at a glance 04 Our business model industry, with a diverse client portfolio including 06 Operational progress 2016 many of the world’s leading integrated, 08 Building on our core strengths 10 Focusing on our core markets independent and national oil and gas companies. 12 Building on our core capabilities 14 Chairman’s statement We design, build, operate and maintain oil 16 Market outlook and gas facilities, delivered through a range 20 Group Chief Executive’s Strategic review 24 Key performance indicators of innovative commercial models, enabling us 26 Risk management to respond to the distinct needs of each client 31 Principal risks and uncertainties 36 Segmental performance and helping them to transform the value of 48 Financial review their assets across the oil and gas life cycle. 52 Corporate responsibility Our service offering is underpinned by our ability to develop resource holders’ local capability through the provision of skills training with competency GOVERNANCE 68 Chairman’s introduction development and assurance frameworks. 70 Directors’ information 72 Executive Committee members At the heart of everything we do, the six Petrofac 73 Corporate Governance report values guide our decisions and behaviours: safe, 82 Nominations Committee report 84 Audit Committee report ethical, innovative, responsive, quality and cost 91 Directors’ remuneration report conscious, and driven to deliver. 111 Directors’ statements
FINANCIAL STATEMENTS 112 Group financial statements 113 Independent auditor’s report 121 Consolidated income statement 122 Consolidated statement of other comprehensive income 123 Consolidated statement of financial position 124 Consolidated statement of cash flows 125 Consolidated statement of changes in equity 126 Notes to the consolidated financial statements 172 Company financial statements 173 Company income statement 173 Company statement of other comprehensive income 174 Company statement of financial position 175 Company statement of cash flows 176 Company statement of changes in equity 177 Notes to the Company financial statements 189 Shareholder information 190 Glossary
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Petrofac Annual report and accounts 2016 / 01 Group performance at a glance
A leading global service provider
Revenue Return on capital employed1 2016 at a glance • Petrofac has delivered positive results U S $7, 873 m 17% for 2016, driven by record revenues, (2015: US$6,844m) (2015: 3%) significant cost reduction and strong cash conversion
EBITDA1 Backlog • In a busy year, the Group has also demonstrated its track record for US$704m US$14.3 bn operational delivery with more than (2015: US$312m) (2015: US$20.7bn) 240 million man-hours worked across the portfolio
Net profit1 Earnings per share (diluted)1 • Whilst the market remains competitive, bidding activity has increased in recent months. We have a robust pipeline of US$320m 93.29¢/s opportunities across our core markets (2015: US$9m) (2015: 2.65¢/s) and remain cost competitive, as evidenced by recent bidding success Reported net profit 1 Business Performance before exceptional items and certain re-measurements. • Petrofac remains firmly focused on its core strengths, committed to reducing US$1m capital intensity and maintaining a (2015: US$349m net loss) strong balance sheet
• Operational excellence and excellent E&C active and submitted Backlog by reporting revenue visibility position us well in 2017 bids by categorisation segment for a recovery in our core markets
18 25
56 25 16 57
3
Upstream gas 25% E&C 57% Upstream oil 16% EPS 25% Downstream 3% IES 18% Other 56% ore ore
Oil and gas Oil and gas Offshore Oil and gas Refining and development Storage and pipelines engineering, construction wind processing facilities petrochemicals and production operations and decommissioning
02 / Petrofac Annual report and accounts 2016 Strategic report Related pages Our business model p04
Market outlook p16
Refining our Group divisions We implemented a Group reorganisation with effect from January 2016. The reorganisation has improved our efficiency through de-layering and centralising back-office services, while allowing us to maintain our focus on delivery, and our responsiveness, both to market conditions and our clients’ needs.
Engineering Engineering & Construction Group revenue contribution Revenue delivers onshore and offshore & Construction engineering, procurement, US$5,928m (E&C) construction, installation and (2015: US$4,821m) commissioning services on a lump-sum basis. We have more Net profit/(loss)1 than 35 years of expertise in % this area and our services 75 encompass both greenfield US$311m and brownfield developments. (2015: US$1m net loss)
Engineering Engineering & Production Services Group revenue contribution Revenue brings together our services’ & Production capability across brownfield US$1,725m Services projects and operations, greenfield (2015: US$1,739m) projects through concept, feasibility (EPS) and front-end engineering and Net profit1 design (FEED) studies as well as a 22% range of operations, maintenance and engineering services for US$111m onshore and offshore projects. (2015: US$58m)
Integrated Integrated Energy Services Group revenue contribution Revenue provides an integrated service for Energy Services clients under flexible commercial US$271m (IES) models that are aligned with their (2015: US$379m) requirements. Our projects cover upstream developments – both Net profit/(loss)1 greenfield and brownfield, related % energy infrastructure projects, 3 and can include investment. US$(42)m (2015: US$7m net profit)