Capital Markets Day 14 June 2011

Transcription

1 Capital Markets Day 14 June 2011

2 Important Notice The information in this document has not been independently verified and no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained herein. None of the Company or any of its affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss whatsoever arising from any use of this document, or its contents, or otherwise arising in connection with this document This document does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase any shares in the Company, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract or commitment or investment decisions relating thereto, nor does it constitute a recommendation regarding the shares of the Company Certain statements in this presentation are forward looking statements. By their nature, forward looking statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward looking statements. These risks, uncertainties or assumptions could adversely affect the outcome and financial effects of the plans and events described herein. Statements contained in this presentation regarding past trends or activities should not be taken as representation that such trends or activities will continue in the future. You should not place undue reliance on forward looking statements, which only speak as of the date of this presentation The Company is under no obligation to update or keep current the information contained in this presentation, including any forward looking statements, or to correct any inaccuracies which may become apparent and any opinions expressed in it are subject to change without notice 1

3 Ayman Asfari, Group Chief Executive 1. Introduction and strategy update

4 Agenda 1. Introduction and strategy update What is our strategy for growth? Ayman Asfari, Group Chief Executive 2. Integrated Energy Services What is the market opportunity? What is our track record? How will we meet our customers needs? Where is the future opportunity? How will we organise to manage risk? What will be the shape of IES? 3. Integrated Energy Services financial impacts How do we account for IES contracts? How will we finance the IES growth plan? What will our earnings profile look like? Andy Inglis, Chief Executive Integrated Energy Services Keith Roberts, Chief Financial Officer Summary and closing remarks Ayman Asfari, Group Chief Executive Q&A session 3

5 Our history 4

6 A focused and distinctive strategy Focus A clear focus on the oil & gas sector Prioritising resource-rich geographies Differentiation World-class competency delivered locally A preference for organic growth with bolt-on acquisitions to build our capability and geographic presence Ultimately our business is about the deployment of capability for our customers We aim to continuously expand our skill set and deploy it in new ways to create more value for our customers and for our shareholders 5

7 Leveraging capability Net income per employee 2010 US$ 000 CAGR Outsourcing 3 Companies 1 7% Engineering 16 Services/ EPC 2 10% Oil Field Services 3 24 (15%) Petrofac % IT Consultants % Financial Services 6 88 (14%) UK Law Firms 7 >170 N/A Upstream IOC 8 >550 (4%) Note: Based on reported total net income, year average headcount. Source: Company Data. 1 Compass, Serco, Sodexo 2 Aker Solutions, Amec, CB&I, Fluor, Saipem, Technip, Wood Group, Worley Parsons 3 Baker Hughes, Halliburton, Schlumberger, Weatherford 4 Petrofac result excludes gain on EnQuest demerger, including the one-off gain increases metric to $44,000 per employee 5 Accenture, IBM, Oracle, SAP 6 Bank of America, Deutsche Bank, Goldman Sachs, JPMorgan, Morgan Stanley 7 Allen & Overy, Clifford Chance, Freshfields, Linklaters, Slaughter and May. Source of profit per lawyer: Lawyer Magazine 2009/10 survey. Source of total employees: Company Reports 8 BP, Total and Shell s upstream businesses, Apache, Occidental and Talisman 6

8 Results to date Strong earnings growth has led to sector-leading total shareholder returns Revenue 6 yr CAGR 24% 3,330 3,655 4,354 TSR change since PFC IPO (October 2005) Petrofac Ltd. 737% 2,440 AMEC PLC 253% ,864 John Wood Group PLC WorleyParsons Ltd. 226% 223% Saipem S.p.A. 184% Tecnicas Reunidas Fluor Corp. 138% 114% Net profit 6 yr CAGR 42% Gain on EnQuest demerger Schlumberger AG FTSE 250 Technip S.A. Halliburton Co. FTSE 100 Chicago Bridge & Iron Co. N.V. Aker ASA 103% 73% 72% 49% 29% 8% 4% Excluding the gain on the EnQuest demerger 2 Tecnicas Reunidas listed on June 21, 2006 TSR chart source: Datastream as of June 12,

9 What is our strategy for growth? Key priorities for growth Geographical expansion Expand existing business into new geographies e.g. Iraq, Turkmenistan, West Africa Offshore Develop our EPC business offshore Integrated Energy Services Implement our integrated services strategy Continue to grow value per employee 8

10 Reim services Cost plus KPIs Lump-sum turnkey Risk Services Contracts Production Enhancement Contracts Production Sharing Contracts Integrated Energy Services Reward Integrated Energy Services Engineering, Procurement & Construction, Operations & Maintenance Contract risk 9

11 Organisation Reporting Segments Business Units Engineering & Construction Offshore Engineering & Operations Engineering, Training Services and Production Solutions Engineering & Construction Sharjah Engineering & Construction Ventures Offshore Engineering & Operations Engineering Services Training Services Integrated Energy Services We will deliver integrated services through Integrated Energy Services Integrated Energy Services will include Training Services, Production Solutions and Energy Developments Andy Inglis is the Chief Executive of Integrated Energy Services Production Solutions Energy Developments Energy Developments 10

12 Growth potential Over our 5 year planning horizon, we anticipate that: Engineering & Construction and Offshore Engineering & Operations will deliver double-digit earnings growth Integrated Energy Services will be the part of our business growing most quickly and will represent an increasing proportion of group earnings We will more than double our recurring 2010 earnings by 2015 Group net income 2010 Group net income 2015 Integrated Energy Services Integrated Energy Services 11

13 Andy Inglis, Chief Executive IES 2. Integrated Energy Services

14 mm bpd NOCs will drive global oil production capacity growth IEA Projections of World Oil Production by Company Type NOC Supply trends A Giant fields in decline Percent B Increasing complexity of new supply sources C Average development/ discovery size decreasing NOCs Majors & Independents Share of NOCs Source: World Energy Outlook 2010, OECD/IEA, figure 3.24, page 127; Petrofac analysis 13

15 Field size Distinct market segments by field size and complexity Reserve split by field size/complexity in NOC controlled countries 1 total reserve volume ~ 2,200bn boe NOC NOC/IOC IES Giant > 500mm boe Large mm boe Medium mm boe Small 25-50mm boe Low Medium Technical complexity High 1 Oil & gas reserves, proved reserves based on BP reserves definition Source: IHS Herold, 2010 BP Statistical Review, Petrofac analysis 14

16 Field size Petrofac addressable market: around 2,400 fields Reserve split by field size/complexity in NOC controlled countries 1 Number, total fields ~4,500 IES e.g. Ticleni Berantai Cendor e.g. Chergui Giant > 500mm boe Large mm boe Medium mm boe Small 25-50mm boe Low Technical complexity Medium High 1 Oil & gas reserves, proved reserves based on BP reserves definition Source: IHS Herold, 2010 BP Statistical Review, Petrofac analysis 15

17 Accelerating trend towards service contract structures Percentage of oil & gas production in NOC countries under service contracts 1 Number of countries with service-based contracts c c E E Countries exploring service contracts Countries with service contracts in place Countries exploring service contracts Countries with service contracts in place 1 Only includes production from fields with international participation. Service contracts include Buybacks and Risk Service Contracts Source: Wood Mackenzie, Petrofac analysis 16

18 What is our track record for integrated service delivery? 2010 Signed Ticleni Production Enhancement Contract, Romania 2011 Signed Berantai Risk Service Contract, Offshore Malaysia 2007 Acquired interest in Chergui gas field, Tunisia 2007 Entered service operator contract with Dubai Petroleum 2010 EnQuest formed following Dons demerger 2005/06 Acquired interest as operator of West Don field and Don SW, UKCS 2004 Acquired equity as development operator of Cendor PSC, Malaysia 2000 Acquired stake in Ohanet field development in Algeria and pioneered partnership business model 1997 Petrofac Resources formed. First investment in KPC, Kyrgyzstan 1991 Petrofac International formed in Sharjah, UAE 17

19 Building our integrated service capability Production engineering Well management Well management Training Training Training Brownfield engineering Brownfield engineering Brownfield engineering Maintenance Maintenance Maintenance Maintenance Operations Operations Operations Operations Asset management Asset management Asset management Asset management Asset management 1991 Petrofac International established 1997 Energy Developments established 2002 O&M capability established with acquisition of PGS Production Services 2003 to 2006 Training businesses acquired and brownfield engineering capability developed 2007 SPD well operations management business acquired 2008 Acquisition of Eclipse production engineering 18

20 How will we meet our customers needs? Production Sharing Contract (PSC) Production Enhancement Contract (PEC) Risk Service Contract (RSC) Business concept Field development/ operation Mature field management Build, operate, transfer How we add value Innovative concept selection Fast-track delivery Integrated field management Increased production and recovery Improved operational efficiency Innovative concept selection Fast-track delivery Build and transfer operating capability Example Cendor Ticleni Berantai 19

21 Cendor, Malaysia We entered the Cendor PSC at the development phase of the project in 2004 We have added value through a fast-track, cost-effective early production scheme that de-risked the Cendor fault block reservoir The permanent development scheme for the Cendor fault block (Cendor ph2) is planned to be on production 2Q 2013 Under the PSC, we are paid a share of production and hedge the commodity price risk Upside exists from the appraisal of the western fault blocks appraisal wells funded from existing cash flow Jambu-Liang Anticline Irama West Desaru East Desaru Cendor Graben Cendor Cendor kms 20

22 Ticleni, Romania We have a 15 year PEC to manage the Ticleni and satellite fields in Romania We are applying our subsurface capability to grow production: optimising pump settings well workovers bringing broken wells back on line waterflood programme Our interests are aligned as we are paid on a tariff basis for every barrel produced We add value for Petrom by increasing production, while allowing them to focus on Romania s largest fields 21

23 Berantai, Malaysia With local partners Kencana and Sapura, we are leading the US$1 billion+ development of the Berantai field and will then operate it for 7 years We add value through our innovative concept selection and fast-track/cost-effective project execution Our RSC aligns our interests rewarding us for our operational performance We deliver accelerated gas for Petronas, on a build, operate, transfer basis, while they retain ownership of their reserves FPSO WHP1 WHP2 (FUTURE) O&G Process Utilities Gas export pipeline to Angsi LQOil Storage Berantai full field development plan 22

24 Where is the future opportunity? North Sea Caspian Key Greenfield Brownfield East Europe SE Asia Mexico Nigeria Middle East and North Africa Focus on areas where There is significant resource potential There are recurring opportunities We have relationships and capability to deliver locally 23

25 How will we organise to manage risk? Chief Executive, Integrated Energy Services Andy Inglis Delivery teams Developments Rob Jewkes Production Solutions Gordon East Training Services Paul Groves Support teams Legal & Commercial Jeanne-Marie de Larrazabal Finance Carl Thompson Human Resources External Hire Strategic discipline Rigour of capital allocation Strong value assurance process Continued build of capability Business Development Gavin Graham Technical Directorate External Hire 24

26 What will be the shape of Integrated Energy Services? Over our 5 year planning horizon, we expect that An increasing proportion of IES long-term cash flows and earnings will come from RSCs and PECs PSC contracts will become a minority of the IES portfolio (predominantly existing Cendor and Chergui) IES Net Income of US$200m from projects in operation or under development with the potential to grow this by at least 50% from new projects Net income evolution Production Sharing Contracts Production Enhancement Contracts Risk Service Contracts Ohanet RSC expires October

27 Keith Roberts, Chief Financial Officer 3. Integrated Energy Services financial impacts

28 How do we account for IES contracts? How we account for IES contracts will depend on whether the contract is a Production Sharing Contract or a contract for services 27

29 How do we account for IES contracts? What defines the contract type? Production Sharing Contract Pure Service Contract High/medium 1 Exploration risk None/ Low High Development cost risk Low / Medium 2 High/medium 1 Reservoir risk None/ Low Medium Commodity price risk None/ Low Cost and profit oil Revenue Specified monetary amount No Defined services Yes Impairment risk Recovery of costs incurred Credit risk 1 Likely to enter after exploration / appraisal stage 2 Depends on contract structure and whether construction is fixed price contract In a PSC the risks and rewards come from the ability to achieve a physical entitlement to volumes which will vary with field performance and market factors. In a service contract the returns are preset in the contractual terms linked to the services to be performed. 28

30 How do we account for IES contracts? Risk Service Contracts and Production Enhancement Contracts fall somewhere on the spectrum between contracts for services and Production Sharing Contracts 29

31 How do we account for IES contracts? What defines the contract type? Contracts fall into two broad categories with the following commercial characteristics: Production Enhancement Contracts We are responsible for providing at risk investment capital to upgrade/improve field infrastructure phased over life of contract Capital investment in field infrastructure depreciated based on barrels of production Operating costs taken in period to which relate We recover costs using a tariff per barrel of oil produced mechanism If reservoir fails to perform risk of impairment or onerous contract The field is owned by the licence holder and we have no right to reserves Risk Service Contracts We develop the asset on behalf of the customer, costs are expensed as incurred. Cash spent recovered from the resource holder over the life of the contract The fee / profit payable to us is based on a agreed set of measureable KPIs (contract specific) We receive payment for costs and our remuneration fee from the proceeds of sale of customer s production over life of contract Construction and operations services are unbundled: revenue recognised by reference to % of completion (construction) and timing of opex costs (operations) Where uncertainty on outcome exists revenue recognised to extent of costs incurred. Expected losses accounted for immediately We have no entitlement to reserves as they are legally owned by the client 30 30

32 What will the IES earnings profile look like? Ticleni Capex, opex and return recovered through a tariff mechanism, including a higher tariff for above baseline production Returns are potentially wide-ranging depending on performance: material upside achievable through incremental production Cost of services may exceed tariff income earned in early stages assuming break-even in 2011 Relatively low capital-intensity Minimum capital investment obligation of c. US$20m Assuming successful waterflood pilot total capital investment could be c.us$250m Ticleni - indicative earnings and cash flow profile Revenue - base case Net profit - stretch case Net profit - base case Annual cash flow - base case 31

33 What will the IES earnings profile look like? Berantai Remunerated based upon delivery of services (higher revenues in development phase) Revenues and margins will depend upon project execution/operational performance, and will reflect confidence in delivery as project progresses Significant capital requirement for construction phase but cash positive thereafter Range of returns prescribed by contract structure Berantai RSC and FPSO - indicative earnings and cash flow profile Revenue - base case Net profit - base case Annual cash flow - base case 32

34 How will we finance the IES growth plan? Currently envisage gross investment of between US$ billion per year into IES Projects are typically either fast-track developments (time frame of 1 3 years) or already producing (PEC contracts) so net investment is considerably less This level of investment activity can be financed from our own resources Opportunity to raise additional funding at a project/asset level e.g. Berantai Prioritisation of business development activity / more rigorous allocation of capital will become increasingly important 33

35 What will the IES earnings profile look like? As the characteristics of the business and the embedded portfolio risk changes... PED IES Oil price risk Subsurface risk Capital intensity Income sustainability...so too will the earnings profile of Integrated Energy Services 34

36 Summary and closing remarks Our strategy meets the growing needs of our customers for an integrated service The market opportunity is significant - enabling us to deliver repeatable long-term cash flows, revenues and profits from the provision of integrated services Continued commitment to our onshore and offshore E&C and O&M businesses - which we expect to deliver double-digit average yearly earnings growth With our clear strategy and commitment, we anticipate that we will more than double our recurring 2010 earnings by

37 Question & answer session

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