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Shares plunge as oil group Petrofac warns on 2015 profits

Oil services company Petrofac saw £1 billion wiped off its value after it warned that profits will be at the lower end of expectations as a result of the falling oil price.

Shares fell 26.45% at the close following its statement that net profits for this year – guided at between $580 and $600m – will fall to around $500m in 2015. Projected oil prices for next year are expected to shave $45m from profits.

Of eight recent broker reports, five recommended the shares a “strong buy”.

In a trading update to the London Stock Exchange, Ayman Asfari, Petrofac’s group chief executive, said: “This has been a difficult period for Petrofac and the industry. The board has analysed the potential impact of a lower oil price environment on our IES [integrated energy services] business and also made a critical assessment of our expectations for project delivery in 2015.

“In the main our project portfolio is in good shape, but it is clear that on a small number of projects our execution has fallen short of the high standards we set for ourselves. We have faced these difficulties and have taken robust action to address them and believe this leaves us on a surer footing for the future.

 “The foundations of the business remain strong. Our ECOM [engineering, construction, operations & maintenance] division is in very good shape, with good progress made on the resolution of a number of ECOM commercial settlements, a record level of backlog and an attractive pipeline of bidding opportunities. We are implementing clear and robust plans to improve project delivery and drive value from the IES contract portfolio.

 “I am confident that Petrofac will meet the challenges presented by certain projects in our portfolio and the medium-term growth prospects for our business remain strong.”

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