Petrofac Limited · OTC:POFCY
Petrofac — Investor Day (December 2013)
54 slides from Petrofac's investor day presentation, Dec 5, 2013
Slide 1: Capital Markets Day
Capital Markets Day 5 December 2013
Slide 2: Important notice
Important notice • This document has been prepared by Petrofac • Certain statements in this presentation are forward Limited (the Company) solely for use at looking statements. Words such as "expect", presentations held in connection with its Capital "believe", "plan", "will", "could", "may", "proje
Slide 3: Introduction and strategy update
Ayman Asfari, Group Chief Executive 1: Introduction and strategy update
Slide 4: Agenda
Agenda 1. Introduction and strategy update Ayman Asfari 2. Building and sustaining a world-class onshore EPC business Marwan Chedid 3. Delivering Integrated Energy Services Andy Inglis 4. Growing and enhancing our offshore EPC capability Ayman Asfari 5. Financial profile Tim Weller 6. Summary and Q&
Slide 5: What we do
What we do • Service company with a clear focus on the oil and gas sector • Growing our capabilities across the value chain to expand our business and better meet the needs of our customers • Striving for differentiation built on core strengths: – Deploying our capabilities in innovative ways to cre
Slide 6: Delivering differentiated performance
Delivering differentiated performance Group Performance 2012 Net income margin (%) Net income / employee (US$k) ROCE (%) Source: Company filings and Factset 6
Slide 7: Background to Interim Management Statement
Background to Interim Management Statement Onshore Engineering & Construction (US$billion) 8 Order intake Revenue expectation (2011) 7 6 5 4 3 2 1 0 2009 2010 2011 2012 2013 2014 2015 In 2011, based on the market, we expected to win work in OEC through 2011/12 - comfortably underpinning our 2015 goa
Slide 8: Background to Interim Management Statement
Background to Interim Management Statement Onshore Engineering & Construction (US$billion) 8 Order intake Revenue reality (2011/12 actual; 2013-15 market consensus) 7 Competitive bidding 6 5 4 3 2 1 0 2009 2010 2011 2012 2013 2014 2015 Through 2011/12 we were disciplined in a period of intense compe
Slide 9: Long-term market fundamentals are robust
Long-term market fundamentals are robust Industry upstream spend (US$billion per annum) Market • Upstream market Capex > US$700bn and US$500bn Opex annually • Long term growth > 5% based on: – demand growth (1-2% pa) – production decline (4-5% pa) – large visible market of downstream opportunities:
Slide 10: The industry challenge
The industry challenge Returns for IOCs squeezed Industry Capex performance 80% % of projects 60% 72% 66% 40% 20% 0% Over Budget Behind Schedule Industry operational performance (UKCS) 90% UKCS production efficiency 80% 80% NOC 70% 60% 60% 50% 2004 2012 Great opportunity for companies with strong ca
Slide 11: Phases of growth built on core strengths
Phases of growth built on core strengths CORE STRENGTHS 3. Growing and enhancing • Deep and widening technical our offshore EPC capability capabilities • Focus on operational excellence • Commitment to local delivery • Effective risk management 2: Delivering Integrated Energy Services • Innovative c
Slide 12: Building and sustaining a world-class onshore EPC business
Marwan Chedid, Chief Executive, ECOM 2: Building and sustaining a world-class onshore EPC business
Slide 13: Our ECOM strategy
Our ECOM strategy Broad customer base of NOCs, IOCs and independents Who do we serve? Range of ECOM Design and build commercial models Strategy oil and gas to fit customer How do What facilities; operate, needs from we do we maintain and reimbursable to deliver? offer? manage facilities lump-sum tur
Slide 14: Underpinning our delivery
Underpinning our delivery Offshore Projects & Operations Engineering & Consulting Services • A strong position in UKCS • Centre of excellence for group • Leading duty holder position • Growing competency and capability • Strong synergy with IES mature • Expanding geographically assets • Internationa
Slide 15: We have a track record of long-term growth
We have a track record of long-term growth Onshore Engineering & Construction revenue and year-end backlog (US$billion) * Backlog as at 31 October 2013; revenue is market consensus • Onshore Engineering & Construction • We have captured market share as we has driven much of Petrofac’s growth have gr
Slide 16: We have established a strong presence in MENA
We have established a strong presence in MENA • We are one of the largest onshore oil Petrofac share of top 15 EPC contractors’ and gas EPC contractors in MENA MENA oil and gas projects • Our business model enables us to be competitive and win work at sector- leading margins • We will partner on a p
Slide 17: We have a strong track record outside MENA
We have a strong track record outside MENA Russia • Kharyaga oil field development project for Total Turkmenistan UK • Value US$158 million • South Yoloten gas • Completed 2003 • Laggan-Tormore gas plant field development • Value > US$1 billion • Value US$3.5 billion • Kovykta and Rospan • Approxima
Slide 18: Our bidding pipeline is attractive
Our bidding pipeline is attractive • Our bidding pipeline in 2014 is attractive Onshore Engineering & with our high priority prospects totalling Construction 2014 prospects c. US$50 billion • Given our good historical win rate, we expect to grow our Onshore Engineering & Construction backlog across
Slide 19: We continue to deliver sector-leading net margins
We continue to deliver sector-leading net margins • Onshore Engineering & Construction has delivered sector-leading net margins since we became a public company in 2005 • We have consistently outperformed our global peers and never made a loss on a lump-sum EPC project • 2014 net margins are expecte
Slide 20: Underpinned by our bidding discipline
Underpinned by our bidding discipline • We secured over US$6 billion of order intake in 2009 and 2010, and have returned to this level in 2013 • 2011 and 2012 were good years in terms of industry EPC awards, but our order intake was low due to our bidding discipline • The competitive environment has
Slide 21: A disciplined approach to securing new business
A disciplined approach to securing new business We take a disciplined approach to securing new business: • New prospects are thoroughly screened to understand project complexities, customer needs, the competitive environment, etc • We heavily pre-invest in the bid: deploying highly experienced perso
Slide 22: Our project delivery is best-in-class
Our project delivery is best-in-class… Our ability to strike the right balance between empowering and actively monitoring the project execution team is one of our key strengths: Empowerment Active Long-term Tailor-made of project monitoring by Alignment with customer execution plan execution senior
Slide 23: Delivery of 4 'mega' projects in 2013
…including delivery of 4 ‘mega’ projects in 2013 We have successfully handed over 4 multi-billion dollar projects during 2013 with a gross value of approximately US$10 billion South Yoloten, Turkmenistan NGL4, Abu Dhabi Asab development, Abu Dhabi El Merk gas processing facility, Algeria 23
Slide 24: We strive for operational excellence
We strive for operational excellence We continuously strive to improve our organisational and operational efficiency: Design optimisation: Organisational Execution model: Construction model: • To optimise our efficiency: • Revisit the process • Improve our overall engineering design, • Optimising fo
Slide 25: Onshore Engineering & Construction in summary
Onshore Engineering & Construction in summary The onshore market opportunity remains robust We have differentiated ourselves through consistent delivery, underpinned by our core skills and capabilities, and we have protected of shareholder value We are working hard to continuously improve, with a fo
Slide 26: Delivering Integrated Energy Services
Andy Inglis, Chief Executive, IES 2: Delivering Integrated Energy Services
Slide 27: The IES strategy
The IES strategy Focus on NOCs and niche exploration players Who do we serve? IES Strategy How do What Wherever possible, we do we Integrated energy we will deliver with deliver? offer? services using Petrofac services innovative (using local supply solutions and chain and local staff commercial mod
Slide 28: Growing interest from NOCs extended to explorers
Growing interest from NOCs extended to explorers North Sea East Europe Caspian SE Asia Middle East and Mexico North Africa West Africa New interest from explorers 28
Slide 29: We deliver services through three commercial models
We deliver services through three commercial models Risk Service Production Equity Upstream Contract (RSC) Enhancement Investments Contract (PEC) Business concept Build, operate, Mature field Field development/ transfer management operation How we add value Innovative concept Increased pro
Slide 30: We create value through operational excellence
We create value through operational excellence 30
Slide 31: Operational excellence: integrate our capability
Operational excellence: integrate our capability • Malaysia, Berantai project – Integrated services from across the Petrofac organisation to deliver a > US$1 billion, fast-track development reaching first gas in 21 months: • Conceptual studies, FEED and detailed design • Procurement, construction an
Slide 32: Operational excellence: redevelop the reservoir
Operational excellence: redevelop the reservoir Increasing production Utilising new methodologies over life of contract in Vertical well Horizontal well Mexico Average cost US$3 million US$4 million Initial 250 bpd 1,000+ bpd production rates Accessing undeveloped resources 32
Slide 33: Operational excellence: drive cost efficiency
Operational excellence: drive cost efficiency 0 We are drilling 55% more efficiently than prior Prior performance performance in Mexico and 1,000 in the top quartile of Depth (metres) Petrofac Performance operators in the region. 2,000 Technical Limit We have established a Mexican Service Company –
Slide 34: What we have achieved in the last two years
What we have achieved in the last two years Net Income US$m 128 89 23 2011 2012 2013* 7 assets 10 assets 11 assets 2,300 employees 3,000 employees 3,200 employees 3 operating centres 4 operating centres 5 operating centres US$1.6bn backlog US$3.0bn backlog US$3.3bn backlog * Company compiled consens
Slide 35: What do we need to deliver by 2015?
What do we need to deliver by 2015? Where are we headed? Net income US$m US$300m Low end of IES data pack guidance Low to high range of IES data pack guidance 89 23 2011 2012 2013 2014 2015 2016+ Current portfolio forms a strong foundation for growth of IES earnings over next 5 years 35
Slide 36: IES in summary
IES in summary Our strategic approach is strong The opportunity set is large from both the NOCs to the explorers We are growing our capability and building our operational momentum We have built a business of scale and are confident we can grow it efficiently 36
Slide 37: Growing and enhancing our offshore EPC capability
Ayman Asfari, Group Chief Executive 4: Growing and enhancing our offshore EPC capability
Slide 38: We have a strong track record in offshore projects
We have a strong track record in offshore projects • We have more than 30 years’ experience • Over the last 10 years, we have been in offshore operations, maintenance and increasingly active in shallow-water brownfield engineering capital projects delivering several billion dollars of projects under
Slide 39: Strong offshore capex growth outlook
Strong offshore capex growth outlook Offshore production is set to play The SURF market is expected to an increasing role in oil and gas more than double in size between markets and the trend is to deeper 2013 and 2020 water 160 Offshore Capex by segment (US$billion) 180 Global oil and gas productio
Slide 40: We have a differentiated offshore EPCI strategy
We have a differentiated offshore EPCI strategy We are building a differentiated top tier offshore EPCI business focused on high-end turnkey opportunities. Our key focus areas: Projects: Customers: Geographies: Building upon our core skills • Predominantly • Focus on areas where we and capabilities,
Slide 41: Building on our core skills and capabilities
Building on our core skills and capabilities • To access top tier EPCI opportunities we need to: – selectively build on our existing core skills and capabilities – make the minimum investment necessary in an installation vessel to access high-end EPCI markets, de-risk delivery and attract capability
Slide 42: We are building a strong offshore team
We are building a strong offshore team We are leveraging on our existing • To manage our deepwater projects onshore EPC capability which is and support our vessel initiative, key providing more than 90% of the specialists have already joined or disciplines required for lump-sum accepted to join the
Slide 43: We are building differentiated installation capability
We are building differentiated installation capability Our installation vessel delivers a unique combination of high-end capabilities achieved for the minimum capital outlay. 43
Slide 44: Petrofac 6000 project is well advanced
Petrofac 6000 project is well advanced • Letters of intent were placed in July 2013 for the design and manufacture of the most critical equipment: – Main 5000 metric tonne crane and 4 deck cranes – 2000 metric tonne J-Lay tower • Since then we have ordered the other main equipment (tensioners, deepw
Slide 45: Petrofac 6000 will be best-in-class
Petrofac 6000 will be best-in-class 2000 1200 1800 J-Lay vessels S-Lay vessels 1000 1600 S-lay tension (> 200 mT) 1400 J-lay tension (mT) 800 1200 1000 600 800 400 600 400 200 200 0 0 Static Capacity Dynamic Capacity Flooded case Single Joint Double Joint 16000 Lift vessels • The Petrofac 6000 will
Slide 46: Preparing Petrofac to be a top tier EPCI contractor
Preparing Petrofac to be a top tier EPCI contractor Deepwater SURF Pipelaying Derrick/platform installation Access to SURF EPCI Subsea Installation Mega lifts >= 5000t Medium lift <2000t Decommissioning Heavy lift > 2000t Deepwater J-Lay Hook Up Comm. Steel Trunklines Key: Steel Flowlines Shallow wa
Slide 47: Offshore EPCI strategy in summary
Offshore EPCI strategy in summary The offshore market opportunity is attractive and our strategy is to build a differentiated top tier EPCI business focused on high-end turnkey opportunities We already have substantial capability in the offshore market, which we are continuing to enhance and grow Pe
Slide 48: Financial profile
Tim Weller, Chief Financial Officer 5: Financial profile
Slide 49: Our return on capital is expected to remain high
Our return on capital is expected to remain high • Our return on capital employed* • ROCE is expected to remain (ROCE) has recently decreased as we significantly higher than 20% over invest in IES, but remains considerably our 5-year planning horizon, as we higher than our peers continue to invest i
Slide 50: We are disciplined in allocating capital
We are disciplined in allocating capital Integrated Energy Services Offshore strategy • We expect to invest around US$1 • We expect to invest around US$1 billion each year on average in IES billion in our deepwater offshore over our 5-year planning horizon strategy over the next 5 years, with the ma
Slide 51: We have a strong financial position
We have a strong financial position From a substantial net cash position, we have entered a period where we will carry net debt as we invest capital in IES and our offshore strategy • Our balance sheet remains strong and Moodys Baa1 prudently managed, reflected in investment grade credit ratings: S&
Slide 52: Financial profile in summary
Financial profile in summary Our return on capital is expected to be remain significantly higher than 20% over our 5-year planning horizon Our offshore strategy is expected to deliver capital returns in line with those expected from Integrated Energy Services As we complete our offshore investment a
Slide 53: Summary and Q&A
Ayman Asfari, Group Chief Executive 6: Summary and Q&A
Slide 54: Summary
Summary • Petrofac has always differentiated itself through first class execution, commercial innovation, local delivery and a unique culture • This consistent approach has allowed us to: – establish a market leading onshore business that continues to grow – create IES, which has become a business o