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Petrofac half-year profit falls, sees low orders denting 2020 revenue

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(Reuters) – Oilfield services provider Petrofac Ltd <PFC.L> reported a 9% drop in first-half core profit on Wednesday and lower new order intake because of an ongoing probe into its contract dealings in Saudi Arabia and Iraq.

The company said low new orders in recent years would continue to weigh, with revenues expected to drop next year.

Petrofac said in June it had lost out on $10 billion (£8.2 billion) worth of contracts globally due to the investigation by Britain’s Serious Fraud Office (SFO), which led to the conviction of its former head of sales on 11 counts of bribery related to Iraqi and Saudi contracts. The company has stressed that no charges have been brought against Petrofac or any other employees.

“New order intake year to date has been impacted by recent challenges in Saudi Arabia and Iraq,” chief executive Ayman Asfari said, adding that Petrofac continued to engage with the SFO and hoped to conclude the matter as quickly as possible.

Petrofac’s earnings before interest, taxes, depreciation and amortisation (EBITDA) fell to $305 million for the six months ended June 30 from $334 million a year earlier, with $2 billion in new orders, down from $3.3 billion at the end of June 2018.

First-half revenue inched up 1.3% to $2.82 billion, with revenue from Saudi Arabia plunging nearly 48% to $280 million but revenue in Iraq up 44% to $156 million.

The Jersey-based company, which had previously expected $15 billion worth of bid opportunities in the second half of the year, said now it expects that to be around $13 billion.

The company said it expected $2.6 billion of secured revenue for the second half of 2019. It maintained its annual revenue and margin forecasts for its Engineering and Construction division, its largest unit with Middle East and North Africa upstream operations at its core.

Shares of the FTSE 250 company have lost half of their value since Britain’s fraud office announced its probe in 2017 as part of a wider investigation into Monaco-based oil and gas consultancy Unaoil.

(Reporting by Yadarisa Shabong in Benglauru; Editing by Tomasz Janowski)

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