Petrofac posts net profit decline as Saudi, Iraq bribery probe continues
Contractor in the spotlight after former employee admitted to paying bribes for contracts worth more than $4.2bn
Engineering, procurement, and construction firm Petrofac’s 2018 net profit has dropped by 2% to $353m, with the oil and gas specialist facing an investigation by the UK's Serious Fraud Office (SFO).
At the end of the 2018 financial year, Petrofac had a new order intake of $5bn, with a backlog worth $9.6bn, including $1.2bn in new work from Iraq, Oman, Turkey, and the UK.
The SFO probe of Petrofac comes after ex-staffer David Lufkin, 51, admitted to paying bribes for contract awards in Iraq and Saudi Arabia, respectively worth $730m and $3.5bn.
Lufkin's admission in February 2019 was followed by Petrofac stating that no current board member “is alleged to have been involved” with the former corrupt employee. In a financial update at the end of February, Petrofac reiterated that no charges had been brought against the company or any of its other officers or employees.
It remains to be seen whether SFO will bring charges against any other former or current employees, and in the event it does, Petrofac said it would “continue to engage” with the investigation.
Petrofac said it had "the utmost respect for the robust, highly structured, and rigorous" procurement processes followed by its clients, but defended the use of agents, calling it a “common practice” and a “legal requirement” in some contracting markets.
"We only expect to be awarded business by submitting the best technical and most competitive commercial offer,” the contractor said.
“Petrofac has comparatively few agents, having phased the majority out as the business established its own regional and local infrastructures.”
Ayman Asfari, group chief executive of Petrofac, praised the company’s efforts for returning to a net cash position “well ahead of schedule”, but warned of uncertainty.
“Whilst we have a busy tendering pipeline and are well-placed on a number of bids, there is a higher degree of uncertainty in the level of awards in the near-term.”