Petrofac announces Ithaca deal

Oil and gas services giant Petrofac said it had delivered a "good operational performance" in the year to date, as it unveiled a deal with North Sea oil producer Ithaca Energy.

The FTSE 100-listed company said its performance so far this year had left it on track to deliver like-for-like net profit growth for the full year of at least 15% and in line with current market expectations.

It cited good progress across all of its divisions, particularly within its offshore engineering and operations division, where activity remains at record levels for both long-term operations support contracts and offshore capital projects.

The group's backlog at the end of September stood at around $10.8 billion (c£6.9 billion), compared with $11.4 billion at the end of June.

For more on a busy day for Ithaca, read:Ithaca announces hat-trick of deals.

"Our existing backlog and a continued positive outlook for our engineering and construction and offshore engineering and operations businesses gives us confidence in achieving our target of more than doubling our recurring 2010 group earnings by 2015," said chief executive Ayman Asfari.

Petrofac's confident update came as it announced that it has signed an agreement with Ithaca to sell 80% of its holding in the floating production facility on the Greater Stella Area development in the North Sea.

Under the terms of the deal, Petrofac will acquire a 20% interest from the other co-venturers in the Ithaca-operated development, covering the Stella and Harrier, Hurricane and Helios discoveries.

The equity position will be established through an earn-in type arrangement in Stella and Harrier which is effected at first oil, expected in the latter half of 2013, and the transfer of an interest in Hurricane and Helios, the company said.

"The FPF1 deal is a typical Petrofac innovative deal - swapping an interest in a 'hard' asset for an interest in an upstream development giving Petrofac shareholders leverage to the resource upside," said Evolution Securities analyst Keith Morris.

"The lack of performance in recent months presents an attractive entry point with newsflow likely on other integrated energy services projects in the coming months."

Are you looking for more on the North Sea oil industry? Why not watch what George Godber from Matterley Asset Management has to say in: The future of North Sea oil.