Today's announcement comes as something of a surprise (not least to us given we previewed next Thursday's (15 May) scheduled update in this week's magazine). We were right to point to the Integrated Energy Services division as an area of concern. A poor contribution from this arm of the business means guidance has been revised from little or no growth for this year to as much as an 11% decline in net profit to between $580 and $600 million.
Although the stock recovered quite quickly from last year's crunch it may be harder for the company to win over the market again having disappointed for a second time in short succession.
The company has two core concerns: a large onshore engineering and construction (E&C) operation; and IES which takes interests in oil and gas fields in return for providing E&C services and sometimes putting up capital for their development. The E&C business enjoyed a strong first quarter and the group order book rose $4.4 billion to a record $18.6 billion during the period. But IES was hit by delays to the Greater Stella Area project, lower than expected production from the Ticleni field, the dilution of its equity interest in Seven Energy and a lack of new awards.
The company says it has completed a review of IES which will see it step back from certain opportunities and reduce capital expenditure.
VSA Capital comments: 'All in all, this is a positive IMS as it confirms PFC has a good visibility for its projects... However, the reduction of guidance may be negatively perceived by some investors.'