Petrofac said to sell Mexico oil fields, seeks upstream exit

Petrofac is looking to refocus on core activities such as onshore engineering and construction. (Reuters)

• Petrofac looking to focus on core strengths of onshore engineering and construction
• Company might also consider selling its Greater Stella assets in the UK North Sea

Oilfield services provider Petrofac Ltd. has hired investment banks Barclays and HSBC to help with the sale of its oil fields in Mexico, as it prepares to scale back its oil and gas production operations, several banking sources said.
Petrofac, which designs, builds, operates and maintains oil and gas facilities, expanded into oil and gas production projects during the oil price boom earlier this decade.
The strategy didn’t last and last year the company warned that the integrated energy services (IES) division would have lower than expected profits, hit by weaker oil prices, lower capital investment by clients in Mexico, and a delayed entry into the Greater Stella Area in the North Sea.
The company is now looking to refocus on core activities such as onshore engineering and construction.
Petrofac, Barclays and HSBC declined to comment.
Petrofac, the subject of a Serious Fraud Office (SFO) investigation in Britain in connection with a probe into Monaco-based Unaoil on suspected bribery, might also consider selling its Greater Stella assets in the UK North Sea, the sources said.
One of the sources said that Ithaca Energy, a company owned by Israeli Delek Group, would consider making an offer for these assets, because it already holds a 54.66 working interesting in the Greater Stella Area.
Ithaca Energy was not available to comment. Its parent company, Israel-based Delek Group did not reply to a request for comment.
In early 2012, Petrofac became the first foreign company for more than 70 years to operate state oil fields in Mexico, when it was awarded two integrated services contracts by Petróleos Mexicanos (PEMEX), Mexico’s National Oil Company.
Petrofac’s net debt was about $600 million at the end of 2017, below the $850 million it forecast. It reported a net loss of $29 million for the year.
Oilfield service companies had been hurt by weak demand as recent subdued oil prices forced explorers and producers to cut capital expenditure and defer or cancel contracts.
Alongside oil producers, companies that drill wells, haul water and provide other services to energy exploration firms had been hit by a slump in oil prices, with benchmark Brent tumbling to about $27 a barrel in 2016 from more than $100 in 2014. It is now trading at $77.
In recent months, oil firms have returned to profits due to higher oil prices and the benefits of deep cost cuts they made during the downturn. But their suppliers are still feeling the squeeze and trying to cope with low profitability.
This has led to a wave of consolidation in the sector, with the merger of France’s Technip and US rival FMC Technologies and the acquisition of Baker Hughes by GE’s oil and gas equipment and services operations.