Petrofac: Recession proof?

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Ayman Asfari is eyeing additional acquisitions for Petrofac.

Oil services provider Petrofac is riding high as Gulf countries forge ahead with infrastructure plans. Claire Ferris-Lay meets group chief executive, Ayman Asfari, who talks billion-dollar deals and recruitment plans.

Most CEOs will be suffering as we enter the second quarter of what is widely anticipated to be one of the toughest financial years in history. But while most CEOs are forcing themselves to put on a brave face in front of the world's media, there are a certain few who don't need to desperately highlight the firm's few good assets that they hope will see them through the economic downturn.

One of those is Ayman Asfari of London-based oil services provider, Petrofac. So good were the firm's 2008 annual results that during its early morning media conference call last month, just one bewildered journalist asked a question - was Petrofac recession proof?

"It was a good question," chuckles the quietly spoken group chief executive before he talks cost pressures and reductions in discretionary spends.

In March Petrofac reported a net income of $265m up from $189m a year earlier, beating the $259m median estimate of eleven analysts surveyed by Bloomberg. As a result, the oil services firm increased its dividend payment from 30 percent to 35 percent while its share price remained in positive territory with an increase of 51.73 percent year to date (as of March 24).

Petrofac was established as a domestic oil services group in Texas, America in 1981. But it is Syrian-born Asfari who has led the transformation of Petrofac into the international business it is today, employing over 11,000 people in 24 offices worldwide. Asfari also led the company's billion-dollar flotation on the London Stock Exchange as chief executive in October 2005.

Now, as a British citizen with an estimated stake worth $534.8m he often finds himself ranked alongside some of Britain's leading businessmen and top entrepreneurs.

But as we sit in the company's gleaming eighteen-storey Middle East headquarters in the unlikely emirate of Sharjah, it is clear 50-year-old Asfari doesn't want to talk about himself, looking uncomfortable when asked if he thinks his Sunday Times Rich List ranking of position 211 with an estimated fortune of $579m is accurate. It's one of the downfalls of having a public company he shrugs.

Instead, he offers his thoughts on why Petrofac seems to be one of the only companies still growing during one of the worst recessions ever.

"We are focused on markets, particularly Middle Eastern markets where the marginal cost of production in oil and gas is relatively competitive.

We've seen clients pressing ahead with their capital expenditure plans, in fact speaking publicly that they want to take advantage of the downturn in the market to build capacity whilst the prices are reasonably competitive. [So] in the markets where we are well-positioned most of our clients are continuing with their capital expenditure plans."

With $5bn worth of contracts currently secured for 2009 its already looking like another strong year for the firm. Much of this backlog of work will be in Saudi Arabia and Abu Dhabi, two of the company's target areas for growth this year.

In January Petrofac signed a $2.3bn, 44-month lump sum order to boost output by state backed Abu Dhabi Company for Onshore Oil Operations (ADCO), a subsidiary of Abu Dhabi National Oil Company (ADNOC), which will see the firm provide engineering, procurement and construction services to upgrade the capacity at the onshore Asab oil field.

The following month the firm won the onshore contract for the Karan gas field owned by Saudi Arabia's state firm Aramco, which aims to bridge a gap in the kingdom's growing gas supply shortage.

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READERS' COMMENTS

Main reason
Posted by Abdul Rehman, Karachi, Pakistan on Tuesday 14 April 2009 at 08:37 UAE time


The main reason behind this success story is that the company has no bank borrowing on its books.

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