Shares of British oilfield services provider Petrofac (GB:PFC) surged nearly 27% yesterday on the news of strategic asset sales. The company is attempting to raise cash to repay bonds that will be due next year. London-based Petrofac is negotiating with financial investors the sale of a minority stake in some of its non-core assets, thus relieving it of short-term obligations.
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The company is facing delayed collections on some of its advance payments on new contracts, forcing it to take such extreme steps. The news initially sent Petrofac shares down to a fresh 52-week low, but investors eventually pushed the shares higher on reviewing the long-term prospects. On a negative note, the company said that it will be unable to meet its full-year “broadly neutral free cash flow” target. The news pushed the value of Petrofac’s bonds lower.
Petrofac’s Financial Condition Under Scrutiny
As per reports citing Petrofac’s half-year results, the company has a $162 million revolving credit facility and $90 million in short-term loans that are due in October 2024. Petrofac shares have been under excessive pressure since last week on weakening balance sheet fears. Its shares have lost 33.3% value in the past five trading days alone.
In particular, Petrofac’s Engineering & Construction (E&C) division saw its revenues decline 32% year-over-year in the first six months of 2023. That said, the unit booked massive new orders worth $4.3 billion in the first half.
Petrofac announced the addition of Aidan de Brunner as a non-executive director to the board yesterday. The Board is reviewing all strategic options to strengthen Petrofac’s balance sheet and protect its stakeholders’ interests.
Is Petrofac a Buy?
Recently, Jefferies analyst Mark Wilson cut the price target on PFC stock to 20p (5.7% downside) from 80p and maintained a Hold rating.
With one Hold and one Sell rating received during the past three months, PFC stock has a Moderate Sell consensus rating. On TipRanks, the Petrofac share price prediction of 27.50p implies 29.7% upside potential from current levels.
