Petrofac will incur a further loss on the Laggan-Tormore gas plant project on the Shetland Islands in the UK because of delays owing to bad weather, the London-listed oil and gas services firm said.
Petrofac shares fell heavily on the news, dropping 13.2 per cent to 889.5 pence in afternoon London trading yesterday.
Petrofac, which said in February it lost US$230 million from the project, will now bear an additional pre-tax loss of $194.4m, it said.
The company, which operates out of Abu Dhabi and Sharjah, in February said that it did not expect any additional profit or loss from the project.
“Continued adverse weather conditions during March on Shetland and industrial action has delayed this ramp-up by almost a month from our original expectations,” Petrofac said.
“As the activity levels have increased, it has become apparent that we will need to expend significantly more man hours to complete the project than anticipated as a result of low manpower productivity levels as the project nears completion, a greater level of rectification and reinstatement work than expected, coupled with the failure of one of our subcontractors to deliver in line with their agreed scope.”
In October 2010, France’s Total had awarded Petrofac a lump sum engineering, procurement supply, construction and commissioning contract worth more than £800m to develop the new gas plant in the Shetland Islands in the far north of the UK.
“Our lack of experience of operating a direct construction model in a wholly new geography for our onshore engineering and construction business, particularly in a location where labour costs are much higher and productivity much lower than we are used to, has cost us dearly,” Ayman Asfari, group chief executive, said.
“We have already affirmed that we will no longer take construction risk on large lump sum projects within the UK to avoid a similar experience to Laggan-Tormore moving forward.”
Petrofac said in February that it expected a lower than forecast net profit of $460m this year owing to the fall in oil prices, which had pushed the company to post a 10.6 per cent drop in net profit last year.
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