International oilfield services company Petrofac extends forbearance agreement again

International energy services company Petrofac has extended its existing forbearance agreement again, in respect of the non-payment of the interest coupon on its senior secured notes that was due on May 15. The new date is December 13, nearly one month later than the initial November 15 extension date. 

This forbearance agreement also extends to the non-payment of the interest coupon that was due on November 15, the company announced in a statement on November 18.

“The forbearance agreement is entered into by an ad hoc group of noteholders representing approximately 47% of the outstanding senior secured notes and certain other acceding noteholders,” Petrofac said.

The struggling London-listed oilfield services provider has referred investors to its previous market announcements for more details on the proposed financial restructuring, which Petrofac’s board and management are actively advancing.

In a previous market update on October 21, Petrofac said it continued to work constructively with the company’s creditors, key clients and other stakeholders to conclude due diligence and agree and finalise the terms and conditions of its proposed financial restructuring.

Petrofac specialises in designing, constructing, managing, and maintaining infrastructure for the oil, gas, refining, petrochemical, and renewable energy industries. Its services span the entire asset lifecycle, from design to decommissioning, with expertise in engineering, procurement, construction, and operations. On its website, the company says it emphasises safety, efficiency, and low emissions in its operations.

However, Petrofac is grappling with serious financial difficulties, particularly related to its senior debt. The recently missed interest payment on $600mn in senior secured notes due in May 2024, prompted Fitch Ratings to downgrade Petrofac’s credit rating to 'C'.

This default has placed the company in a critical position, initiating a 30-day grace period to resolve the issue. Petrofac took another blow when Fitch further downgraded its credit rating to “restricted default” (RD) on June 20, 2024. This decision followed the company’s failure to make an interest payment even after the 30-day grace period had expired.

Petrofac is now negotiating with bondholders on a debt restructuring plan, which could involve converting a significant portion of the debt into equity, Energy Voice reports.

However, the company maintained stable revenue in 2023, reporting $2.5bn compared to $2.6bn in 2022, according to its delayed full-year financial results. Additionally, Petrofac successfully secured significant contracts, bolstering its order book and offering strong potential for future growth and returns.

In Africa, the company signed an initial three-year integrated services contract in 2023 with Canadian Natural Resources International (CNRI), an independent crude oil and natural gas producer, for a floating production storage and offloading (FPSO) vessel, which is working offshore Ivory Coast in West Africa.

In January 2024, Petrofac was awarded a three-year operations services contract by energy supermajor BP, strengthening their partnership in West Africa. The multimillion-dollar agreement encompasses a variety of services for BP’s Greater Tortue Ahmeyim (GTA) project, which spans Mauritania and Senegal. These services include onshore and offshore management, personnel supply, supervision, and equipment maintenance.

International energy market analysts have a mixed view of Petrofac’s outlook. While the company is projected to achieve substantial growth, with earnings expected to increase by 130.6% annually and revenue by 26.2% annually, its ongoing financial challenges present significant risks. The success of its debt restructuring efforts and its ability to secure new contracts will be critical to its recovery and future performance, says Financial Times (FT).