Petrofac (lon:pfc)
Petrofac Down On Just The SFO Enquiry?

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Title: Petrofac Down On Just The SFO Enquiry?
Company: PFC - Petrofac
Share Price Then: 458p
Author: Ian Smith
Date: Thu 27 Jul 2017
Comments: Petrofac are a huge oil drilling support company and an announcement that the SFO were looking into bribery allegations was made in May 2017.

This sent the share price tumbling from 600p to 400p, dropping right down to 350p.

This seems to have been an overreaction as they have paid two dividends ever year since 2006, and the current share price drop is the worse since 2008/2009.

The recent $100m Iraq win seems to suggest that this investigation is not affecting new business wins and there haven't been any contract cancellations as a result of it.

This seems to be a popular view as the share price has shown a slow recovery, probably because SFO investigations are rarely quick.

If you look at the June trading update

  • Underlying net profit(1) for the first half of 2017 is expected to be US$135 million to US$145 million; full year net profit is expected to be weighted to the second half of the year

  • New order intake of US$1.7 billion in the year to date

  • Backlog of US$13.0 billion at 31 May 2017

  • Net debt is forecast to be around US$1.1 billion at 30 June 2017 in line with expectations

This is not a company in obvious trouble.

When you consider that the 600p mark was at least in part the result of a drop related to oil stocks in general it seem to be an interesting option.
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