- Company wins biggest contract in its history
- Collaboration marks major step in bulk renewables
- Earnings upgrades could be significant
Energy services group Petrofac (PFC) stunned the market with the news it had won a share of a multi-year offshore wind framework agreement worth around €13 billion or £11.4 billion.
The shares leapt as much as 36p or 73% to 85p in early trading before settling back slightly to 80.8p for a gain of 65%.
LANDMARK EUROPEAN PROJECT
The agreement, the largest in Petrofac’s history, will see the UK firm work alongside Hitachi Energy to supply multiple offshore platforms and onshore converter stations in the North Sea on behalf of the Dutch-German transmission system operator TenneT.
The multi-year framework deal is part of TenneT’s two gigawatt high-voltage direct current (HVDC) offshore wind programme designed to accelerate the integration of bulk renewables into the European power grid.
The two firms will deploy six record-breaking renewable integration systems, five connecting offshore wind farms to the Dutch grid and the sixth to the German grid.
Petrofac will be responsible for the Engineering, Procurement, Construction and Integration (EPCI) side of the offshore platforms and elements of the onshore converters, while Hitachi Energy will supply its proprietary converter stations which convert AC power to DC offshore and convert it back to AC onshore.
The first contract has been awarded with immediate effect, with the second expected to be awarded later this year and the remaining four over the next three years.
UPGRADES AND SHORT-COVERING
According to sell-side analyst estimates compiled by the company, before today’s news the consensus forecasts for 2023 revenue and earnings after tax were $2.7 billion and $26 million respectively.
Clearly these numbers and any forecasts for 2024 to 2026 will have to be revised sharply upwards after today’s announcement.
Contributing in part to the huge share price rally is the fact Petrofac is one of the most-shorted stocks in the UK market, with roughly 4.7% of its equity capital out on loan according to the shorttracker website.
Among the funds shorting the shares are Astaris Capital Management, GLG Partners, Kairos Investment Management, Pictet Asset management and Systematica Investments.
