Petrofac Limited (LON:PFC) (PFC.L) has released an investor update today to coincide with its AGM. The business was able to deliver net profit growth of 7% in 2017, which was backed by good project execution and high levels of activity in the wider energy markets.
The company was also able to report a recovery in new orders at the same time as maintaining its bidding discipline, which bodes well for its future prospects in my opinion.
Petrofac has continued to focus on its core operations, with it seeking to deliver organic growth as well as reducing capital intensity. In the year to date, the company has been successful at winning new business, with over $1.7 billion of new orders having been received.
Clearly, the current period is an uncertain one for the company. It is in the process of making management changes, while also being subject to an investigation by the SFO. In my view, these factors could contribute to its share price being held back to at least some degree over the near term, with investor sentiment having the potential to be relatively subdued.
In the long run, the Petrofac share price could perform well in my opinion. Activity levels across the resources industry have picked up in recent months, and the company seems to be performing well when it comes to winning new contracts. This could act as a catalyst on its financial performance and lead to a higher share price further down the line.
However, with the ongoing investigation, I feel that the company has a relatively uncertain outlook. Therefore, there may be better risk to reward ratios available for me elsewhere in the industry.
That’s not to say that the stock lacks investment appeal, but for me it remains a difficult share to predict in the short term. As a result, I’m content just watching it, rather than buying it, at this moment in time.