Accordingly, the Petrofac Board has, following engagement with a group of its core lending banks and other stakeholders, developed a Refinancing Plan, as defined below, to strengthen its capital base and financial position. The Refinancing Plan will deleverage the Group's balance sheet, extend the maturity profile of the Group's financing arrangements and strengthen the Group's capital structure. This will increase the financial flexibility and stability of the Group and improve the credit perception of Petrofac with customers, partners and suppliers. The Petrofac Board believes that this will, in turn, enable the Group to pursue its strategy more effectively and enhance long-term shareholder value. 2. The Refinancing Plan

Petrofac's existing lending facilities comprise: (i) a syndicated revolving credit facility of USUSD610 million maturing on 2 June 2022 (the "Existing Revolving Credit Facility"); (ii) a bilateral term loan of the equivalent of USUSD90 million, from Abu Dhabi Commercial Bank (the "Existing ADCB Term Loan Facility"), maturing on 1 April 2022; (iii) a bilateral term loan of USUSD50 million (the "Existing RAK Term Loan Facility"), from The National Bank of Ras Al-Khaimah (P.S.C.) ("RAK Bank"), maturing on 31 October 2023; (iv) GBP300 million of commercial paper, issued under the Covid Corporate Finance Facility (the "CCFF") due to be repaid on 31 January 2022; and (v) an USUSD8 million overdraft facility that is drawn and is to be repaid.

The "Refinancing Plan" includes the following components:

-- the raising of gross proceeds of USUSD275 million (GBP200 million) by way of the Firm Placing and Placing and Open Offer (USUSD259 million after deduction of estimated expenses, including underwriting commissions);

-- the establishment of a USUSD500 million bridge financing facility, which matures on 26 October 2022, with an option (at the Company's election, and without requiring the lenders' consent) to extend the maturity by six months (the " Bridge Facility"), and which is expected either to be: (a) drawn in full and subsequently refinanced by way of a public bond issuance prior to its maturity; or (b) replaced prior to being drawn down by way of a public bond issuance, in either case following the closing of the Capital Raise;

-- the establishment of an AED185 million (USUSD50 million) new term loan facility with ADCB, maturing 24 months following its utilisation date (the "New ADCB Facility");

-- the amendment of the USUSD50 million Existing RAK Term Loan Facility (as amended, the "Amended RAK Facility", maturing 1 November 2023); and

-- the establishment of a USUSD180 million revolving credit facility, maturing 26 October 2023 (the "New Revolving Credit Facility").

The Company intends to use the proceeds of Firm Placing and Placing and Open Offer, in combination with the proceeds from the Bridge Facility, the New ADCB Facility and available cash reserves in order to pay, in January and February 2022, the GBP77 million in penalties and fees imposed by the Southwark Crown Court in relation to the SFO Investigation and to repay indebtedness under its existing revolving credit facility (USUSD546 million), its existing term loan with ADCB (USUSD90 million), its commercial paper under the CCFF (GBP300 million) and an existing overdraft facility (USUSD8 million), as well as estimated fees and expenses in connection with its refinancing plan (USUSD36 million).

Petrofac entered into the Bridge Facility, the New Revolving Credit Facility, the New ADCB Facility and the Amended RAK Facility on 26 October 2021. The effectiveness of the Refinancing Plan, however, is contingent on completion of the Capital Raise, which is conditional on the Resolutions having been passed by Shareholders at the General Meeting. Assessment of the Refinancing Plan

The Refinancing Plan aims to deliver the Group's key objectives of:

-- reducing indebtedness, taking into account the resolution of the SFO resolution, including the payment of the SFO Fine;

-- diversifying the Group's sources of capital by accessing the debt capital markets in order to replace the Bridge Facility or to refinance borrowings under the Bridge Facility prior to its maturity; and

-- extending the maturity profile of the Group's financing arrangements, providing the Group with long-term certainty, flexibility, balance sheet strength, improved liquidity, covenant headroom and ultimately an appropriate capital structure to deliver its strategy.

The Refinancing Plan will also facilitate, and allow the Group to focus its efforts on, the implementation of its strategy. The Directors believe that successful delivery of the Group's strategy, together with the implementation of the Refinancing Plan, will enable Petrofac to grow its businesses and generate increased surplus cash flow with a view to further deleveraging the Group, while providing a platform for the Group to resume dividend payments in the future. The Petrofac Board, having carefully considered the available alternatives, believes that the Refinancing Plan is the optimal solution available to support delivery of the Group's strategy, and has confidence in being able to issue the proposed public bonds on market-competitive terms.

Petrofac closed 2020 with USUSD1.1 billion of liquidity and ample covenant headroom. The Refinancing Plan provides sufficient operating liquidity over the coming years based on Petrofac's internal forecasts. Petrofac expects to continue to deliver and transition to a net cash position in the medium term. 3. The Group's Strategy and Key Strengths 1. Market Outlook

Global energy demand growth is underpinned by population growth, with an increase of 2 billion people expected by 2050, together with increasing levels of prosperity in emerging economies which are urbanising quickly and improving their access to energy.

There are a range of different scenarios, considering the aggregate views of the IEA, OPEC and other commentators, for future energy demand depending on government policies, speed of recovery from the COVID-19 pandemic and environmental targets. However, in all scenarios, absolute energy demand is expected to increase in the period to 2050. Renewables are expected to grow most rapidly, but all forms of energy will be required for the foreseeable future and oil and gas are expected to constitute a considerable proportion of the total energy supply for the foreseeable future in all scenarios.

Based on the Group's market analysis, it expects that worldwide capital investment in all forms of energy will grow to approximately USUSD850 billion by 2025. In aggregate, the addressable market for Petrofac is expected to exceed USUSD100 billion by 2025 (excluding opportunities within the UAE, Saudi Arabia and Iraq, which Petrofac expects to re-enter over time). In the period up to 2025, Petrofac is focused on three compelling addressable markets that align closely with its core capabilities and track record. Firstly, capital expenditure on upstream, refining and petrochemicals, where Petrofac has a compelling customer proposition and a strong track record of project execution, is expected to rise to approximately USUSD70 billion per annum by 2025. The MENA region upstream capex forecast is expected to grow at 10% CAGR 2021-2025 (Source: Rystad). Secondly, opportunities within new energies (comprising offshore wind, carbon capture and storage, waste-to-fuels/energy and hydrogen), where Petrofac is accelerating its efforts, are expected to grow to approximately USUSD20 billion per annum by 2025. Thirdly, operating expenditure for upstream and new energies infrastructure, where Petrofac believes that it can deploy its operations and maintenance capabilities, is expected to grow to USUSD15 billion per annum by 2025.

Source: Group market analysis


Notes: 
(1) Core (upstream and refinery) and adjacent (petrochemical) sectors excluding UAE, Saudi and Iraq. 
(2) Top 5 countries by aggregate addressable market 2021-25 are Algeria, Oman, Kuwait, India and Russia. 
(4) Opex for upstream and new energies. 2.               Key Strengths 1.         Leading international service provider and trusted partner to the energy industry withlong-standing customer relationships 

Petrofac is a trusted partner to a diverse portfolio of customers, providing services covering every stage of the project lifecycle from conception to completion, and able to offer flexible commercial models. The Group has operations in 29 countries with 16 major projects ongoing and 8,499 employees worldwide.

The Group has long and deep customer relationships with international and national oil companies. Its E&C division has a 40-year track record in designing and building major energy infrastructure projects with over 200 major projects delivered. It has a particularly strong presence in the MENA region where it has, for example, built 70% of the gas infrastructure in Oman and built infrastructure in Kuwait that supports 35% of the country's oil production. These positions have supported revenues of USUSD25 billion in E&C MENA operations between 2014 and 2020.

Petrofac has a reputation for having an exceptional EPC capability in the market. The Group's 40% market share in operations and maintenance in the UK is a testament to its market-leading capabilities and service offering. In 2020, Petrofac secured first place in Refining and Petrochemicals Middle East magazine's Top 30 EPC Contractors listing, which cited the Group's operational delivery, its strong safety record and its digitalisation programme. 2. Strategic positioning in attractive core markets with addressable spend expected to rise by 40%by 2025

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October 26, 2021 02:27 ET (06:27 GMT)