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Why Shares In Petrofac Limited Plunged

Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares in Petrofac (LSE: PFC) plummeted over 16% in early trade this morning, following a downbeat trading update from the oil services company.

So what: Management cautioned that net income growth would be modest or flat over the next two years, after two projects (including the potentially lucrative Upper Zakum project in Abu Dhabi) were ‘rephased’ — or delayed — with management stating that it is expected to result in the deferral of significant revenue and margin from 2014 into 2015 and beyond.

Now what: 2013 hasn’t been the best of years for Petrofac, with its rally alongside the FTSE 100 at the turn of the year short-lived, and its share price has now sunk 30% lower than its late-January highs.

However, group chief executive Ayman Asfari commented “We remain confident of the long-term growth trajectory for Petrofac given our record backlog, the robustness of our contract portfolio and the strength of our bidding pipeline” so this might provide a buying opportunity for contrarian investors who are backing Petrofac to return to its former glories.

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> Sam does not own shares in Petrofac.