Petrofac: Sullen Voe

The fall in the oil price has made the North Sea a bad-tempered place to operate. The rancour between employers seeking cost cuts and resentful staff is reflected in an extra $195m loss on a big gas plant that oilfield services group Petrofac is building for Total. Productivity on the Laggan-Tormore project, close to Shetland's famous Sullum Voe oil terminal, has fallen partly due to strikes.

Grievances among workers have included a requirement to share hotel rooms. In other parts of the world roustabouts have learnt to put up with snoring co-workers. The disputes underline the difficulty of shrinking costs in the North Sea in order to adapt to straitened times.

This takes further wind out of the sails of the economic case for Scottish independence. Investors must meanwhile wonder at Petrofac's optimism in inking the Laggan-Tormore contract in 2010. A cumulative loss of $425m on the job is around half the original contract value, with the latest instalment taking a 20 per cent bite out of 2015 earnings before nasties.

Laggan-Tormore is a further blow to the ambitions of suave chief executive Ayman Asfari. A cost overrun on a fixed price contract is a discouragingly prosaic Nemesis for a business that had aspired to be an oilfield services giant. Risk-sharing deals with big oil companies have meanwhile generated write-offs of their own. Rival group Amec Foster Wheeler, run by wisecracking boss Samir Brikho, has suffered less in the downturn because most of its work is paid for on a cost-plus basis. Its shares, which trade at a modest premium to Petrofac's, remain a better bet.

[email protected]

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation