Petrofac surges on $1.5bn contract award

Petrofac surged on Thursday after it said that its joint venture with China Huanqiu Contracting & Engineering Corporation (HQC) has been awarded an engineering, procurement and construction (EPC) contract valued at around $1.5bn by STEP Polymers SPA.

The oilfield services company said this is a "significant" downstream project, which will form part of the Arzew Industrial Zone, located west of Algiers, supporting Algeria’s energy strategy.

Covering the design and build of two major integrated processing units, the contract includes the delivery of a new propane dehydrogenation unit and polypropylene production unit, as well as associated utilities and infrastructure for the site. It is expected to produce 550,000 tons of polypropylene per year.

Chief executive Tareq Kawash said: "We are proud to be supporting our customer to deliver this strategic project. Algeria is a core market for Petrofac and we are committed to supporting the long-term delivery of critical infrastructure as the country plays an increasingly important role as a major energy producer and moves into major petrochemical projects."

At 1215 BST, the shares were up 12.4% at 74.45p.

Broker Peel Hunt, which rates the stock at 'buy' with a 90p price target, said: "This deal takes the awards year-to-date to well over $2.2bn and means that if the second Tennet contract is awarded on schedule Petrofac should meet our forecasts for the year. This is a very encouraging sign, and we expect the stock to react very positively."