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Petrofac Secures Major Production Enhancement Contract in Romania

Petrofac Petrofac has been awarded its first Production Enhancement services contract by Petrom in Romania. Under the terms of the contract, Petrofac's Production Solutions business will provide production enhancement services to Petrom as the concession holder for the Ticleni oilfield and its eight satellite fields (Ticleni). The initial 15-year contract, which includes an option for extension by a further ten years, is effective immediately.

Ticleni, a mature onshore field which has been operating for some 60 years, is located in South-western Romania and has more than 1,000 wells, of which around 300 are currently producing a total of approximately 4,500 barrels of oil per day. Under the Production Enhancement contract Petrofac will provide a range of services to increase production through improving recovery rates, optimise operational efficiencies and invest to upgrade the facilities. Petrofac will be paid a tariff per barrel of oil produced, including an enhanced tariff for incremental production.

Petrofac will manage all aspects of the fields' activity on behalf of Petrom, including the responsibility for the employees currently working in Ticleni, who will be transferred to Petrofac under the terms of the contract.

Commenting on the award, Ayman Asfari, group chief executive of Petrofac, said:

"I am delighted to announce this contract which is a significant milestone for Petrofac Production Solutions as we have been assessing opportunities like this for some time. We believe this innovative approach enables us to align with our customer while generating additional value by investing and leveraging our operations, drilling management, production engineering, facilities upgrade and training skills. This contract also provides us with the opportunity to develop a track record for excellence in the production enhancement market which has the potential to be an area of significant growth over the medium-term."

Mariana Gheorghe, chief executive officer, Petrom, commented:

"In order to unlock our E&P potential, given the complexity of operating mature fields as well as the complexity of our portfolio in Romania, we will focus our efforts on the re-development of six to eight fields. In parallel, in order to maximise production on other mature fields, we decided to enter partnerships with internationally reputed companies, with a track record of remarkable results in this area. This partnership with Petrofac in Romania is an example of this approach and we are confident of obtaining the best results through this aligned and incentivised contract to enhance production and improve operational efficiency."

Gordon East, managing director, Petrofac Production Solutions added:

"This is an exciting contract for Petrofac and the first of its kind for our group. Within Production Solutions we will be combining our significant production and well engineering knowledge with the wider operations and training capability from within the Petrofac group to deliver an integrated solution for these fields in alignment with Petrom. This will include the implementation of field re-development plans to significantly increase production. We will also be undertaking surface facilities upgrades to accommodate the incremental production volumes and reduce field operating costs."

Notes:
1 - In accordance with its normal accounting policy Petrofac will book the initial five years' of estimated contract revenues into backlog in relation to this contract, which equates to US$270 million. Backlog consists of the estimated revenue attributable to the uncompleted portion of lump-sum engineering, procurement and construction contracts and variation orders plus, with regard to production enhancement, engineering services and facilities management contracts, the estimated revenue attributable to the lesser of the remaining term of the contract and five years. The group uses this key performance indicator as a measure of the visibility of future earnings. Backlog is not an audited measure.

Posted 12/07/2010

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