As a general rule of thumb, it’s good to remember that cause and effect are not necessarily closely related in time and space. Today, however, the response to the news of Petrovac’s (LSE:PFC) latest contract award was immediate and pronounced.
Petrovac released the news of being awarded a new $3.7 billion contract at 10:32 this morning. At that time its share price was drifting along between 1424.00 and 1431.00. One minute later the share price was 1458.00. At 10:34 it had surged to 1466. By 10:36 it had risen by another 18.0 points to 1484.00. By 10:45, only 10 minutes after the announcement, the stock had reached 1502, it’s high for the day and its best mark since 21 March.
The $3.7 billion contract was award by ZADCO, an Abu Dhabi National Oil Company, to Petrofac Emirates, a joint venture with Mubdala Petroleum. Petrofac will receive 78.4% of the proceeds, or $2.9 billion. Subramanian Sarma, the Managing Director of Onshore Engineering and Construction indicated that the award is a part of a growing relationship with ZADCO. He said that it “builds on the substantial work we have underway in the UAE. We look forward to developing our relationship with ZADCO through the successful delivery of this strategically important project.”
The new contract includes engineering, procurement construction transportation, and the commissioning of the surface facilities on four man-made islands.
Today’s announcement was preceded by a report from Petrofac on 02 April that revealed that the company had been awarded a $500 million contract for a similar project on two other artificial island in Abu Dhabi. There was little market reaction to the previous announcement, but then $500 million is not $3.7 billion.
Petrofac is one of the world’s leading oilfield service companies with 18,000 employees operating in 29 different countries, including major project in Malaysia, Mexico, Turkmenistan and Iraq. Its current market capitalization is £4,991.20. Company revenue for 2012 was $6.3 billion, with a backlog of $11.8 billion as of 31 December 2012.
By 3:27 BST the company’s share price had retracted back to 1443.00 on a volume of 1.8 million shares traded.