S&P downgrades Petrofac

Standard & Poor’s said it lowered the long-term corporate credit rating on Petrofac Ltd. to BBB from BBB+.

The agency also said it affirmed the company’s A-2 short-term rating.

The outlook is negative.

The downgrades follow news that the costs to Petrofac to complete the major Laggan-Tormore development in the Shetlands in the north of the United Kingdom will be about $195 million higher than previously estimated, S&P said.

These further cost overruns cannot be recovered from the client, Total SA, and imply a cumulative loss of about $375 million on this project for Petrofac, the agency said.

Petrofac’s financial risk profile was downgraded to intermediate with a satisfactory business risk profile, S&P said.

The earlier Laggan-Tormore delays and ongoing cost escalation represent the most serious operating setback for Petrofac, although 2014 results also included impairments as a result of delays with the Greater Stella project and Petrofac’s reduced focus on its Integrated Engineering Services division, where it has lowered its profit expectations, the agency said.

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