This blog gives you the latest topical news plus some informal comments on them from ShareSoc’s directors and other contributors. These are the personal comments of the authors and not necessarily the considered views of ShareSoc. The writers may hold shares in the companies mentioned. You can add your own comments on the blog posts, but note that ShareSoc reserves the right to remove or edit comments where they are inappropriate or defamatory.

£400 Million Legal Claim to be Launched Against Petrofac

Keystone Law have announced that they are about to launch a legal claim against Petrofac (PFC). This is what the announcement says: “Keystone Law is getting ready to launch a claim on behalf of institutional investors who have suffered significant losses on their Petrofac investments since at least 2010. The team, led by senior litigators George Lambrou, Matthew Reach and Robert Lawrie, has joined forces with litigation funder, Innsworth, to mount legal action against the oil services company. The claim is centered on allegations that Petrofac was involved in bribery, corruption and money laundering, which first emerged in press articles in early 2016. Petrofac saw billions wiped off its value in 2017 when the SFO confirmed its investigation. The value of the shareholder claim is expected to be in excess of £400,000,000.”

The Petrofac share price peaked at 1750p in 2012 but is now only 390p. The company admitted in an RNS announcement on the 7th February that a former employee had admitted bribery under the UK Bribery Act 2010 after a Serious Fraud Office (SFO) investigation.

At a prospective p/e of 5 and dividend yield of over 7%, is this a bargain one wonders? But one would need to be convinced that the company has changed its culture. Revenue and normalised earnings are also forecast to fall. It’s also a tricky sector as developing oil/gas production projects depends on the market prices of those commodities so can result in feast or famine for new business. The threat of a major law suit won’t help the share price either.

I did hold some shares in this company from 2009 to 2012 and attended at least one of their AGMs in 2012. It’s interesting to look back at what I said in a report on the meeting that I wrote at the time and which is available to ShareSoc full members, here. Basically I complained about evasive answers and waffle from the directors. There were also negative press comments subsequently about £1 million spent on a private jet for the CEO, and lack of disclosure of that to investors. I concluded that I did not trust the directors of the company and sold my shares.

As I have said many times before, it’s always worth attending AGMs to get an impression of the directors – you can always learn a lot by doing so.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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