Oil and gas deal provides 5x return

Petrofac, an Aberdeen-based oil and gas facilities service provider, has floated near the top of its IPO price range to provide a £120m return to private equity backer 3i.

Petrofac sold 149.94m shares at 215p each, with a 10% greenshoe. This was near the top of its 180p–220p price range, which had been increased by 27% in late September on account of strong demand.

Petrofac’s total revenue from continuing operations was US$951.5m, with a net profit attributable to shareholders of US$46.1m, in the year to December 31 2004. In the six months ended June 30, Petrofac’s total revenue from continuing operations was US$692.4m, with a net profit attributable to shareholders of US$36.4m. The company’s backlog was US$2.5bn at the same date.

The exit by UK-listed 3i gives Petrofac a market capitalisation of £742.1m, according to joint lead managers Credit Suisse First Boston and Lehman Brothers, who were joined by JPMorgan, Cazenove and Shuaa Capital as co-lead managers.

3i, which has 40 portfolio companies in the exploration and production sector, originally invested £22m for a 16.2% stake in May 2002. This gives a return of 5.3x and an internal rate of return (IRR) of 67%.

3i has funded 24% of all European oil and gas private equity deals in the past three years. The current portfolio includes Vetco International, ABB’s former upstream oil and gas business, and EDP, an oilfield development project manager. Previous investments for 3i included John Wood Group, the UK’s largest oil services company, which was floated in 2002.

After the listing, Petrofac trades at a 2006 earnings multiple of just over 19x, a discount to Wood Group on 19.9x and significantly below Technip, which trades at around 28x.

The Petrofac deal has helped to boost 3i in a strong year for the company. The firm has realised £910m from investments in the first five months of its financial year, up from £577m in the same period last year. The figures include proceeds from the sale of stakes in foreign exchange company Travelex and telephone directory firm Yellow Brick Road.

3i said it expected the value of unrealised investments to be “substantially higher” in the six months to the end of September.