Proposed Fully Underwritten $275M Firm Placing and Placing and Open Offer

Source: 10/26/2021, Location: Europe

Petrofac Limited announces a proposed issuance of equity, by way of a Firm Placing, Placing and Open Offer (together, the "Capital Raise") in order to create a long-term, sustainable capital structure.

The Company intends to raise gross proceeds of approximately US$275 million (£200 million), through the issuance of, in aggregate, up to 173,597,412 ordinary shares in the capital of the Company (the "New Shares"), at an issue price of 115 pence per New Share (the "Issue Price"). The Issue Price represents a discount of 27.2 percent to the closing share price of 158 pence on 25 October 2021.

Key Highlights
• The US$275 million Capital Raise is part of a wider refinancing plan (the "Refinancing Plan") announced today, comprising:
o US$500 million bridge financing facility expected to be replaced or refinanced by way of a public bond issuance, expected to be launched later today;
o US$180 million new revolving credit facility;
o AED$185 million (US$50 million) new bilaterial facility; and
o an amendment of a US$50 million existing bilateral term loan facility.
• Proceeds from the Capital Raise will be used, alongside the Refinancing Plan and available cash reserves to:
o Pay, in January and February 2022, the US$106 million (£77 million) penalty imposed in relation to the SFO investigation; and
o Repay existing indebtedness.
• These actions will extend Petrofac's debt maturities and strengthen the Company's platform to execute its strategy.
• The Capital Raise will be effected by way of a Firm Placing of US$138.0 million (£100.2 million) and a Placing and Open Offer of US$137.0 million (£99.4 million).
• Ayman Asfari has irrevocably committed to invest at least US$38 million in the Capital Raise and to vote in favour of the corresponding resolutions at the General Meeting.
• All directors in addition to Mr Asfari have committed to invest in the Company, in connection with the Capital Raise at the Issue Price.

Petrofac Chairman Renι Mιdori said: "Support from all our shareholders and debt providers in the refinancing plan will provide the company with a stable platform from which to grow and look to the future with confidence. I welcome the continuing support of our largest shareholder and fellow Board member Ayman Asfari, as Petrofac moves on to the next chapter of its history."

Sami Iskander, Group Chief Executive of Petrofac, said: "Petrofac has a tremendous opportunity over the coming years to grow and re-establish itself as one of the world's leading providers of critical services to the energy industry. Following a quieter period during the pandemic, we see activity in our markets increasing significantly at a time when the full potential of our business has been unlocked - in recent years we have refocused on compliance, rebased our cost competitiveness, and now we are re-energised under a new team and a new strategy. The completion of the financing will cement a fantastic platform from which I am confident that we will deliver significant shareholder value over the coming years."

Ayman Asfari said: "I am pleased to support today's fund raise which, after more than four difficult years, puts the company squarely back on the path to recovery. I look forward to Sami and his leadership team restoring Petrofac to its greatest potential."

The Firm Placing and Placing are being conducted by way of an accelerated bookbuild process (the "Bookbuild"), which will be launched immediately following this announcement (the "Announcement") and is subject to the terms and conditions set out in the appendix to this Announcement (which forms part of this Announcement) (the "Appendix").

Goldman Sachs International ("Goldman Sachs") and J.P. Morgan Securities plc ("J.P. Morgan") are each acting as Joint Bookrunner, Joint Underwriter and Joint Global Coordinator (together the "Joint Bookrunners") to Petrofac in connection with the Capital Raise. J.P. Morgan is acting as Sole Sponsor to Petrofac in connection with the Capital Raise.

Background to and reasons for the Capital Raise
Petrofac is a leading provider of services to the global energy industry, with a 40-year track record of designing, building, managing, and maintaining energy infrastructure. The Group has particular expertise in engineering, procurement and construction of major facilities for the oil & gas and renewables sectors, in addition to a strong operations and maintenance focused business operating in the UK North Sea and internationally.

In May 2017 the Serious Fraud Office ("SFO") announced an investigation into Petrofac. The investigation concluded on 4 October 2021, when Southwark Crown Court imposed a penalty of £77 million in relation to seven historic offences of failing to prevent former Petrofac employees from offering or making payments to agents in relation to projects awarded between 2012 and 2015, contrary to Section 7 of the UK Bribery Act 2010. All employees involved in the charges have left the business and the Court and the SFO acknowledged Petrofac's corporate reform through its transformation of the Company's leadership, personnel, compliance and assurance processes.

Under new leadership, Petrofac has continued to prioritise ethical business conduct and a comprehensive governance regime. Following his appointment as Chief Executive on 1 January 2020, Sami Iskander developed a new strategy based on best-in-class delivery, returning the Company to growth and generating superior returns. This strategy was communicated on 20 April 2021 at Petrofac's full year results, and encompassed the Company's plans for growth in its traditional core oil & gas markets alongside an accelerated focus on new energies, particularly in those segments aligned to Petrofac's core capabilities, in offshore wind, carbon capture and storage, waste-to fuels/energy and hydrogen.

The resolution of the SFO investigation is expected to unlock significant opportunities for Petrofac. The Company has identified an annual addressable market growing to US$105 billion by 2025 with a bidding pipeline of US$46 billion of opportunities scheduled for award by the end of 2022, including US$7 billion of opportunities in new energies. Contract awards are expected to accelerate in 2022, following a period of underinvestment by the industry during the COVID-19 pandemic and supported by a stronger commodity price environment.

The Directors believe Petrofac's refreshed leadership, improved systems and clear strategy leave it well positioned to pursue material opportunities in both core markets and new energies, positioning the group to deliver growth and superior returns. Petrofac's strategy aims to deliver revenues of US$4-5 billion (with more than 20% from new energies), consistent premium margins and a strong balance sheet with a net cash position over the medium term. This strategy is expected to deliver significant shareholder value creation.

The Refinancing Plan will create a long-term, sustainable capital structure for the Company with appropriate leverage and a maturity profile that supports its strategic plan.

Comprehensive Refinancing Plan To Deliver The Company's Strategy
In connection with the Capital Raise, the Company is implementing a comprehensive Refinancing Plan to create a sustainable long-term foundation for the Company to execute its strategy from. In addition to the Capital Raise, the Refinancing Plan comprises: (i) a US$500 million bridge financing facility which the Company expects to replace or refinance by way of public bond issuance, (ii) a US$180 million new revolving credit facility, (iii) a AED$185 million (US$50 million) new bilaterial facility, as well as (iv) amendment of an existing US$50 million bilateral term loan facility.

The Company intends to use the proceeds of the Capital Raise, in combination with the proceeds from the bridge facility (or the public bonds which replace or refinance it), the new bilateral facility and available cash reserves in order to pay, in January and February 2022, the £77 million penalty imposed by the Southwark Crown Court in relation to the SFO Investigation and to repay indebtedness under its existing revolving credit facility (US$546 million), an existing bilateral term loan (US$90 million), and its commercial paper issued under the CCFF (£300 million). Had the Capital Raise taken place as at the last balance sheet date, being 30 June 2021, adjusted for the draw down on the revolving credit facility which increased by US$196 million between June 2021 and September 2021, the effect on the balance sheet would have been to decrease Petrofac's pro forma net debt to US$172 million. In the same period cash increased by US$3 million, however cash increase is not included in the pro forma net debt.

The Refinancing Plan aims to deliver the Company's key objectives of:
• reducing indebtedness;
• diversifying the Company's sources of capital by accessing the debt capital markets; and
• extending the maturity profile of the Petrofac's financing arrangements, providing the Company with long-term certainty, flexibility, balance sheet strength, improved liquidity, and ultimately an appropriate capital structure to deliver its strategy.

The Directors believe that successful delivery of the Company's strategy, together with the implementation of the Refinancing Plan, will enable Petrofac to grow its businesses and generate increased surplus cash flow with a view to further deleveraging the Company, while providing a platform for the Company to resume dividend payments in the future. The Petrofac Board, having carefully considered the available alternatives, believes that the Refinancing Plan is the best solution available to support delivery of the Company's strategy.

Highlights of the Capital Raise
The Company proposes to raise aggregate gross proceeds of approximately US$275 million through the issuance of, in aggregate, 173,597,412 New Shares, at the Issue Price comprising:
• 87,119,226 New Shares through a Firm Placing, raising gross proceeds of approximately US$138.0 million at the Issue Price (the "Firm Placing Shares"). The Firm Placing Shares are not subject to clawback and are not part of the placing and open offer; and
• Up to 86,478,186 New Shares through a Placing and an Open Offer, raising gross proceeds of approximately US$137.0 million at the Issue Price ("Open Offer Shares").

Under the Open Offer, Qualifying Shareholders will have an entitlement of one New Shares for every four existing ordinary shares held.

The Firm Placing and Placing are fully underwritten and are being conducted by way of an accelerated bookbuild process, which will be launched immediately following this Announcement and is subject to the terms and conditions set out in the Terms and Conditions to this Announcement.

The Capital Raise is conditional upon, amongst other things, shareholder approval for the issue of New Shares.

Shareholders who do not acquire New Shares in the Open Offer will experience dilution in their ownership of approximately 33.5 percent and shareholders who take up their Open Offer Entitlement in full will experience a dilution of approximately 16.8 percent as a result of the Capital Raise and Director Subscriptions.

Director Commitments
Ayman Asfari, Non-Executive Director, and family hold in aggregate approximately 19% of the shares in the Company. Mr Asfari and family have provided an irrevocable commitment to invest at least US$38 million into the Capital Raise, which they intend to achieve through participation in both the Firm Placing and the Open Offer. Mr Asfari and family's ultimate participation may increase from this level but will not exceed the pro-rata entitlement related to their aggregate shareholding

Ayman Asfari and family's participation in the Capital Raise is a related party transaction and is of sufficient size to require independent shareholder approval.

In addition, all directors other than Mr Asfari, have committed to invest in the Company, in connection with the Capital Raise at the Issue Price, pursuant to a direct subscription with the Company for the purchase of additional shares (the "Director Subscriptions").

Mr Sami Iskander, who does not currently hold any shares in the Company following his appointment as CEO earlier in the year, has committed to subscribe for shares at the Issue Price for an aggregate price of £250,000.

All other directors have committed to subscribe for shares at the Issue price, at a minimum, pro-rata to their shareholdings acquired by virtue of their position as directors or as employees of the Company. In aggregate, 308,673 shares are expected to be issued by the Company to the directors.

Each director is a related party of the Company. However, due to the size of the individual subscription relative to the Company's market capitalisation, the Director Subscriptions are exempt from the rules regarding related party transactions.

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