Good morning, everyone, thank you for joining us. I'm Tareq Kawash, Petrofac's Group Chief Executive. I'm very pleased to be joined by Afonso Reis e Sousa, our Chief Financial Officer. On screen, you should see our standard disclosure notice. Please read it at your leisure. In a few moments, Afonso is going to take you through the detail of our financial results. First, I'd like to summarize progress on our key priorities. The H1 of 2023 was Petrofac's strongest period of new awards in many years. Thanks to the efforts of our people around the group, we secured over $4 billion of new awards in both traditional and renewable energies. With this high-quality backlog, a diverse pipeline of future opportunities, and a growing talent pool, we have created a strong base for which to move forward.
In addition to building a robust backlog, continuing to strengthen our balance sheet is critical to our plan to restore Petrofac to sustainable, profitable growth. While the H1 results we've announced for our E&C business are disappointing, they reflect steps taken to resolve historical contractual disputes and release working capital in the H2 of the year. Over the coming months, we will continue to close out the legacy portfolio while improving our financial resilience through advanced payments and commercial settlements due in that period, maintaining our target of broadly neutral free cash flow for the full year. At the same time, I'm focused on ensuring exemplary execution and driving a selective approach to bidding to grow our high-quality backlog. After four months as CEO, I'm excited for the opportunities I see ahead and encouraged by the energy, drive, and capabilities I see in Petrofac.
We have demonstrated the strength in our competitive position with a succession of contract wins, providing confidence and momentum to deliver further progress in the H2 and beyond.
Thank you, Tareq. Good morning everyone, and welcome to our results presentation for the 6-month period ending 30th of June, 2023. As Tareq just mentioned, we had a bumper period for contract awards, both in E&C and in Asset Solutions. The group has made significant progress in the recovery, with our order book now standing at $6.6 billion, nearly double what it was at the start of the year. These awards are aligned with our strategic objectives, with E&C contracts in our core markets, with long-standing clients, and in the new energy space, building on over a decade of experience in that sector. In Asset Solutions, the strong order intake included renewals and extensions, as well as expansion into new territories. This is aligned with our strategy to expand Asset Solutions' footprint into new geographies and to capture higher-margin work.
Tareq will provide more color on our progress in rebuilding backlog and a strong pipeline of opportunities in a few moments. We reported group revenue of $1.2 billion, which reflects the continued growth in Asset Solutions and the relatively low levels of activity in our E&C division, with revenue from the new awards to come primarily in 2024 and beyond. The business performance EBIT loss of $96 million was largely driven by the operational performance in E&C, and we shall go into more details on that shortly. Our net debt increased in the period to $584 million, largely as a result of working capital outflows in E&C, with the anticipated unwind of historical balances and advances of new contracts to come in the H2. I will cover this in more detail shortly. Moving to segmental performance.
E&C's order intake of $3.4 billion is the highest for many years. It nearly triples the backlog to $4.5 billion. Further growth is expected, not least from the remaining five contracts in the TenneT framework agreement, as well as the strong bidding pipeline. Other financial metrics reflect the challenges embedded in the completion of the remaining legacy contracts. E&C reported H1 revenue of $500 million, which is 32% lower than in the same period last year as a result of the low activity on the contracts coming towards completion. As we highlighted in the June trading update, E&C EBIT performance reflects the impact of onerous contracts with no margin recognition, which account for approximately 30% of revenues.
It reflects also the adverse operating leverage due to the low levels of activity. It reflects the one-off write-downs that we took as actions to protect our full-year cash flows. Consequently, E&C reported a H1 EBIT loss of $122 million, including the impact of these write-downs of approximately $67 million, a little higher than we previously communicated. Operationally, we continued to make progress on closing out the legacy contracts, with five of the remaining contracts expected to complete during the H2 of this year or in early 2024. On a Thai Oil Clean Fuels Project, good progress is being made on the construction phases, and the execution plan remains in line with the update provided at our full-year results in April.
In Asset Solutions, the strong performance of recent years continued into the H1 of 2023, with revenues of $0.7 billion, up 34% on the same period last year, and with awards of $0.9 billion, resulting in a book-to-bill of 1.4 times in the H1. The recent award in Africa with CNR International, which we announced in July, takes the awards in the year to date above $1 billion. In terms of EBIT, as we mentioned in previous guidance, this will be lower in 2023 than it was in 2022 due to the completion of historic high-margin contracts during the course of last year, as well as the higher proportion of pass-through revenues.
As a result, EBIT margin in Asset Solutions in the H1 was 2.1%, though we expect profits to be second-half weighted and Asset Solutions to deliver a full year EBIT in line with guidance. In new energies, we saw increased levels of activity in the H1 as we continued to secure early-stage alliances with technology providers, including an exclusive partnership with OCI to decarbonize their methanol production through biomass gasification. This is part, of course, of our waste-to-value offering. Moving on to IES, the financial performance for the first six months was in line with the guidance provided in April. Revenue was up 13% compared to the same period last year due to higher production, delivering an EBITDA of $48 million.
Net production was 640,000 barrels of oil, with an equivalent realized oil price of $96 per barrel, taking into account hedging, of course. Turning now to the balance sheet. In the H1, there was a free cash outflow of $225 million, which resulted in net debt of $584 million at the 30th of June. This movement was largely driven by the operating loss and net working capital outflow in the E&C division. As we mentioned in the June trading update, we have made progress on settlement resolutions on historical contracts, which will unlock working capital. We therefore expect to reverse the H1 outflows during the H2 with settlement collections, as well as advances on the new awards that were secured during the H1.
Reflecting that, we are maintaining our forecast to deliver broadly neutral free cash flow for the full year. As a consequence, whilst liquidity has reduced in line with the free cash outflow, we expect that it will improve with the second-half cash inflows. Looking now towards the full-year outlook. E&C has approximately $500 million of secured revenue for the H2 of the year, of which about one-third relates to contracts with no future margin contribution. The dynamics we saw in the H1 relating to the mature portfolio of contracts and adverse operating leverage will continue to play out for the remainder of the year, as new awards will not contribute to earnings during 2023. Therefore, we expect an E&C EBIT loss of approximately 10% for the full year. Let's turn now to Asset Solutions.
Asset Solutions is expected to continue to perform well, with revenue growth driven by the high levels of new order intake. The division has approximately $700 million of secured revenue for the H2 of the year. Its margins are expected to remain healthy, albeit lower than last year, reflecting the roll-off of the historically high-margin work in the Middle East, as well as an increased proportion of pass-through revenues. IES is also expected to continue to perform well for the remainder of 2023, although full-year production is projected to be marginally lower than in 2022. We reiterate the guidance we provided in April of EBITDA in the range of between $65 million and $75 million for the full year at an oil price of $85 per barrel.
From a group perspective, we expect cash flow to be broadly neutral in 2023 through a combination of positive tailwind from cash advances collected on the new E&C awards that we secured in the H1, coupled with the release of working capital from the legacy portfolio. With that, I will hand you back to Tareq.
Thank you, Afonso. Let's look at operational performance, starting with our HSE performance. We continued in the 1st half to mitigate lost time injuries, and our low incident rate remains significantly better than the previous year's industry average. When I spoke to you in April, I outlined the efforts underway to engage our teams in the development of our HSE culture. I'm pleased to say that the investment we've made in technology, education, and compliance is making a positive difference. This is particularly apparent when you look at driving safety, where we've seen a huge reduction in incidents in the 1st half. Of course, our goal must be zero incidents. That's why we're investing in further driver training and awareness in the 2nd half of this year. Turning to ESG.
At Petrofac, we are committed to playing our part in delivering a more sustainable energy sector by reducing our own carbon intensity and further diversifying our portfolio into new and renewable energy. Following our H1 win with TenneT, we have several years of work in front of us dedicated to accelerating that transition. Our role on TenneT's 2-gigawatt program will support the delivery of six carbon-neutral platforms, which, taken together, will provide clean energy to approximately 25% of the Dutch and German population. These projects demonstrate the role that Petrofac, which developed its skills in the traditional oil and gas sector, will play in the delivery of a lower carbon future. Turning to operational performance. In E&C, we've been driving progress in three key areas. The first priority has been backlog.
With a long-term framework agreement with TenneT, our first material petrochemical project, and our first significant EPC award with ADNOC since our reinstatement, E&C has made big progress. I'll go into more detail on some of these wins in a moment. With these contract awards, we have quickly ramped up to ensure successful delivery. Following a concerted recruitment effort, we welcomed talented new team members at all levels of the organization in the H1. This theme is set to continue. In July, 53 Petrofac graduates were inducted as part of our first group-wide graduate development program since 2019. Recently, we began adjusting our operating model to drive the right leadership focus, project governance, and geographical oversight across our growing portfolio. These internal changes will support the delivery of more predictable results moving forward.
At the same time, we have taken steps to strengthen our business development organization and approach. This will ensure we continue to bid selectively, adding quality work to our backlog. Moving on to the last column. As Alfonso outlined, across the mature project portfolio, we have continued to make progress closing out activities and historical settlements. On Thai Oil, we continue to progress project delivery against the updated execution strategy. I spent time at site recently and will return again in September to meet our team, customer, and partners to review the progress. Across the remaining portfolio, five of the eight projects, which were so severely impacted by the pandemic, will complete this year or early next year as planned. We are focused on closing this portfolio out quickly and safely. Looking to the future, let me take you through the progress we've made in building the E&C backlog.
E&C has nearly tripled its backlog in the H1. Most importantly, this is quality backlog. The specific examples on the screen represent significant future revenues, providing assurance for the future. Taking the examples in order, you've already heard me talk about TenneT's groundbreaking 2- gigawatt offshore wind program. Our framework agreement provides backlog visibility across multiple years. As previously communicated, the second project in our scope is expected to be awarded in the H2 of 2023. Our win with STEP Polymers builds on a 25-year track record in Algeria with a customer we know very well. The win further diversifies our portfolio in the petrochemicals industry. In a similar vein, our award from ADNOC represents a strategically significant win in our home market of the UAE, with one of Petrofac's longest-standing customers.
In Asset Solutions, we have continued to deliver a robust performance in the H1, maintaining a renewal rate of more than 80% for operation and maintenance contracts. Our focus on protecting the core business has been achieved through continued high standards of delivery. We continued to grow Asset Solutions' geographic footprint in the H1 with expanded late life and decommissioning scopes in both the Gulf of Mexico and Gulf of Thailand. Combining our focus on expansion into higher margin geographies with our ability to integrate services, in July, Asset Solutions was awarded a three-year, GBP multimillion integrated services contract by CNRI on the Ivory Coast, which takes the order intake to over $1 billion for the year to date. We continue to pursue other opportunities of this nature in the H2. This leads me to the last section of today's presentation, the outlook.
When I talked to you in April, I described the four market themes that gave me confidence for the future. They appear on the screen now. As you've heard today, these themes have underpinned a major increase in our backlog this year. Looking forward, they continue to drive the makeup of our pipeline. The outlook for new awards at E&C is robust, with a total pipeline schedule for awards by December 2024 of approximately $44 billion. Almost half of these opportunities exist in our core MENA market, where we continue to see increasing capital expenditure as customers catch up on a decade of underinvestment. $8 billion of our E&C pipeline, which spans both traditional and new energies, is scheduled for award by December 2023. Of this, $6 billion of bids have already been submitted.
Asset Solutions also has a strong pipeline of opportunities, with $16 billion scheduled for award by December 2024, of which $7 billion is scheduled for award in 2023. As I mentioned earlier, Asset Solutions' focus on geographic growth will support higher margin opportunities. Before we wrap up, let me summarize some of the key points from today's presentation. The H1 of 2023 was Petrofac's strongest period for new awards in many years. Having secured this high-quality backlog, we have created the platform for our recovery. While we have a strong base, we must also bring the legacy contract portfolio to a close for Petrofac to continue to move forward. Our teams are working hard to safely close out five of the remaining legacy contracts in 2023 or early 2024.
The operating model adjustments we've instigated will ensure they have appropriate leadership support and project governance to drive exemplary delivery on these and future projects. A strong balance sheet is key to our plan to restore Petrofac to sustainable, profitable growth. We have a clear way forward. As a result of the actions to date, we will release working capital in the H2 and largely reverse the outflows from the H1. Alongside advanced payments due in this period, this positive tailwind will support us to maintain our target of broadly neutral cash flow for the full year. Bolstered by a diverse pipeline of future opportunities, we will continue to bid selectively to grow our order book with quality backlog, returning to sector-leading margins and free cash flow in the medium term. Thank you for listening. We will now open the call for questions.
Ladies and gentlemen, if you'd like to ask a question, please press star one on your telephone keypad, and to withdraw your question, please press star two. First question comes from the line of Alex Smith, calling from Investec. Please go ahead.
Morning, guys. Thanks for the call this morning. Just first question, just, I guess, kind of get a bit more detail on the confidence in the award pipeline, especially the bidding pipeline, which has fallen from $73 billion to $60 billion. I guess there's a timing impact of 16 months versus 18 months to factor here, as well as recent awards. Just wanted to kind of square that delta, and just confidence in several awards in the bidding pipeline, and are there any meaningful awards expected before the end of 2023? Then secondly, just on guidance for working capital movement. I believe previously you said almost like a fully unwinding by 2024. Just want to check the guidance on this as it is kind of key to the deleveraging process. Thank you.
Okay, thank you. Thank you for your question. The pipeline of opportunities are still, you know, as we said in the presentation, very healthy across both E&C, Asset Solutions and our energy transition business. You know, we have $60 billion in the pipeline as addressable business. $15 billion of that to be awarded in 2023. Some of that's timing, as projects get awarded or moved to the right. You know, we've got a very, very healthy pipeline. The E&C pipeline is, a majority of that is in the MENA region, which is really our traditional region we've, we've operated in, which makes it addressable, and we're well positioned for a lot of that work. The Asset Solutions pipeline is across all the Asset Solutions offering in the North Sea, as well as in some of the geographic areas that we're expanding into. The markets remain robust.
I think if we're looking towards the end of this year, we have a number of prospects which we are bidding and negotiating, that we're confident we'll get across the line. We expect that there'll be some awards coming in this year. We have, we have mentioned earlier on, about the TenneT HVDC program, which is a framework of six contracts. One contract is already in backlog. We expect to sign up the second contract before the end of this year, so that will go into backlog. That's something that we're working on. There are other prospects across both Asset Solutions and E&C. Alex, sorry, the, the line was a little bit garbled. I know you had a second question. Could you repeat it?
Sure, yeah. It was just on your previous guidance on working capital, on why I think you kind of said by the end of 2024 is kind of your kind of confident, almost fully on. I guess it's kind of key to the deleveraging process. I just want to double-check the kind of reiteration of that guidance.
Yes, we do reiterate that the working capital is winding down gradually. It's not an instant process. As you know, in E&C, traditionally, we've had a very low or in fact, negative working capital requirement, and that was true until 2019, and then it reversed beyond that with the onset of the pandemic impact. As we work through these resolutions of historical contracts, and then, of course, the tailwind of the advances on new contracts, which, of course, are favorable working capital movements, we should expect our working capital to revert to a more normal and negative levels by 2024.
All right. Thank you.
The next question comes from the line of Moyo Adebayo, calling from Goldman Sachs. Please go ahead.
Morning, all. Thank you for taking my question. It's Moyo here from Goldman Sachs. I was just wondering how the group scales the relative growth opportunities for its Asset Solutions business across wells and decommissioning projects, as well as from its entry into new geographies such as Western Africa.
Yeah. Yeah, thank you for that question. In the Asset Solutions business, we see a, you know, a good opportunity to expand the current expertise that we built up over the last decade in the North Sea, in the O&M business, asset development business, and decommissioning into new geographies. The recent awards in West Africa, for example, the recent award in West Africa is, is a start of that journey. We see some, you know, some really good opportunities for us in end-of-life assets and decommissioning in those areas. As some of those assets come to their end of life, IOCs tend to move on, hand them over to the national oil companies.
There's an opportunity for us, with our technical know-how and our résumé, to come in there and operate those assets and eventually decommission them. Yeah, it's, it's a, it's a big area of expansion for us. It's a area for that we've, we said would, would bring us higher margins as well. It's a big focus area. I'm really happy with the, the recent awards there, that Asset Solutions have been able to bring in. We have a good pipeline of opportunities over the, over this year and, and the coming years in, in that, in that area. We are working decommissioning also in the Gulf of Mexico, Australia, and a couple of areas in the North Sea. We see the whole decommissioning business as a, as a, as a, as a, as an opportunity to expand our offering in the, in the Asset Solutions business.
Thank you.
We currently have no question coming through. As a final reminder, if you would like to ask a question, please press star one now. The next question comes from the line of Richard Ryan, calling from Berenberg. Please go ahead.
Hi, thank you for taking my questions. Two, please. First is just on the five legacy projects that are due to be completed by 2024. Good to see those are still on track, but for the other three contracts, do you have a timeline for when those are expected to be completed by? I, I assume one of those is also the Thai Oil contract as well. Then just in IES on the oil production, just some figures on or some color on how much of the production is hedged would be great, just to see how sensitive EBITDA is to movements in Brent. Thank you very much.
All right, thank you for your question. I'll take the first question on the, on the legacy contract. Yeah, we, we, we did say there are three, three contracts that would will still be going on into, into next year. First of all, on Thai Oil, I mean, Thai Oil is one of the largest contracts in our, in our backlog. There's still a couple more years to go on that contract. It's getting a lot of our management attention. We're, we're going out there again in September. This project is a three-way joint venture.
It's in the peak of construction today, and we are working with our joint venture partners and our clients to bring it to completion in the next two years. That project will remain with us for a couple more years. The other two will, the plan is to complete those by middle of 2024. Those are smaller contracts.
I can pick up on the, on the hedging. Our policy is that we hedge about 12 months ahead, but we only hedge the sort of P90 production. I think probably the best way to think about it is it's about $9.7 million of sensitivity for every sustained $1 difference in oil price for the full year.
Okay. That's great. Thank you very much.
Ladies and gentlemen, if you'd like to ask a question, this is the final reminder. Please press star one now on your telephone keypad. If there are no further questions, I will hand it back to your host to conclude today's conference.
Well, just, thank you, everyone. Appreciate you taking time to join us this, this week. Of course, we're available for any follow-up discussions as usual. No doubt, we'll be speaking again in our trading update later on in the year. In the meantime, I wish you all a very good summer and a well-deserved break, I'm sure.
Thank you very much.