Following a period of weakness, Credit Suisse has upgraded its rating on the shares of oilfield services group Petrofac from 'neutral' to 'outperform' and raised its target price from 1,750p to 1,800p.

"We believe the stock has performed poorly on a lack of project awards over the summer period and elevated expectations for the IES business. We believe the next few months will be better: awards should step up, thanks to less instability in the Middle East, and the payoff of extensive marketing efforts in southeast Asia and amongst oil majors," the broker said on Tuesday morning.

Nevertheless, Petrofac is not without its risks, Credit Suisse admits, highlighting its exposure to the South Yoloten project in Turkmenistan and the expectation that 2013 revenue in the core onshore E&C division will be down year-on-year.

The broker has reduced its earnings per share (EPS) forecasts by 5% and 3% for 2012 and 2013, respectively, due to lower E&C profit assumption.

However, the stock is still the cheapest on an enterprise value-to-earnings before interest and tax basis in the European sector, "which we regard as extraordinary given the long-term track record, and see limited downside".

By 11:19, shares were up 1.78% at 1,543p.

BC

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