Oilfield services group Petrofac was performing well on Wednesday morning, helped by an upgrade by UBS from 'neutral' to 'buy'.

"We think Petrofac has a solid business model within the onshore engineering & construction (E&C) end market," the broker said.

"While Saipem's [Italian peer] warning may have cast doubt on the business model, we think that Petrofac's portfolio of projects is profitable and the order intake momentum is strong and hence we upgrade."

UBS highlighted that Petrofac's E&C business is cash generative and a good use of this cash would be to invest in the Integrated Energy Services (IES) business to create value for shareholders.

"Deploying cash organically also avoids the normal pitfalls of M&A risk, which when carried out in large sizes, can carry execution risks."

After increasing Petrofac estimates for the next three years, UBS has raised its target price for the shares from 1,575p to 1,875p.

By 10:19 on Wednesday, shares were up 3.51% at 1,679p.

BC

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