Wood buoyant but warns of slowdown in oil contracts

Robin Watson, chief executive of Wood.
Robin Watson, chief executive of Wood.

Energy service giant Wood today warned that recent volatility in commodity prices could slow down contract awards for oil and gas jobs.

But the Aberdeen-headquartered firm said its diversification into other markets, partly achieved through the acquisition of Amec Foster Wheeler (AFW), meant it was “flexible” and “well positioned”.

Company bosses said the outlook was “generally favourable” across its industrial markets, with further earnings growth expected next year, underpinned by cost synergy delivery.

In a trading update, Wood said its full-year results for 2018 would show “good organic revenue growth”, up by more than 10% on the previous year, in the region of £8.7-8.8 billion.

Full year Ebita should be in the range of £495-500m.

Net debt is on track to drop to around £1.19bn at the end of 2018, against £1.27bn on June 30.

Wood believes it can deliver synergies of around £48m next year and is confident of meeting its target of more than £165m by the end of the third year following completion of the AFW acquisition in October 2017.

Chief executive Robin Watson said: “Wood returned to growth in 2018 and performance is in line with guidance and expectations. In 2018 good momentum in trading has driven revenue growth of over 10%; we secured revenue synergies of over £400m and increased our cost synergy targets to over £165m.

“Integration is complete and our unique platform is generating strong operational cashflows which are supporting good progress on our deleveraging plan.”  

John Moore, senior investment manager at Brewin Dolphin Scotland, said: “Earnings have fallen slightly short of what some analysts were hoping for, but Wood’s latest update is more or less in line with expectations.

“The trading environment for the oil services market, as a whole, remains very mixed: volatility in the oil price, financial uncertainty at some operators, and cost-saving targets at certain oil majors will act as an immediate drag.

“In the face of such challenges, Wood has focused on cash generation, cost savings and debt reduction to give it flexibility and the potential to invest.

“The company also has strong, long-term relationships with oil majors like Exxon, BP and Chevron, which place it well to benefit from their expansion plans in US Shale, among other areas.

“Combined, these factors put Wood Group in an encouraging position for the months ahead.”

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