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Wood says it will be strong despite weaker markets

Wood says it will be strong despite weaker markets
INTERNATIONAL energy service company Wood Group expects to avoid the worst of any impact on the oil and gas industry caused by global recession and lower oil prices.

INTERNATIONAL energy service company Wood Group expects to avoid the worst of any impact on the oil and gas industry caused by global recession and lower oil prices.

Chief executive Allister Langlands said yesterday that people were talking about a 10-15% cut in exploration and production spending by the oil and gas industry worldwide, however, he added that Aberdeen-based Wood would suffer much less than some other service companies because a high proportion of its revenue came from operations expenditure rather than capital spending.

He said: “I think there will be an impact on spending everywhere, including the North Sea, as clients determine their spending on a range of factors including the short-term and long-term oil price.

“But I think we’ll still be pretty active in the North Sea, and we expect employment to be up overall in 2009 compared to this year thanks to winning deals like the TAQA dutyholder contract.”

This involves acting as dutyholder on four North Sea platforms recently acquired by TAQA, the Abu Dhabi national energy company.

Mr Langlands was speaking after Wood issued an update for the year to December 31 in which it said the outlook for 2009 was more uncertain and challenging.

It added, however: “Our strong order book, our focus on production support and longer-term capital projects, our good international spread and our high-quality customer base will stand us in good stead in this more challenging market.”

The group said trading performance in 2008 had been strong and earnings before interest, taxes and amortisation would be in line with expectations.

It said: “In engineering and production facilities, we have seen strong demand for our engineering services and have a healthy workload.

“In upstream, we continue to be a global market leader in topsides engineering.

“Within production facilities, demand for our services continues to be driven by our clients’ focus on maintaining production levels, ensuring asset integrity, and developing their operations in new markets.

“In our gas-turbine business, we are maintaining our focus on a range of initiatives to increase our differentiation and to increase our margins over time, including increasing the amount of revenue under longer-term contracts.

“Our overall funding position is strong, with bank facilities of around £660million committed to July 2010. We expect to deliver an improved working capital performance in the second half of 2008 which will drive strong operating cash flow.”

Analysts were generally positive after the update, with UBS rating Wood Group as “buy”, Cazenove “overweight” and Credit Suisse “market weight”.

Credit Suisse said it expected Wood to make pre-tax profits of more than £255million in 2008 compared with £171million the year before.

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