Bright future for North Sea, says Wood Group

Group Business Correspondent

Wednesday 22 August 2012

WOOD Group, the Scottish oil services giant, has expressed confidence in the outlook for the North Sea after increasing interim profits by 56%, helped by strong activity levels off the UK.

PROFIT LEVELS RISING: It has been a good period for Wood Group chairman Sir Ian Wood, centre, and chief executive Allister Langlands, right.

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MARK WILLIAMSON

The Aberdeen-based firm said uncertainty about the global economic outlook or matters closer to home have had no apparent impact on oil and gas markets, which look set to remain strong amid rapid economic growth in places like China.

A spokesperson for the company said: "We do not consider that the outcome of any independence vote for Scotland will have an impact on the business." Reflecting a bullish view, chief executive Allister Langlands said the company has the appetite to do more deals on the scale of the £608m acquisition of PSN in December 2010. This significantly increased its exposure to the North Sea. "(We) raised a billion dollars at that time fairly easily. To do that size of deal we think remains very possible," said Mr Langlands, who will be succeeded as chief executive by the former head of PSN, Bob Keiller, in November. Mr Langlands will succeed Sir Ian Wood as chairman. He added: "By the end of the year we don't think we'll have much in the way of net debt so we've got plenty of firepower there to look at things." After Wood Group announced that profit before tax and exceptionals increased 56% in the six months to June, to $160 million (£102m), from $102.7m last time, Mr Keiller said it has benefited from oil and gas firms' efforts to boost production in the North Sea amid robust global demand. The acquisition of PSN increased the company's share of the market to provide maintenance services and work on raising output from existing assets, through the Wood Group PSN division. Around 40%, or $720m, of Wood Group PSN's $1.8bn first-half revenues came from the North Sea. Now head of Wood Group PSN, Mr Keiller noted overseas firms have increased investment in the area recently, including China's Sinopec and CNOOC. "We are still seeing a lot of activity around the type of work we do and what I'm also encouraged by recently is inward investment... and I think that will lead to further investment in the North Sea which can only be good for the UK and for jobs specifically in Scotland." Mr Keiller said he saw no prospect of a big drop in activity given projected global economic and population growth. "We are reasonably confident that there's a (North Sea) market for at least three years and probably way beyond that." The prediction covers a period extending beyond the proposed referendum on independence for Scotland in 2014. Mr Keiller welcomed the tax breaks that were included in the 2012 Budget. He said concessions on investments in existing brown field assets and clarity regarding the tax treatment of decommissioning costs could encourage further investment in the North Sea. The company said Wood Group PSN did well overseas. However, growth was held back by $10m losses on a complex contract in Oman that Wood expects to become profitable eventually. The engineering division that works on new facilities is involved with projects in areas like the Gulf of Mexico, Canada and Australia and subsea and pipeline installations in the North Sea. "Overall, conditions in energy markets remain favourable. Uncertainty about the global economic outlook and somewhat lower commodity prices has not had any discernible impact on activity levels or the current outlook," said Wood Group. The gas turbines business has benefited from increased activity levels amid signs of improvement in the US power market. Wood Group said it is confident of achieving full-year performance in line with expectations. Group revenue from continuing operations increased by 36%, to $3.3bn, from $2.5bn in the first half last time. Wood Group intends to pay a total dividend of 17 cents per share for 2012, up 26% annually. Analysts at Oriel Securities retained their "add" rating on shares in Wood Group, which closed down 7.5p at 826p.

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Bright future for North Sea, says Wood Group

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