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Oil firm Wood Group bullish in North Sea

WOOD Group, the oil and gas services giant, has underlined the strength of demand in the North Sea as Aberdeen harbour said it was nearing capacity amid heavy-sector traffic.

BOB KEILLER: Wood Group's chief executive has seen growth in the North Sea and US make up for other challenges.
BOB KEILLER: Wood Group's chief executive has seen growth in the North Sea and US make up for other challenges.

Aberdeen-based Wood highlighted strong activity levels in the North Sea and the US shale market in a trading update in which the company said it is on course to grow profits again this year.

The update was issued at Wood's annual general meeting, at which investors signalled unease about executive pay.

It provides fresh evidence of how Scotland's services firms are benefiting from the boom in spending by oil and gas firms, which are looking to increase production to cash in on strong demand for energy.

This has provided a big boost for the Wood Group PSN maintenance business in the North Sea, which works on existing assets.

"In the North Sea demand remains strong and we are benefiting from significant contract renewals secured in 2013," said Wood Group.

The engineering division, which works on new assets, is busy on a range of subsea developments in Europe. The North Sea accounts for the bulk of the European business.

The bullish news from Wood came weeks after a study by Ernst & Young found the UK's oil services industry generated £35bn total revenues a year.

The report said the output of the services industry should increase given expected investment in the North Sea.

The strong performance by Wood's maintenance business provides vindication for the group's decision to increase its exposure to that market through the £630m acquisition of PSN in 2010.

This was completed when Allister Langlands was chief executive. He was succeeded in November 2012 by the former head of PSN, Bob Keiller.

Wood has invested heavily in growing its US shale business through acquisitions under Mr Keiller. The company said its US maintenance business has been led by further growth in shale-related work. In the engineering arm the onshore pipelines division is benefitting from "healthy activity" in US shale.

Growth in the North Sea and US has helped compensate for challenges Wood has experienced in other areas.

Wood Group warned in December it expected to suffer a 15 per cent fall in underlying earnings in the engineering division in 2014.

The division has been affected by moves by some giants to limit spending on giant projects, to help free up funds to return to investors.

Wood said yesterday: "Overall, our trading outlook for the full year is unchanged and we continue to expect EBITA (earnings before interest tax and amortisation) to be up in 2014, with growth in Wood Group PSN offsetting a reduction in Wood Group Engineering."

Analysts at Numis Securities forecast the company would achieve EBITA of $550m (£330m) in 2014, up from $533m in 2013.

Shares in Wood Group closed up 5p at 774.5p. They traded at 718p following the warning in December.

Wood's general meeting was the last under the chairmanship of Mr Langlands, who joined the board in 1991 as finance director. Mr Langlands became chief executive in 2007 and chairman in 2012.

Following the AGM, Ian Marchant, the former chief executive of Scottish and Southern Energy, became chairman of Wood Group. At Wood's general meeting yesterday 6 per cent of votes cast opposed his re-election as a director. Some 12 per cent of votes on the directors' remuneration report were withheld or opposed it.

Jann Brown, managing director and chief financial officer of Cairn Energy, is to join Wood's board as a non-executive director today.

Cairn's general meeting today will be the last chaired by the company's founder, Sir Bill Gammell, who is retiring from the board.

Ms Brown and deputy chief executive Mike Watts are to stand down from the board. Both will work out their notice periods in senior roles.

Aberdeen Harbour said turnover increased to a record £27.6m in 2013, from £27.3m in 2012. Pre-tax profits fell to £9.6m from £10.5m.

Chief executive, Colin Parker, said the port needs to expand.

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