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Wood Group cashes in on energy demand

INVESTORS have added around £170 million to the stock market worth of Wood Group, after the company predicted another year of growth in 2014 amid strong activity in US shale fields and in the North Sea.

DIPLOMATIC: Chief executive Bob Keiller said the independence referendum was for the Scottish people to decide.
DIPLOMATIC: Chief executive Bob Keiller said the independence referendum was for the Scottish people to decide.

The Scottish giant increased profits by 14% last year, when it cashed in on oil and gas firms' efforts to boost production around the world to meet strong demand for energy.

The company's chief executive, Bob Keiller, said the prospect of the referendum on Scottish independence created uncertainty for all businesses with activities on both sides of the border but it was up to Wood Group to succeed whatever the outcome. He declined to comment on the potential implications if Scotland voted for independence but was unable to keep the pound.

Mr Keiller is confident about the outlook for the North Sea, where he believes Aberdeen-based Wood Group will remain busy for years. He said the industry was not expecting any nasty surpises from George Osborne's Budget next month.

Wood Group is monitoring the potential for the development of shale oil and gas in the UK to generate work for services firms.

The company highlighted the benefits it enjoyed in the year to December as result of the hefty investment it has made in building a big position in shale in the US through acquisitions.

After completing his first full year as chief executive, Mr Keiller indicated big changes were unlikely at the group. "I have considered the group's strategy, which remains sound and positions us well for the longer term," he said.

Signalling confidence, Wood Group proposed a 29% increase in the total dividend for 2013, to 22 cents per share, up from 17 cents last time.

The results provided reassurance about the prospects for Wood Group, which disappointed investors in December by warning it expected to suffer a 15% fall in underlying earnings in the engineering division in 2014.

The division helps oil and gas firms develop new fields and has been hit by cuts in spending on big offshore projects by majors. The company's Wood Group PSN arm, which works on existing assets, has been very busy in US shale areas and the North Sea lately.

Shares in Wood Group closed up 45p at 721.5p yesterday, giving the company a market capitalisation of £2.7bn.

Mr Keiller said Wood Group was well placed with businesses that operated across the oil and gas industry cycle. The company said it expected to increase profits overall in 2014, "with growth in Wood Group PSN offsetting a reduction in Wood Group Engineering".

Asked about the vote on Scottish indendence set for September, Mr Keiller said: "The referendum and the potential decision that's made ... does present some uncertainties for all businesses that operate on both sides of the border."

He added: "We still believe it's up to the Scottish electorate to make the decision and then for us to make sure we can be successful whatever the outcome of that decision."

On the possible implications if an independent Scotland was not part of a currency union with the rest of the UK, Mr Keiller said: "I don't want to dive down deeply into hypothetical discussions about what might or might not become of the independence debate."

Mr Keiller said if the debate about shale became settled in the UK and activity went ahead "we would like to think that there's opportunities there for companies like us to play a part in it".

Oil and gas firms have sparked controversy in the US by using hydraulic fracturing, or fracking, to release tighly-held deposits from rock. Wood Group does not do any fracking but helps firms produce oil and gas once deposits are opened up.

The group increased pre-tax profits to $413m (£247m) in 2013, from $361m in 2012, in line with revised analysts' expectations.

The PSN business increased earnings before interest, tax and amortisation to $262m from $205m. The engineering division increased EBITA to $246m from $220m.

The company still anticipates Engineering EBITA falling around 15% in 2014 .

Mr Keiller predicted the offshore market will recover given expected demand for energy.

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