WOOD chief executive Robin Watson has noted a marked improvement in conditions in the North Sea after three grim years as the Aberdeen-based engineering giant highlighted wider signs of recovery in its core oil and gas market.

Speaking after Wood posted a 13 per cent increase in first half revenues, Mr Watson indicated the North Sea business had played a small but noteworthy part in the company’s return to growth.

“We have seen an encouraging if modest increase in activity but after the three years of decline we’ve experienced I think we should all be fairly upbeat about that,” said Mr Watson of the North Sea business.

“Any increase in activity has got to be good for the local economy,” he added.

The update on conditions in the North Sea by Mr Watson yesterday provides the latest evidence that oil and gas firms have started investing in the area after slashing budgets in response to the crude price plunge.

This led to spending in areas such as drilling and modifications work being cut as work on some big projects came to an end, taking a heavy toll on the supply chain.

Mr Watson noted: “All these things coming together gave quite a rapid and quite a steep reduction in activity levels. I think there’s something of a bounce back from that, you can only defer some of the modification work for so long and we’re seeing some of that work coming back.”

Wood expects moderate growth in the North Sea to continue into the second half, amid expectations the partial recovery in the crude price since late 2016 will be sustained.

“We are well positioned with broader capabilities for continuing improvements in the North Sea,” said the company in its interim results announcement.

Mr Watson said the North Sea industry is benefiting from moves that firms such as Wood made to increase efficiency in response to the downturn.

While these resulted in hefty job cuts in Wood’s North Sea business, the numbers employed in Aberdeen have increased slightly this year. Wood employs around 3,000 in Aberdeen and 1,500 in its UK North Sea operations.

Aberdeen has been a beneficiary of the £2.2billion acquisition of Amec Foster Wheeler Wood completed last year, under Mr Watson’s drive to make the company less reliant on the oil and gas market.

Wood closed Amec Foster Wheeler’s former head office in London and cut a range of senior management positions as it aimed to realise cost synergies from the deal. Some work was transferred to Aberdeen.

Mr Watson is confident the acquisition has left the firm with a strong platform for growth. It helped Wood build big positions in markets such as environmental engineering.

Mr Watson said Wood remains on track to deliver growth in 2018 in line with market expectations, following good contract awards in broader industrial sectors.

Wood said: “In our core oil & gas market which accounts for c60% of revenue, we’re encouraged by the recent relative stability in oil prices and expect to see further momentum in activity including growth in international upstream spending.”

The company highlighted increased activity in the US shale market.

Mr Watson said Wood had achieved stronger than expected revenue and cost synergies after the acquisition of Amec Foster Wheeler.

Revenues rose to $5.3 billion in the six months to June 30 from $4.7bn last time on a pro forma basis. Earnings before interest tax and amortisation fell to $260m from $264m. Mr Watson cited factors such as the timing of project completions.

Wood lost $52m after $109m exceptional costs including $36m redundancy, restructuring and integration charges. It hiked the interim dividend to 11.3 cents per share from 11.1c.

Shares in Wood closed up 50.6p at 712p.