WOOD has won a landmark contract to supply technology for use at a nuclear plant which will reduce its reliance on the North Sea as a rival noted that conditions remain tough on the United Kingdom Continental Shelf.
Aberdeen-based Wood has been appointed to supply digital control technologies for use at the Sellafield plant in Cumbria under a $66 (£52m) million contract.
The win provides a boost for Wood as the engineering giant grapples with the fallout from the crude price plunge in the North Sea oil services market in which the company made its name.
Read more: Wood shares plunge as engineering giant highlights fresh crude price challenge
The sharp fall in the crude price from summer 2014 to early 2016 prompted firms to slash spending on the kind of upgrade work that has been an important revenue generator for Wood.
Yesterday Petrofac said conditions in the market for engineering work on North Sea facilities remain challenging.
The updates came on a day when Brent crude fell by four per cent, $2.44 per barrel, to $57.17/bbl in afternoon trading after reaching a four year high of $85/bbl in October.
The boom in supplies of oil from US shale areas has offset efforts by exporters led by Saudi Arabia to support the market by curbing production, in a programme initiated late in 2016.
Concerns about the outlook for growth in the global economy amid trade tensions between the US and China have also weighed on the market.
Against that backdrop, Wood said the Sellafield success provided further vindication for the £2.2 billion acquisition of Amec Foster Wheeler which it completed last year.
Read more: Wood claims £2.2bn takeover will be good for Scotland
The blockbuster deal helped the firm develop positions in a wider range of engineering markets including nuclear.
“Securing this important framework is proof of the rationale for acquiring Amec Foster Wheeler 12 months ago and a good revenue synergy,” said Bob MacDonald, who heads the division that will complete the Sellafield work, yesterday. “We could not have won this contract as separate businesses.”
The contract win also reflects the benefits of acquisitions involving controls firms specialising in the automotive industry completed by Wood in recent years.
Read more: Wood moves up a gear with Detroit deal
The company said the win was secured by a joint approach from nuclear and automation and controls specialists within Wood, augmenting experience from the automotive and oil and gas sectors with nuclear competence.
Led by chief executive Robin Watson, Wood saw its share price fall 10 per cent on Wednesday last week after it told investors the renewed crude price fall since October could pose challenges for oil and gas firms.
The company said then: “Although our medium-term outlook remains positive, in oil and gas recent volatility in commodity prices may impact confidence and the pace of contract awards.”
In August Mr Watson said Wood had seen an encouraging if modest increase in North Sea activity after three years of decline.
The company made no mention of the North Sea in an update on trading since January which it issued last week. It is understood the recovery noted in August has been maintained.
In the trading update Wood noted an improvement in its US shale business, with work increasingly significantly in the Permian basin.
Mr Watson said Wood had made good progress overall with good momentum in trading driving revenue growth of over 10%.
Wood shares closed down 3%, 17p, at 517p yesterday, leaving the firm with a market capitalisation of around £3.5bn. They closed down 65.6p at 578.6p following last Wednesday’s update.
Petrofac said the market environment for brownfield projects in the North Sea was challenging, The engineering firm added it was on course to report good results for 2018 after making progress in areas such as the Middle East.
In April the company announced plans to cut up to 90 positions held by onshore staff and contractors in the North Sea. It employs around 4,000 people in Scotland.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here