WOOD has seen its shares surge seven per cent after the company provided reassurance that it was on course to achieve strong growth in spite of the cloudy outlook for the global economy.

The Aberdeen-based engineering group told investors the full year outlook for underlying earnings “remains broadly in line with consensus, despite the impact on activity of a slowing macro environment”.

The rise in the company’s share price may reflect relief that the company appears to be making progress amid tough conditions in key markets such as oil and gas.

Wood has big oil services operations in basins ranging from the North Sea to Australia. It has built a significant position in the shale market in the US in recent years through acquisitions.

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On Tuesday Glasgow-based Weir revealed it had slashed 450 jobs in the US in response to a slowdown in shale activity, following a long boom.

After ramping up activity in recent years, US oil and gas firms have been looking to conserve cash amid uncertainty about the outlook for crude prices.

Investment bank UBS has warned the Brent crude price could fall to $55 per barrel in the first half of 2020, from around $62.50/bbl, citing “strong supply growth in non-OPEC states amid weak global demand growth”. The prospect of trade wars has weighed on sentiment although tensions between the US and China have eased in recent days.

In a trading update issued yesterday, Wood said shale activity in the US had slowed, without elaborating.

However, the company said its US business is benefiting from increased activity in the refining and chemicals production sectors.

Wood has increased its exposure to such markets in recent years under chief executive Robin Watson’s plan to reduce the company’s reliance on the North Sea oil services business in which it made its name.

Wood was hit hard by the slump in North Sea activity that was triggered by the sharp fall in the crude price since 2014.

Oil price warning bodes ill for North Sea

The crude price has recovered some ground since falling below $30 per barrel early in 2016. However, there appears little prospect of a return to the boom conditions seen in the North Sea during the period of $100/bbl plus oil prices earlier in the decade.

Wood has said it expects to achieve moderate growth in the North Sea this year but made no mention of the area in yesterday’s update.

Conditions appear to be brighter in other oil and gas markets.

Wood said the division that works on oil and gas facilities has continued to perform strongly in the Middle East, Caspian and Asia Pacific.

The company said activity and margins in its environment and infrastructure solutions (E&IS) business remain relatively robust.

The group expanded significantly in these markets through the £2.2bn acquisition of Amec Foster Wheeler in 2017.

Mr Watson has held out the prospect that Aberdeen will be a beneficiary of the deal, with some work being transferred to the city under plans to achieve synergies.

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Investors may have been concerned the E&IS division could be vulnerable to cuts in spending on infrastructure projects made in response to the prospect of a wider economic slowdown.

Mr Watson thinks Wood will be able to capitalise on moves intended to help tackle climate change around the world.

“We are confident Wood is well positioned to unlock growth opportunities from the emerging trends in our energy and built environment markets,” he said.

The company is set to strengthen its balance sheet by offloading the nuclear engineering business it built up through the acquisition of Amec Foster Wheeler.

Wood expects to complete the $305 million (£240m) sale of the business to engineering multi-national Jacobs in the first quarter of 2020. The sale will accelerate the company’s progress towards meeting its debt reduction targets.

Wood said its financial performance is benefitting from “proactive cost reduction measures including accelerated synergy delivery”.

In its annual results in March Wood said it expected to generate $210m cost synergies annually from three years after the Amec Foster Wheeler deal, up 24% on its previous target.

Wood says oil and gas market recovery slower than expected

The consensus of analysts’ forecasts is for Wood to achieve $890m earnings before interest, tax, depreciation and amortisation in 2019, compared with $694m in 2018.

Wood shares closed up 24.9p at 380p.

They traded at 691.6p a year ago, when Brent crude sold for more than $70 a barrel.