WOOD has underlined the scale of the downturn in oil and gas markets such as the North Sea amid the coronavirus crisis as it said annual revenues and profits both fell by around 20 per cent last year.

The Aberdeen engineering giant said it had cut costs by around $230 million (£170m) as part of a response that has taken a toll on jobs in Scotland.

However, the group said the progress it has made in markets such as renewables has helped offset the impact of the fall in oil and gas market activity.

READ MORE: Cut-price exit from North Sea by energy giant bodes ill for area

After reducing net debt by $400m in the latest year, Wood reckons it is well placed to capitalise on the growth opportunities it expects will be presented amid the global shift to a less carbon-intensive energy system.

Chief executive Robin Watson said: “Looking ahead, while near term headwinds remain in 2021, we see significant opportunities from the accelerating pace of energy transition and will optimise our operating model to unlock stronger medium- term growth.”

Wood said that whilst the ongoing impacts of Covid-19 remain uncertain it has seen some signs of markets stabilizing. The group’s order book reflects continued strength in the built environment and resilience in renewables and other energy markets.

Under Mr Watson’s leadership, Wood has invested heavily in building its presence in markets such as wind power and solar energy to reduce its reliance on the oil and gas business in which it made its name.

The Herald: Wood chief executive Robin Watson Picture: Gordon TerrisWood chief executive Robin Watson Picture: Gordon Terris

However, a trading update from the group yesterday made clear that the company has faced challenges amid the plunge in oil prices triggered by the coronavirus crisis.

The Brent crude price fell from around $70 per barrel in January to an 18-year-low of less than $20/bbl in April. It has rallied to around $55/bbl amid hopes that coronavirus vaccines will fuel an economic recovery.

Wood helps companies to develop oil and gas facilities and to maintain existing assets.

The oil market turmoil has prompted firms to cut investment in new developments sharply and to pare discretionary spending to the bone.

READ MORE: North Sea oil heavyweight highlights scale of challenge facing supply chain

Noting that it had operated against a backdrop of the impact of Covid-19 and oil price volatility, Wood said its revenues fell 20 per cent on an underlying basis last year, excluding income from businesses sold.

Underlying earnings for the year will be down around 22%.

The group did not provide details of the performance of its North Sea business.

It said the division that includes the North Sea business saw revenues fall around 20% “reflecting lower activity on upstream and chemicals and downstream projects”.

Wood said it had taken early action to protect margins including the delivery of around $230m overhead savings.

Employee numbers fell in Scotland during the year but Wood did not say how many jobs were lost.

READ MORE: Aberdeen oil services firm cuts jobs and dividend amid turmoil in market

In April Wood said its response to the downturn had included temporary furloughing, unpaid leave and operational salary reductions. It said executive directors and senior leaders had elected to take a voluntary, 10% reduction in base salary for nine months.

The company noted then: “Regrettably, employee reductions are also being made in some areas reflecting the reduction in operational activity.”

Wood employed around 3,000 people working offshore or in Aberdeen and a further 1,000 elsewhere in Scotland at the time.

Wood has not paid any dividends since 2019. In April it scrapped the final dividend due in respect of 2019.

Helped by the disposal of its nuclear and industrial services businesses, Wood reduced net debt by around $400m last year to around $1.03bn.

It increased its exposure to a range of engineering markets, including nuclear, through the £2.2 billion acquisition of Amec Foster Wheeler in 2017.

READ MORE: Wood judged to be ahead of oil services pack in response to renewables

Wood said it expects to report revenues of around $7.6bn for 2020.

Underlying earnings are expected to be between $620m and $640m.

In 2019 it achieved $855m underlying profit on revenues of $9.9bn.

Shares in Wood closed down 2.5p at 350.8p. They fell from 421.6p in February to 155.35p in March.

Stuart Lamont, investment manager at the Brewin Dolphin wealth management business in Aberdeen, said Wood had shown resilience amid the challenges of the pandemic. Noting the group had reduced its reliance on oil and gas work and shored up its balance sheet, he added: “Wood is in a good position to weather oncoming storms.”