Wood Group Sees Resilient 2015 Despite Oil Drop

Posted by Joseph Keefe December 11, 2014

John Wood Group Plc, a British energy services company, said it expected relative resilience in 2015 helped by its largely reimbursable order book and range of longer-term contracts.

The company, which provides engineering, production support and turbine services to the oil and gas, and power sectors, said it anticipated full-year 2014 performance to be higher than last year's and in line with expectations.

Shares in Wood Group rose as much as 4.5 percent in early trading and were among the top percentage gainers on the FTSE 250 index.

The steep fall in oil prices is leading operators to re-consider their spending plans for 2015, hurting energy service providers. However, reimbursable order book will help Wood Group in getting full payment for any cost overruns.

Brent crude edged up on Thursday after hitting its weakest since July 2009 of $63.56 in the previous session.

Wood Group said it expected 2014 earnings before interest, tax and amortisation (EBITA) from its engineering division - its second largest unit - to be less than the 15 percent fall indicated in December 2013.

It warned last year that the division, which carries out early-stage design work mainly on offshore oil rigs and accounts for around half its total profit, would see significant fall this year due to weakness in Canada.

"Wood Group is our only 'outperform' rated stock in a sector faced with an uncertain outlook, as we favour its defensive attributes of being asset light, with long-term cost-reimbursable contracts, and robust balance sheet," Credit Suisse analysts said in a note.

The company also said it had secured a $750 million, five-year contract from BP for engineering, procurement and construction services in Grangemouth, Scotland.

The company, which earlier won a subsea contract from BP for the Shah Deniz II gas project in Azerbaijan in June, said the latest contract was its largest in 2014 and included an option for two, one-year extensions.

Wood Group also said it had acquired Swaggart Brothers, an Oregon-based provider of civil construction and fabrication services for $36.3 million with a further payment in 2017 based on future performance.