WOOD has underlined its confidence that the recovery in the North Sea is set to accelerate and said it remains on track to grow underlying profits helped by the £2.2 billion acquisition of Amec Foster Wheeler last year.
The Aberdeen-based engineering giant provided further evidence that conditions are improving in the key North Sea oil services market following three tough years as the increase in the crude price in recent months stokes activity.
In an update on trading in the first half of 2018, Wood said: “North Sea activity is showing moderate growth on 2017 albeit from a low base and is expected to strengthen in the second half.”
The company included a similar assessment in the statement made to investors at its general meeting six weeks ago.
The May update signalled there had been a significant change in market conditions since last year when chief executive Robin Watson said he saw no signs of recovery in the North Sea.
Mr Watson noted in May that operators had started spending on asset modification work again. They slashed spending in areas other than maintenance during the downturn triggered by the sharp fall in the crude price from mid 2014 to late 2016.
Royal Dutch Shell provided a big vote of confidence in the North Sea this week when it announced plans to develop the Fram gas field. In January the oil giant approved plans to redevelop the giant Penguins field north of Scotland.
The company noted on Wednesday that the approval for Fram followed moves to squeeze costs out of the supply chain.
Other operators followed a similar approach amid the crude price plunge posing big challenges for suppliers.
The resulting fall in costs has created opportunities for some relatively small players to increase activity.
Serica Energy yesterday submitted a plan to develop the Columbus gas field off Scotland to the regulator.
Jersey Oil & Gas said it has made good progress with preparations for the potential development of the Verbier find it made in the Moray Firth last year.
Wood said it is seeing the strongest growth in oil and gas market work in the Asia Pacific region and in the Middle East. The improvement in the US shale market is continuing.
Mr Watson said the company had recorded good contract awards in broader industrial sectors.
The company bought Amec Foster Wheeler last year under his plan to take Wood into a broader range of markets in a way that would reduce its reliance on the North Sea.
The company said it had achieved significant revenue synergies by winning contracts helped by combining the expertise offered by Wood and AFW, including one to work on a giant oil to chemicals complex in Saudi Arabia.
Wood remains confident of delivering cost synergies worth at least $170m annually within three years.
Last month Mr Watson said Wood had shed about 400 senior management jobs under the integration programme. It closed Amec Foster Wheeler’s head office in London. The company had not cut any jobs in Aberdeen under the programme.
“We remain on track to deliver growth in 2018,” said Mr Watson yesterday.
Wood is confident of achieving annual earnings before interest, tax and amortisation (EBITA) in line with market expectations.
The consensus of analyst estimates com piled by Wood is for the group to achieve $633m (£480m) EBITA.
Wood made $372m last year, before $165m exceptional costs. These included $118m related to it buying and integrating AFW..
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