Energy services heavyweight Wood Group saw its shares jump today after it set out plans to cut costs by more than $30 million (£19.5m) this year as it reacts to lower oil prices.
The Aberdeen-based firm, which has already frozen staff wages and cut contractors’ rates, admitted there would be job losses among its 40,000-strong global workforce, but chief executive Bob Keiller said the cutbacks would be relatively small scale.
Keiller, who declined to put a figure on the number of potential job losses, told The Scotsman: “They will be distributed across all the countries in which we operate, but we’re not looking for anything that would be seen as major. It’s work in progress so I can’t give any specific numbers.”
As well as headcount reductions, the savings will include a “tightening” of the group’s spending plans, changes to its travel policies and the deferment of staff conferences.
His comments came after Wood Group posted a profit of $549.6m for 2014, up 3.1 per cent on the previous year, as total revenues rose 7.8 per cent to $7.6 billion. Lewis Sturdy, dealer at London Capital Group, said the results represented “a very healthy looking performance against a difficult second half of the year for anyone in the oil space”.
He added: “Shares have been coming off a low base since last month after declining in line with the fall in crude prices, so a strong set of numbers is certainly going to help them stand out.”
Wood Group’s shares ended the session up 30p, or almost 5 per cent, at 660p, having risen as high as 706.5p.
Despite the sharp fall in crude prices since last summer, Wood insisted its North Sea business remained “robust”, helped by more than $1.5bn worth of contract renewals with the likes of BP, EnQuest and Talisman Sinopec to provide engineering, procurement, construction and maintenance services.
Keiller added: “On the maintenance and operations side of the business, people are not making cuts that are damaging the integrity of their assets. Where I’d be worried about the North Sea is if we see a continued drop-off in exploration, appraisal and development activity. Project activity and investment is under strain at the moment, but from a Wood Group PSN perspective, most of our activity is on existing assets with existing production.”
In December, the group said it would be creating 150 jobs after its PSN division won a deal with BP worth almost £500m, covering six offshore installations as well as onshore facilities at Grangemouth.
That agreement came as it announced the acquisition of Swaggart, an Oregon-based provider of construction and fabrication services to the US oil and gas, industrial and agricultural sectors for an up-front $36.3m, with a further payment due in 2017 based on performance.
Keiller said today that the firm has a “healthy pipeline” of additional acquisition opportunities, having completed a string of deals in recent years.
“We need to make sure they provide a good fit with the business, good growth opportunities and return on capital,” he added.
“We will continue on the path of acquisitions, but I think we’ll be less active than we were in 2014.”
Wood Group’s board proposed a final dividend of 18.6 cents a share to be paid on 19 May, giving a total payout for the year of 27.5 cents, an increase of 25 per cent.
It added: “Reflecting our confidence in longer-term growth, our intention remains to increase the US dollar dividend per share for 2015 onwards by a double-digit percentage.”
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