Keiller sends top directors to sort out Oman contract problems

By PETER RANSCOMBE
Published on 21/08/2012 23:25

INCOMING Wood Group chief executive Bob Keiller has dispatched two of his most senior directors to Oman to turn around a loss-making contract that is dragging down the Aberdeen-based firm’s profits.

Ricky Duff and Bill Nicholson have been sent to the Middle East to manage the seven-year deal with Petroleum Development Oman (PDO), which yesterday reported bigger-than-expected losses.

Wood Group posted a 56 per cent jump in profits for the six months to 30 June to $160 million (£102m) but analysts warned the problems in Oman and with a contract with power company GWF in California had “detracted” from the firm’s otherwise strong performance.

Keiller, who will take over as chief executive from Allister Langlands in November, told The Scotsman that the PDO deal had become more complex since Wood Group won the contract, including changes to employment law in Oman.

“The contract is for seven years, with a possible three-year extension, and so we’re looking at this over the long term,” added Keiller, who carried the Olympic torch through Banchory in June for his work with disabled charity Glencraft.

Wood Group estimated that the PDO contract will lose $15-20m during the current financial year and booked $10m of that loss in its interim accounts.

Langlands – who in turn is taking over as chairman in November from Sir Ian Wood – highlighted the “strong” growth of the company’s engineering division, particularly in the Gulf of Mexico. He added: “We’ve also benefited from the switch from shale gas to shale oil in North America. Having already laid gas pipelines, we’re now being asked to lay oil pipelines too.”

Sanjeev Bahl, an analyst at Numis Securities, said: “A strong engineering result has been offset by weaker-than-expected margins in Wood Group Production Services Network – partly due to larger-than-forecast Oman losses – and weaker Gas Turbine Services margins, due to delays at the GWF Power Solutions contract.”

Wood Group increased its interim dividend by 46 per cent to 5.7 cents (3.6p). Turnover rose by 36 per cent to $3.3 billion.