Wood eyes up further growth as profits set to rise 50%

Published on Thursday 20 December 2007 09:46

SCOTTISH oil services firm Wood Group said it was expecting core operating profit to be up by almost half over its latest year.

The latest upgrade comes after the City hiked its expectations earlier in the year as industry strength continued after Wood delivered a 61 per cent increase in operating profit at the half-year stage.

Wood – which last month denied speculation that it was talking to Amec about a takeover by the engineering giant – is now looking at a profit before one-off costs of 157.2 million

The company's bullish trading update ahead of its results, due in March, followed an announcement earlier this week by counterpart Petrofac, which said it would beat market expectations – an announcement that marked its fourth upgrade to its numbers in a year.

And late last month Expro reported strong first-half numbers and predicted strong markets continuing to support its business. But Expro also warned of capacity constraints in the oil field services industry.

One analyst said Wood, which earlier this week secured an engineering contract with Brazilian group Petrobras, was "in the right industry bang at the right time" with oil prices near their all-time peaks.

Allister Langlands, group chief executive of Aberdeen-based Wood, which employs around 22,000 staff at almost 50 locations globally, said: "Our businesses are performing well in strong oil and gas and power markets.

"We continue to expand our service range and geographic reach alongside our ongoing investment in successfully recruiting and developing high quality people."

Companies in the oil services industry are benefiting from booming expenditure by oil companies on the back of high prices, rising demand for hydrocarbons, and slow capacity growth upstream and downstream.

Wood said all three of its divisions were performing strongly. Engineering and production, which accounted for over half of its total revenue of 2.05bn, has grown in core areas and in newer ones such as the Middle East, India and Asia Pacific.

And the well support division has grown strongly in Russia. The gas turbine division is thriving on the back of the after-market for industrial turbines and burgeoning power demand worldwide, particularly in developing countries, analysts said.

Looking ahead to next year, Mr Langlands said: "We anticipate markets will remain healthy and we are well placed to deliver further good growth."

Meanwhile, Scottish oil rig builder and operator Abbot Group has agreed a 906m management buyout backed by private equity firm First Reserve, an energy specialist.

Abbot's executive chairman, Alasdair Locke, said First Reserve's "combination of capital and industry knowledge will aid considerably the long-term development of Abbot and its employees as well as the investment and growth plans that management have for the business".

Abbot's independent directors said the deal was "fair and reasonable and is in the best interests of Abbot shareholders".

Those investors include Mr Locke, who is set to invest 25m in Turbo Cayman, which owns Turbo Alpha Ltd, the vehicle being used by First Reserve to effect the takeover.