Wood adds voice to concerns over tax hit on North Sea investment

Published on Tuesday 10 May 2011 21:49

WOOD Group, the Aberdeen-based energy services heavyweight, yesterday warned of the potential for clients' projects in the North Sea to be delayed as "field economics" are reassessed in light of the Chancellor's tax raid.

Speaking at the group's AGM in its home city, chairman Sir Ian Wood said the group's production services division had reported "reasonable activity" in the North Sea but cautioned over possible delays to investment.

Analysts said the uncertainty over the timescale for customers spending money in the area could be a drag on Wood Group's share price.

Wood had previously voiced his strong opposition to George Osborne's decision, announced in March's Budget, to raise oil and gas taxes, which has prompted a number of producers to warn that they are reviewing their plans.

On Monday, shares in Centrica fell after it warned that the tax hike would erode its profit growth.

It came after the Scottish Gas-owner - which bought Aberdeen-based Venture Production in 2009 - last week warned that it may keep its Morecombe Bay gas fields closed after their current maintenance ends in response to the coalition government's surprise tax grab.

Energy giants BP and Shell last month warned the levy could also harm investment.

Wood told shareholders: "The North Sea has seen reasonable activity levels and we have extended a number of longer-term contracts. Project-related activity has been healthy, although we see the potential for projects to be delayed as field economics are reassessed."

But the chairman was more up-beat on the group's other divisions, telling investors that he expects profit growth in the engineering and gas turbine businesses to keep full-year performance in line with expectations.

He said an update would be given later this month on the firm's plans to return "not less than" $1.7 billion (1bn) to shareholders following the sale of its well support division.

Keith Morris, an analyst at Evolution Securities, which carries an "add" rating, said: "We increase our target price to 700p from 650p, but the North Sea potential slowdown may be a concern and we expect better growth prospects and potential for outperformance elsewhere in the sector."

It later emerged that 10.9 per cent of the votes cast at the AGM were either against the renumeration report or were withheld or marked as "abstained".

In other oil and gas news yesterday, Inverness-based maintenance and construction firm Global Energy Group announced it had bought a majority stake in Cumbria-based Kaymas Electrical Engineering for an undisclosed sum.Global chairman Roy MacGregor said the deal would enhance the services offered by the group's Rigfit offshore accommodation arm.

Meanwhile, shares in Bow-leven leapt after the Aim-quoted explorer said it had found what looked like oil and gas in an exploration well off the coast of Cameroon.

The Edinburgh-based firm will conduct tests over the next four weeks to determine if the find was oil.