Wood Group shares hit year high on news of £100m deal in America

WOOD Group yesterday announced a £100 million US contract and reported strengthening trading in its engineering division as oil and gas companies gave the green light to more projects.

• Wood Group's GTS arm has won major power plant deal

Shares in the Aberdeen-based energy services company rose to their highest level this year on the news and closed up 20.5p, or 4.8 per cent, at 449.9p. The company said its GTS arm, which provides services to power and renewable energy markets, had secured the contract for a major project at the Tracy Peaker power plant in California.

The work, awarded by GWF Energy, will see Wood Group involved in conversion of the station to more environmentally-friendly generation technology.

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In its interim management statement, the Scots group also said overall performance for the year to date "continues to be in line with expectations".

Its engineering division had secured a number of contracts including design work for Chevron's Jack & St Malo deepwater facility in the Gulf of Mexico.

It is also involved in studies on a number of other potential projects in the Gulf of Mexico and in West Africa.

The company said it expected to see an improvement in performance in the second half and into 2011 from the division.

Wood Group noted that its production facilities division remains active in the North Sea and has continued developing a presence in a number of international markets including Angola.

In Australia, the division's joint venture with Wagners has recently secured its second contract in the coal seam methane market.

The company said its well support operations were also continuing to make good progress in expanding overseas but that the gas turbine services aftermarket remains "relatively soft".

"However we expect to deliver an improved second-half performance based on higher underlying activity and some benefit from ongoing cost reduction initiatives," Wood added.

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Overall, the group said future prospects for the group were positive.

"Our financial position remains strong and we anticipate good operating cash flow for the second half of the year.

"Looking further ahead, we believe the fundamentals for oil and gas services and gas-fired power generation remain strong and we are well positioned to deliver good medium term growth."

A full year trading update will be provided on 16 December.

Yesterday's share price rise means Wood Group has seen its market value increase by more than 40 per cent this year. The upbeat announcements prompted Evolution Securities analyst Keith Morris to up his share price target to 500p from 450p.

"The $150m (95m] engineering, procurement and construction contract win in California is the main surprise, and together with internal cost reductions in GTS should start the rebound in revenue and margin," he said in a note.Fellow oil services company Petrofac also saw strong share price gains yesterday following news of a 157m contract in the United Arab Emirates.

The company will take over operational responsibility and facilities management of the Sajaa gas plant, owned by the UAE government and BP in a five year deal.

The move boosts Petrofac's position in the Middle East, and extends its activities away from its key operations in the North Sea.