Wood Group shares pumped up after £500m Oman win

Petroleum Development Oman (PDO) has awarded the seven-year engineering and maintenance services contract to the Aberdeen-based group and its partner the Consolidated Contractors Company, the largest engineering and construction firm in the Middle East with more than 120,000 employees.

Under the deal, Wood Group-CCC will provide engineering, construction, maintenance and support services for PDO's facilities in southern Oman.

The deal is the first major contract win for the joint venture, which operates across Qatar, Kuwait, Saudi Arabia, Oman, UAE, Bahrain and Yemen.

The news came days after Wood Group's Gas Turbine Services division announced a 560m contract to build a new power plant in Israel. The division also won a 97m agreement last month to service a gas plant in California.

Les Thomas, board director for Wood Group Production Facilities, said: "Wood Group-CCC is delighted to have won this important contract and we look forward to working closely with PDO over the next seven years.

"A key aspect of our operating success has been our ability to develop the local resource base and this ethos will be brought to Oman and this contract."

Over the next ten years it is estimated that there will be 380 billion of investment in oil and gas and petrochemical plants in the region with a need for ongoing operations and maintenance support.

"Wood Group-CCC is a powerful combination that has the people, equipment, skills and experience to provide that support," said Thomas.

Keith Morris, an analyst with Evolution Securities, said the contract was the latest positive newsflow from Wood Group which has led him to upgrade his price target on the shares from 500p to 550p.

"We like the operational gearing of Wood Group and its exposure to current and future growth in demand for engineering services and North American downhole products and services in the well support division," he said.

Morris added there "good potential for earnings upgrades in 2011".

Wood Group is releasing its pre-close trading update next Thursday.

In August the company said it was looking at the second half of this year and 2011 with "increasing confidence", despite reporting flat turnover and a slip in profits in the first half.

Chief executive Allister Langlands said at the time that growth would be spurred by demand for oil from China, Latin America and India while demand from western economies was likely to remain subdued.

Shares in the company reached a year-high of 516.5p in early trading yesterday, before closing down 3.1p at 499.9p. They have risen by 70 per cent since June.