Wood to reveal momentum in key markets

Investors will be keen to see whether signs of a pick-up in momentum in Wood’s key markets have continued when the Aberdeen-headquartered energy and engineering services group updates this week.

Although the year got off to a slow start with weaker activity than expected in the first quarter, the group’s last update reported that it was seeing improving levels of activity.

Further signs of progress with its order book, which stood at $7.1 billion (£5.05bn) at the end of the first quarter, will also be looked for by investors when the group reports first-half trading on Thursday.

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With oil prices posting strong gains this year – and some commentators forecasting they could return to more than $100 a barrel in 2021 – analysts will be keen to see if there has been any positive impact on the project pipeline.

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William Ryder, equity analyst at Hargreaves Lansdown, said Wood’s last update alongside its annual general meeting in May had shown a robust performance in the consulting division was unable to offset weakness in projects and a volatile oil price conspired against the operations division.

“Nonetheless, management is maintaining guidance thanks to improving momentum, and even expects stronger margins this year,” Mr Ryder said.

“Consulting activity is expected to increase and operations to be buoyed by conventional energy demand and growth from process & chemicals.”

Mr Ryder also said “commentary on the order book and any changes to guidance will be top of the agenda”.

Last week Wood, let by chief executive Robin Watson, extended its long-standing relationship with global outfit Equinor in Norway.

Thanks to an extension of its existing framework agreement, the Scots group will work with Equinor to drive down costs, increase efficiency and improve sustainability across a number of platforms in the Norwegian Continental Shelf.

Craig Shanaghey, Wood’s president for operations in Europe, the Middle East and Africa, said the extension was “testament to the strong performance of the Wood teams and solidifies our position as a leading provider of integrated offshore solutions in the Norwegian Continental Shelf.”

Renewal

Earlier in June, Wood secured a contract renewal to provide a range of services to the Hibernia platform off the coast of St. John’s, Newfoundland, and Labrador in Canada.

With the five-year extension agreement, Wood will continue to employ up to 300 people on the contract, where it has been working since first oil in 1997.

Announcing its full year results in March, Wood said it planned to simplify its global operations and hammer down on costs as it tackles the “accelerating pace of energy transition”.

The FTSE-250 firm outlined its strategy as it reported a 23.5 per cent decline in full-year revenues to just over $7.56bn compared with 2019.

The group did not pay out a final dividend to shareholders after sliding to a $228 million loss before tax in 2020 as it was hit by the fall in oil prices last year.

It highlighted growth in renewables activity, strength in the built environment and relatively robust revenue in process and chemicals despite the challenging backdrop of Covid-19 and oil price volatility.

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