Energy services giant Wood Group today said it was adopting a “more cautious” outlook for the remainder of the year after seeing a weaker-than-expected performance during the first half.
The Aberdeen-based group, which earlier this month had its £2.2 billion takeover of rival engineer Amec Foster Wheeler approved by shareholders, said it had seen only a “modest” recovery in some areas of its core oil and gas market.
“Robust activity in the west including improved performance in offshore greenfield project engineering and commissioning is being more than offset by weaker activity in the east, where we have seen a further reduction in projects and modifications work, particularly in the North Sea,” Wood said in a trading update.
“The impact of the tougher pricing environment in 2016, partially offset by the enduring benefit of structural cost reductions achieved in the last two years, will result in a reduction in first-half margin as expected.”
However, the group told investors that its balance sheet remains strong – although its debt-to-earnings ratio is at the upper end of its preferred range, reflecting last month’s acquisition of US automation and controls firm CEC, which counts car-maker General Motors among its clients.
• READ MORE: Wood Group in $59m swoop for US automation firm CEC
Following shareholder approval on 15 June, Wood expects to complete its purchase of Amec in the fourth quarter, subject to clearance from competition regulators.
Addressing current trading, the group added: “First-half performance is down on 2016 and weaker than anticipated. We are more cautious on the full year outlook but anticipate a stronger second half.”
The update came as it announced a multimillion-dollar contract with Husky Energy to complete detailed engineering for the topsides of White Rose, an offshore wellhead platform planned for eastern Canada.
• The North Sea’s fortunes received a further boost yesterday as Repsol Sinopec said it had started gas production from a new field, writes Scott Reid.
The Cayley gas field will, together with the adjoining Godwin and Shaw fields, reach a peak production equivalent to 40,000 barrels of oil a day, the firm added.
The fields feed into the existing Montrose facilities, in a move that will extend their life to beyond 2030.
Brian Winton, general manager, Montrose and Arbroath, said: “Safe and successful delivery of these fields is a great achievement for Repsol Sinopec and underlines the transformation of our business.”
He added: “We can now look forward to hub production from Montrose for another 15 years.”
The announcement came just days after EnQuest started oil production from its 50,000 barrels-per-day Kraken project, which lies some 80 miles east of Shetland.