By Alex MacDonald
LONDON--John Wood Group PLC (WG.LN) said Thursday it is on track
to deliver higher earnings this year due to a strong performance
from its Wood Group PSN production services division, which will
offset lower earnings from its engineering and turbine activities
units, and despite a slump in oil prices.
Wood Group said in a trading statement the oil-price slump to a
five-year low is leading oil and gas producers to shelve spending
plans for next year, which will have a knock-on effect on service
providers such as itself, but that it expects to show some
resilience in 2015 due to its spread of businesses, long-term
contracts and recent acquisitions.
At its engineering division, earnings before interest, taxes and
amortization for 2014 will be 15% lower than the level indicated
last December because of the slower pace of engineering work. This
has been partially offset by several offshore projects and U.S.
onshore and pipeline work driven by the shale boom.
The company expects its PSN production services division to
deliver strong growth this year, led by U.S. shale oil and
gas-related activity, including the benefit of U.S-based services
provider Elkhorn acquired last year. The North Sea business is also
robust and the company continues to benefit from several large
long-term contracts secured this year with companies such as
ExxonMobil (XOM) in Papua New Guinea and Malaysia.
The company said the performance of its power-sector-focused
turbine activities division has improved in the second half
although Ebita this year will be significantly lower than in 2013.
The division should show that it is on track to recover its
first-half financial position at its full-year results.
At 0903 GMT, the company's shares are up 3.8% at 584 pence a
share, resulting in a market capitalization of GBP2.1 billion($3.3
billion.)
Wood Group said its balance sheet remains strong enough to
support its investment in further acquisitions and organic growth;
working capital should improve significantly in the second half of
the year, in line with typical seasonal fluctuations.
The U.K.-listed oil and gas engineering-services firm also said
it has secured a $750 million, five-year contract from BP PLC (BP)
to provide engineering, procurement and construction services at
six North Sea offshore fields and the Forties pipeline system.
It has also acquired Swaggart Brothers, a U.S.-based provider of
civil construction and fabrication services to the U.S. oil and
gas, industrial and agricultural sectors for an initial
consideration of $36.3 million.
Write to Alex MacDonald at alex.macdonald@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires