Wood Group interim results six months ended 30 June 2015

Wood Group wins major Shell Gabon contract

Wood Group has won a $31m contract to deliver operations management services to Carbon Creek Energy's coalbed methane field in Wyoming. The FTSE 250 oil and gas services company announced the deal on Monday. The contract, which is initially for 12 months and reviewed annually, will create up to 65 new jobs and secure an additional 40 existing jobs. The field in the Powder River basin consists of approximately 7,000 drilled wells, 6,000 to 12,000 drillable locations and currently produces 385m cubic feet of gas per day.

Wood Group wins c.USD90m new contract

StockMarketWire.com

Wood Group has acquired Kelchner Inc, a privately-owned US-based provider of construction and energy field services.

Kelchner will operate within the onshore business of Wood Group PSN Americas, providing construction capabilities primarily to the midstream and upstream oil and gas sector in the Marcellus and Utica shale basins, and broader industrial sectors.

Wood Group warns.

Wood Group anticipates that FY EBITA will be about 20% lower than in 2015, but in line with consensus expectations.

"Market conditions remain challenging in 2016 and we have seen further margin pressure in an environment of expected lower activity by operators," the company said in an AGM statement.

"Year-to-date financial performance, although down on 2015, continues to benefit from the breadth of our offering, our focus on management of utilisation in response to demand, and structural overhead cost savings."

The company continued: "Our continued focus on reducing costs, improving efficiency and broadening our service offering through organic initiatives and strategic acquisitions, positions us as a strong and balanced business in both the current environment and for when market conditions recover.

"A trading update for the first half of the year will be provided on 30 June 2016."

StockMarketWire.com
Wood Group has turned in a full-year pretax profit of $66.0m, down more than half $138.6m as revenue from continuing operations eased amid a fall in global E&P customer spending and challenging market conditions.

It recommended a final dividend of 22.5 cents a share, taking the total to 33.3 cents, up 10%.

Chair Ian Marchant said 2016 represented a second successive fall in global E&P customer spending, which was down over 20% following a similar reduction in 2015.

"Oil and gas markets remained very challenging; lower oil prices endured and activity fell across the sector," he said in a statement.

Marchant added that early indications for 2017 suggested the potential for some modest increase in spending from 2016 levels, this reflecting a recovery in North American onshore spending, largely offset by further reductions elsewhere for a third successive year.

"Given the spending outlook for 2017 and the inherent lag of the impact on service company activity, we are cautious on the near term outlook for the Group. However, we remain positive on the longer term recovery."

Total revenue was $4.9bn, down 15.7% from $5.9bn, while operating profit before exceptional items was $244m, down 28.4% from $341m.

StockMarketWire.com
Wood Group has won a $50m contract with Premier Oil to deliver topside operations and maintenance services to the Balmoral floating production vessel (FPV) in the Central North Sea and the Solan installation, west of Shetland.

The two-year contract which had three, one-year extension options, retained more than 150 jobs. The company had delivered operations, maintenance and engineering services to the Balmoral FPV since 2012.

Wood Group also supported Premier Oil in the delivery of fabric maintenance services to the Balmoral FPV in a separate contract held since 2014.

StockMarketWire.com
Wood Group said its H1 performance is down on 2016 and weaker than anticipated, as it remains more cautious on its FY outlook but anticipates a stronger second half.

"In the first half we have seen continued challenges in our core oil & gas market with modest recovery only in certain areas," the company said.

"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 & modifications work, particularly in the North Sea.

"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."

"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."

Separately, Wood Group said Husky Energy had awarded it a multi-million dollar contract to complete detailed engineering for the topsides of White Rose, a concrete gravity-based structure wellhead platform planned for offshore eastern Canada.

The project included procurement services and engineering design work.

The Wood Group team has identified several project innovations to significantly reduce engineering person-hours and realize other savings at White Rose.

Looks like another Petrofac situation...


Amec Foster Wheeler announcement re: SFO investigation

John Wood Group PLC (the "Company") notes the announcement made yesterday by Amec Foster Wheeler plc ("Amec Foster Wheeler") that the UK Serious Fraud Office (the "SFO") has informed Amec Foster Wheeler that it has opened an investigation into Amec Foster Wheeler, predecessor companies and associated persons in respect of the Foster Wheeler business. As announced by Amec Foster Wheeler, the investigation focuses on the past use of third parties and possible bribery and corruption and related offences.

In its circular and prospectus published on 23 May 2017, the Company disclosed that information previously provided by Amec Foster Wheeler to the SFO related to matters that may well develop into an investigation into Amec Foster Wheeler by the SFO. As stated in those documents, and as disclosed by Amec Foster Wheeler yesterday, it is not possible to estimate reliably what effect the outcome of this matter may have on Amec Foster Wheeler.

StockMarketWire.com
Wood Group said operational profit fell 32.1% to $72m in the six months to 30 June 2017.

In December 2016, we highlighted challenges in our core oil & gas market that we felt were likely to persist in 2017.

We expected to see indications of recovery in certain markets - US onshore including shale, offshore upstream engineering and automation. We also noted the commercial close out of a number of projects in 2016.

Overall, these themes have played out largely as expected in the first half although the macro environment has been more volatile.

As a result we have seen an increasing focus on efficiency by operators and some evidence of further deferrals in customer spending, which has decreased for a third successive year.

In the first half total revenue fell by 11% and total EBITA was down 23%. Robust performance in the West including, improved activity in offshore greenfield project engineering and commissioning and modest improvement in US onshore activity, was more than offset by weaker activity in the East, where we have seen a significant reduction in projects & modifications work, particularly in the North Sea.

In Specialist Technical Solutions, growth in automation and robust activity in technology related work was offset by weaker performance in subsea.

Our continued focus on utilisation and the enduring benefit of our actions in the last 30 months around reorganisation and back office efficiency are delivering sustainable structural cost reductions. Overheads were $44m lower than H1 2016.

We remain focused on managing utilisation in light of prevailing market conditions. Underlying headcount, excluding acquisitions, is down 34% since the start of 2015. We have seen a modest increase in headcount since the start of the year.

Profit for the period was impacted by exceptional costs of $47.6m. This included $25.2m in respect of costs relating to the acquisition of Amec Foster Wheeler, comprising advisory fees of $19.7m and underwriting fees in respect of new debt facilities of $5.5m.

We also made a provision for $15.9m in relation to an ongoing subcontractor dispute on the Dorad contract which was substantially completed prior to the formation of EthosEnergy.

In May we acquired CEC in the US for an initial consideration of $49.8m, further enhancing our automation process & control capabilities in the automotive, aerospace, logistics, water, and pharmaceuticals sectors. We have continued to progress our strategic options for EthosEnergy and have commenced a disposal process.

Our internal investigation into Wood Group's historical engagement of Unaoil is substantially progressed and we will be proceeding to share our findings with the Crown Office on a voluntary basis.

As previously disclosed, this investigation has confirmed that a Wood Group joint venture made payments to Unaoil.

The investigation has not confirmed that the payments made were used by Unaoil in ways that would amount to bribery, corruption or money laundering offences or that there was any involvement in or knowledge of bribery, corruption or money laundering offences on the part of Wood Group companies, the joint venture or their personnel.

The Group is in a strong financial position. Net debt was $490m and Net debt : EBITDA is 1.2x.

We have seen a slight improvement in Days Sales Outstanding as administrative and billing issues with certain of our customers were resolved during the first half and we expect further improvement to lead to a better working capital position in the second half.

We have declared an interim dividend of 11.1 cents per share which will be paid on 28 September 2017 to shareholders on the register on 1 September 2017.

This is an increase of 3% in line with our progressive dividend policy.

OUTLOOK
Our view on the full year has not changed from the half year trading update.

The themes identified in December 2016 have played out largely as expected in the first half and although the market continues to present challenges, we do anticipate a stronger second half performance in 2017.

Further growth in US onshore operations in ALCS Western Region and increased activity in Asia Pacific and the Middle East in ALCS Eastern Region are expected to contribute to a stronger second half.

In STS, growth is anticipated in automation where we continue to work on the Tengiz expansion project.

Whilst pricing on new work remains very competitive, group margins should benefit from further cost saving and business efficiency initiatives.

StockMarketWire.com
The CMA accepted the remedy formally offered by Wood Group and Amec Foster Wheeler on 9 August.

This follows the CMA's in principle acceptance on 15 August.

The combination is therefore now expected to complete in October 2017, following receipt of merger clearance in Mexico.

The remedy consists of the majority of Amec Foster Wheeler's UK upstream oil and gas business located in the UK and serving UK customers (excluding its commissioning business, qedi).

The CMA does not require the parties to complete the sale of the remedy business in advance of completing the combination.

Wood Group CEO Robin Watson said: "Since we announced the deal in March, both parties have maintained a relentless focus on keeping on schedule.

"Today's earlier than anticipated decision from the CMA allows us to move forward with pace and we are very confident of completing the acquisition of Amec Foster Wheeler in October."

Amec Foster Wheeler CEO Jon Lewis said: "We welcome today's announcement from the CMA.

"We have made significant progress marketing Amec Foster Wheeler's UK upstream oil and gas business to a range of high quality bidders, which has helped to ensure that we will close the transaction in October, bringing the many benefits of the combined company to our clients, colleagues and shareholders."

StockMarketWire.com
Wood Group said it has won a "multi-million dollar" contract from Total to support the French oil company's Lindsey refinery in Lincolnshire.

The five-year contract is to provide onshore maintenance services and includes the option to be extended up to two years.

"We are strategically focused on leveraging our proven offshore track record of strong service, to broaden our downstream footprint in the UK; and this contract win achieves this," chief executive Robin Watson said.

StockMarketWire.com
Wood Group said it had won a 'multi-million dollar' five-year contract to support Saudi Aramco in the delivery of the Marjan oil field in Saudi Arabia.

The front-end engineering design, major increment and overall project management consultancy would be executed from Wood's Reading UK, Khobar, Saudi Arabia and India offices, the company said.

StockMarketWire.com
Oil services company Wood Group said it had won a $43m contract from a large-cap midstream company to construct 80 miles of steel pipeline in west Texas.

The project would serve to transport natural gas liquids across the US state.

'This is a strategic pipeline for the US and we are proud to play our part in delivering this milestone project,' US asset solutions business head Andrew Stewart said.

'We have the largest and most vertically integrated pipeline project offering in North America and this win strengthens our position as a major midstream player.'