29 June 2017
Pre-close trading
update for the six months to 30 June
2017
Trading performance
In the first half we have seen continued challenges in our core
oil & gas market with modest recovery only in certain areas.
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.
Asset Life Cycle Solutions
Western Hemisphere
The first half is anticipated to be broadly in line with H1
2016. Improved performance in offshore greenfield activity is
offsetting lower onshore activity in Projects & Modifications,
with Operations & Maintenance work remaining relatively robust
overall.
In Projects and Modifications, increased greenfield engineering
activity has been more than offset by a reduction in onshore
engineering work. In March, we announced our detailed engineering
and procurement scope for Samsung Heavy Industries on BP’s Mad Dog
2 project and the topsides and jacket detailed engineering scope on
Noble Leviathan. We secured a multi million dollar engineering,
procurement and construction award in Alaska and have recently secured the topsides
detailed engineering contract on the Husky White Rose project in
Eastern Canada. We remain active
on other projects including Statoil Peregrino 2, BP South Pass and
our SAGD well pad engineering programme for Suncor. Work in onshore
refinery and pipeline projects is down as expected, following
completion of a number of significant workscopes in 2016.
In Operations and Maintenance, we are seeing increased activity
in the first half from our scope on the Hibernia Platform in
Newfoundland. Our work on the
Hebron hook up and commissioning
contributed to increased activity in H1 but is now coming to an
end. Activity in the US onshore shale market has modestly improved
since the start of the year. In March we secured one of our largest
onshore civil works and infrastructure construction projects with
Sofidel in Ohio.
Eastern Hemisphere
The first half is materially down on H1 2016, principally due to
a significant reduction in projects and modifications work,
particularly in the North Sea. Operations and Maintenance is also
down but is less impacted.
In Projects & Modifications, we have seen a significant
reduction in brownfield modifications and upgrade work in the North
Sea. In May, we were awarded the modifications work for the Shell
Brent decommissioning scope. Work under our General Engineering
Services Plus contract in Saudi
Arabia is being released at a slower rate than expected and
this has led to a reduction in headcount in the region. In
May we extended our scope of work under a 5 year contract with SEIC
to include drilling upgrade services in addition to engineering,
construction support and modifications work.
In Operations & Maintenance we are seeing lower activity
together with the impact of competitive pricing in the North Sea.
Our duty holder scope operating the CATS pipeline and terminal for
Antin Infrastructure and our operating partner scope for Ancala on
their midstream assets are both progressing and we renewed our
$50m contract with Premier Oil for
operations and maintenance services on the Balmoral Floating
Production Facility. In Asia Pacific, activity levels on our
Exxon contract in Papua New Guinea
are increasing. We also commenced work on our five year managed
services scope from Hess Malaysia for their offshore facilities in
the North Malay basin.
Our turbine related operations and maintenance activity is
performing in line with H1 2016. Elsewhere, we are making good
progress in our pursuit of strategic options for Ethos Energy.
Specialist Technical Solutions
In subsea, although activity has modestly improved during 2017
it will be down on H1 2016. Activity is generally limited to
smaller scope, brownfield or early stage work. Current projects
include the flowline FEED for Snorre, engineering and project
management on Mad Dog 2 and follow on engineering support contract
for the subsea pipeline on Woodside’s Greater Western Flank
project. The market for larger projects remains weak and is not
expected to improve in the second half. Performance in our
technology related business including asset integrity solutions and
clean energy is relatively robust.
We anticipate automation to be up on H1 2016 and our main
automation contracts with Chevron on the Tengiz expansion project
and ExxonMobil on the polyethylene plant in Texas are progressing well. In May, we
acquired CEC, further enhancing our industrial process &
control capabilities in the automotive, aerospace, logistics, water
and pharmaceuticals sectors.
Cash flow, balance sheet and
dividend
Our balance sheet remains strong. Net debt : EBITDA is at
the upper end of our preferred range of 0.5x to 1.5x, reflecting
the acquisition of CEC for an initial consideration of $53m in May. Our intention remains to
pursue a progressive dividend policy taking into account cash flows
and earnings.
Acquisition of Amec Foster Wheeler
On 15 June our shareholders overwhelmingly approved the
recommended all-share offer for Amec Foster Wheeler. Our objective
is to create a leader in project, engineering and technical
services delivery across a broad range of industrial markets,
predominantly focused on oil & gas. Our current focus is on
integration planning ahead of completion, which is expected in the
4th quarter of 2017 subject to competition
approvals.
Conference Call
A telephone conference call for analysts will be held at
8.30am today; participant dial-in
details below:
UK: 0844 800 4256
International: +44 844 800 4256
Passcode: 970 051#
Notes to Editors:
Wood Group is an international energy services company
with around $5bn sales and operating
in more than 40 countries. The Group designs, modifies, constructs
and operates industrial facilities mainly for the oil & gas
sector, right across the asset life cycle. We enhance this with a
wide range of specialist technical solutions including our world
leading subsea, automation and integrity solutions. Our real
differentiator is our range of services, the quality of our
delivery, the passion of our people, our culture and values. We are
extending the scale and scope of our core services into adjacent
industries. Visit Wood Group at www.woodgroup.com and connect with
us on LinkedIn and Twitter.
Company compiled publicly available consensus 2017 EBITA on a
proportionally consolidated basis is $334m and AEPS is 58.3c, last updated on
12 June 2017.
(https://www.woodgroup.com/investors/investor-information/analyst-consensus)
Wood Group Investor Relations
Andrew Rose
+44 (0)1224 532 716
Ellie Dixon
+44 (0)1224 851 369
For media enquiries contact:
Carolyn Smith
+44 (0)1224 851 099
Wood Group Press Office
Email: press.office@woodgroup.com
Brunswick
Patrick Handley
+44 (0)20 7404 5959