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LONDON (Alliance News) - John Wood Group PLC Thursday said its first half results will be weaker year-on-year as challenging conditions in the oil and gas markets continues, but reiterated it expects to meet its full year earnings expectations and said it would increase its dividend.
The FTSE 250-listed oil services company said the weaker first half performance will be partially offset by the company's ongoing cost cutting. John Wood said it was "delivering savings significantly in excess of original targets from our cost reduction initiatives".
"We remain confident that our market leading businesses and breadth of capability position us well to deliver for our customers. There is no change to overall guidance and we continue to anticipate that full year earnings before interest, tax and amortisation will be broadly in line with analyst consensus," said the company.
John Wood also said it plans to increase the dividend per share "by a double digit figure" from 2015 in the medium term.
Upstream activity "remains subdued", but the company has seen a "good contribution" from larger detailed engineering projects in the Norwegian North Sea and in the Gulf of Mexico. The subsea business has been active on larger projects with the likes of BP PLC, Tullow Oil PLC and Chevron, but overall subsea capital expenditure remains restricted as fewer projects are coming online, it said.
The onshore pipeline business is "performing robustly" in the US whilst the downstream, process and industrial activities are "performing well". It said it has also been awarded the engineering, procurement and construction contract for the Flint Hills project in the US after securing the early stage engineering work at the project's refinery.
Wood Group PSN, its brownfield service company, is still being impacted by the US onshore market which is experiencing reduced demand and pricing pressure on capital expenditure.
"Our ongoing operating expenditure focused activity, which accounts for over half our onshore work, has also experienced pricing pressure and some lower demand but has been less affected," said the company.
PSN is benefiting from good visibility from long term contracts in the UK North Sea despite fewer non-essential maintenance work being carried out, but it said efficiency improvement work continues to grow.
"In our international business, longer term contracts in Australia and Asia Pacific are progressing and we see a number of near term opportunities for growth in the Middle East and Africa," said John Wood.
In a separate statement Thursday, PSN has also been awarded a 10-year USD250 million contract to provide operating services to the Central Area Transmission System, or CATS system in the UK North Sea. That contract has been awarded by Antim Infrastructure Partners, which bought out BP's stake in CATS for GBP324 million in April.
CATS transports gas through 404 kilometre of pipeline from the Central North Sea to its terminal in Teesside in the UK where it is then processed on behalf of major North Sea gas producers.
"Financial performance in the first half of 2015 will demonstrate the relative resilience and flexibility of our asset-light predominantly reimbursable model, but will be down on the first half of 2014 reflecting challenging market conditions," said the company.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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