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LONDON (Alliance News) - John Wood Group PLC Wednesday said its overall performance in 2015 is down from 2014, as expected, but "reflects the relative resilience" of its business model and said its full-year earnings should be in line with analysts consensus.
The FTSE 250 oil and gas service company said it has improved visibility on customers' spending plans for the rest of the year but reiterated that market conditions remain challenging.
"We are flexible and asset light, with a range of predominantly reimbursable activities across customers' operating expenditure and capital expenditure spending. We remain focused on selling, general and administrative cost reduction and utilisation, and are helping customers to reduce their project costs, increase operating efficiency and safely improve performance," it said.
Wood Group said it aims to reduce its costs by USD30 million in 2015.
In 2015, Wood Group is expecting to deliver "strong cash flow" and said it has a strong balance sheet which provides security and flexibility.
Its upstream division "remains subdued" but it said it recognises that there is currently a high volume of early stage work as customers look to re-engineer projects to try and improve there economics.
"We remain active on a number of detailed engineering projects, including Det Norske's Ivar Aasen in the Norwegian North Sea and Hess Stampede in the Gulf of Mexico," said Wood Group. "In March we were awarded the FEED and procurement scope for Statoil's Kollsnes gas plant in Norway leveraging our strength in automation and control engineering and our 2014 Norwegian acquisition, Agility Projects."
FEED stands for front end engineering design and is the basic engineering which comes after the conceptual design or feasibility study for a project. Wood Group also secured an offshore maintain potential contract from Saudi Aramco for six years covering engineering, procurement and construction management.
In subsea and pipelines, activity levels have "reduced somewhat" with a smaller number of large subsea capital expenditure projects coming to market, which has led to some areas seeing increased activity whilst others have declined.
"Our UK business is supporting activities in Africa, Middle East and the Caspian, including activity with BP on Shah Deniz, with Zadco in Abu Dhabi and with Tullow in Ghana," said Wood Group. "We have also recently secured a five year maintenance contract for subsea well control spanning the UK, Singapore and Brazil as part of a joint industry project."
Wood Group said it has also secured a FEED contract with Woodside in Australia and said its onshore pipeline business is benefiting from the impact of US customers seeking to improve transportation to downstream facilities.
Its downstream division and process and industrial activities are "performing well" due to the fall in commodity prices.
Wood Group PSN, which services brownfield operations, has been hit by the decline in the rig count in the US whilst continuing to reduce contractor rates in the UK North Sea. But the company said it still sees longer-term opportunities in the area.
"In the Americas, the US onshore market has been impacted by the decline in the rig count leading to reduced demand for our well-pad related activities including fabrication and site preparation and, to a lesser extent, midstream construction services. Our ongoing operating expenditure-focused maintenance activity which accounts for over half our onshore work has been less affected," said the company.
"Following our decision to reduce contractor rates in 2014, we have continued to work alongside customers on efficiency improvement initiatives," the company added. "In both onshore and offshore, we are making good progress on cost reductions to help reduce the impact of lower pricing and activity."
Wood Group PSN's international business is progressing contracts it secured in 2014 in Australia and Asia Pacific and PSN has identified a number of near-term opportunities in the Middle East, particularly in Iraq.
In a separate statement, John Wood Group said it has secured a USD250 million from oil giant BP PLC. The five-year contract was secured through the Massey Wood Group and will see Wood Group deliver engineering, procurement and construction services to BP's 13 upstream offshore facilities, located within the Greater Cassia and Greater Mahogany areas in Trinidad.
The onshore Galeota Point Terminal and Beachfield facilities are also included in the scope of the contract, which is effective immediately.
The Massey Wood Group is co-owned by Wood Group PSN and the energy division of Massy Holdings Ltd.
This is the second major contract that Wood Group has secured with BP in recent months. In January, PSN began a five-year contract to provide engineering, procurement and construction services to six UK continental shelf offshore upstream assets and the Forties Pipeline System onshore midstream facilities in Grangemouth in the UK.
Wood Group shares were up 1.6% to 711.50 pence per share on Wednesday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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