LONDON, Feb 18 (Reuters) - British energy services companyWood Group said on Tuesday it expected strong demand forservices in U.S. shale to drive overall growth despite a weakeroutlook for its core engineering division.
Wood Group recently increased its exposure to the onshoreoil and gas market in the United States, acquiring Wyoming-basedservices firm Elkhorn last November, and Chief Executive BobKeiller said the acquisition should help deliver growth thisyear.
Wood Group shares rose 4 percent in morning trade, against abroader oil and gas index that was up just 0.1 percent.
Oil services experienced a difficult 2013, peppered byprofit warnings, as years of bumper profits fed by a high oilprice and record investment by oil companies came to an end.
Wood Group's engineering division, which accounts for aroundhalf the company's profit, provides equipment and pipelines andperforms work on oil-well integrity and corrosion management.
The company expects the division's profits to fall in 2014as oil companies cut back on spending and delay or cancel newprojects.
But Keiller told reporters that slowdown would be more thancompensated by growth in the contractor's services division -Wood Group PSN.
PSN saw profits jump in 2013, thanks to better margins inthe United States, cost reductions in the division and lowerlosses from a contract in Oman with Petroleum Development Omanwhich has plagued the group for three years. Wood Group said itwas in discussions to exit the seven-year contract.
"We now have something like 4,500 people in Wood Group PSNfocused on shale activities. That covers everything in the mainplays; from Bakken in the North down to Eagle Ford, across toMarcellus and Utica in the East," Keiller told reporters on acall. "We think that's a place we're likely to see furthergrowth."
Wood Group posted an increase in full year 2013 profit of14 percent, in line with its expectations, as a strongperformance in services and engineering offset weakness in itsgas turbine division.
The company reported pre-tax profit of $413 million onrevenue of $7.1 billion for 2013, slightly below analystforecasts. A Thomson Reuters I/B/E/S poll of analysts estimatedpre-tax profit of $445 million from revenue of $7.2 billion.
"Wood Group are well positioned to deliver growth led byU.S. onshore shale related business. 2014 will benefit from afull year of the Elkhorn acquisition and Oman losses have beenprovided for," analysts at Numis wrote in a note to clients.They have an "add" rating on the stock.
The company said Chairman Allister Langlands would retire inMay to be replaced by Ian Marchant who has been a non-executivedirector at Wood Group since 2006.
Wood Group (J) (WG.)
