Service & Supply | Quarterly / Earnings Reports | Oilfield Services | First Quarter (1Q) Update
Wood Group: 2014 Performance 'Ahead of Expectations'
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John Wood Group PLC has reported a corporate update.
Trading Performance and Financial Position
Performance for the year to date is slightly ahead of expectations in Wood Group Engineering and Wood Group PSN - Production Services. In our Turbine Joint Ventures, financial performance has been adversely impacted by delays on the Dorad contract, but this is expected to be largely recovered during the balance of the year.
The Group remains in a strong financial position. Market conditions remain broadly consistent with those at the time of the preliminary results announcement in February, with a continuing focus on customer capital efficiency. Overall, our trading outlook for the full year is unchanged and we continue to expect EBITA to be up in 2014, with growth in Wood Group PSN offsetting a reduction in Wood Group Engineering
Wood Group Engineering
In Upstream, we remain active on a number of offshore projects, including Hess Stampede and Anadarko Heidelberg in the Gulf of Mexico, Husky White Rose in Eastern Canada and Ivar Aasen for SMOE in the North Sea. Operator focus on capital budgets remains evident in the pace of significant awards, but we expect to secure further pre-FEED and FEED opportunities during the remainder of 2014.
Our subsea business is seeing good activity levels, with the most active markets being in Europe, Middle East, Africa and in the Caspian where we were awarded the contract for the initial phase of subsea and pipeline engineering and project management work on Stage 2 of Shah Deniz for BP. Onshore pipelines is benefitting from healthy activity in US shale. In April, we added to our technology offering with the acquisition of Cape Software and enhanced our onshore pipeline capability with the acquisition of Sunstone in Calgary. The Sunstone acquisition positions us well in a market which is expected to grow to facilitate better access to end markets for oil & gas produced in Western Canada.
Wood Group PSN
Production Services
Wood Group PSN - Production Services1 is performing well. In the North Sea demand remains strong and we are benefitting from significant contract renewals secured in 2013.
Performance in the Americas has been led by further growth in our US shale-related business, including the benefit of Elkhorn which has performed strongly since acquisition. We have invested further in the 2 US shale market, adding specialist fabrication capability in the Bakken and establishing safety & technical training facilities in the Eagle Ford play
Elsewhere, the transition plan in Oman is progressing and we expect to exit the contract in 2015. In Australia, we renewed a contract with Esso for reimbursable engineering, project management and construction services in the Bass Straight.
Turbine Joint Ventures
Following completion of the EthosEnergy joint venture with Siemens on 6 May, all Wood Group’s predominantly opex related gas turbine activities operate in joint ventures and are reported as Wood Group PSN - Turbine Joint Ventures2 . Financial performance in Turbine Joint Ventures is currently behind plan, although we expect this to largely be recovered by the year end. Delays on the Dorad contract, on which testing is complete and client handover pending, resulted in increased costs which are anticipated to be largely recovered during the remainder of 2014.
Outlook
Overall, our trading outlook for the year is unchanged from that outlined at the 2013 results announcement in February. We continue to anticipate EBITA to be up in 2014, with growth in Wood Group PSN offsetting a reduction in Wood Group Engineering
Board Composition
As previously announced, Allister Langlands will retire from the Board at the AGM. Allister joined the Group as Group Finance Director in 1991. He became Deputy CEO in 1999 and CEO in 2007, leading the Group through a period of significant change and strong growth. Following the AGM, Ian Marchant will take over as Chairman of Wood Group. Ian knows the Group well, having served as a non-executive director on the Board since 2006, latterly as senior independent director. Ian was Chief Executive of SSE plc for over 10 years, is non-executive chairman of Infinis Energy plc and a non-executive director of Aggreko plc. His appointment represents a natural evolution in the Group’s stewardship and provides important continuity. David Woodward will succeed Ian as Senior Independent Non-executive Director. Jann Brown will join Wood Group as a non-executive director on 15 May and will chair the Board's Audit Committee and join the Nomination Committee. Jann is currently Managing Director and Chief Financial Officer of Cairn Energy PLC.