Wood Group weathers oil storm

"Through-cycle" UK-based oilfield engineering and services firm Wood Group has weathered the oil price down-turn with an increase in revenues and profits in 2014.

But, the firm said it would continue to take action to increase efficiencies leading to cost reductions and deferrals totaling more than US$30 million in 2015 compared to 2014.

In 2013, the firm hit the headlines for announcing a 10% rate cut for contractors, repeated in 2014. CEO Bob Keiller has been outspoken about the industry's need to "re-baseline" costs. 

But, while many companies have been announcing lay-offs running into the hundreds and even thousands, and profits sliding into the red, due to the slide in oil prices from $110/bbl to $50/bbl June-January, Wood Group has proved more resilient. 

The firm's 2014 revenues were US$7,616.4 million, up 7.8% on 2013. Profit from continuing operations on an equity accounting basis before tax and exceptional items (but after tax on JV profits) was up 10.9% at $414.5 million.

Wood Group said the results reflected strong growth in its Wood Group PSN Production Services division, offsetting an anticipated reduction in the Wood Group Engineering segment and weaker performance in Turbine Activities.

"In 2014, we saw the anticipated reduction in capex by many operators as they looked to increase efficiency on capital projects although some areas, such as independents in North America and NOCs, generally continued to increase expenditure. Towards the end of 2014 we witnessed a decline in the oil price," said chairman Ian Marchant.

"The lower oil price brings challenges for our customers, and we are in active discussions with them to assess how we can work together to improve performance from new and existing assets and reduce costs without affecting the safety or the integrity of the assets they operate," he continued.

Efficiency measures would be taken, including collaboration across the firm; management of staff utilization levels; and cost reduction initiatives.

But, the firm said it would also continue to make "value adding acquisitions." Last year, the firm saw the benefits on its books of the acquisitions of Elkhorn in the US and Pyeroy in the UK. A further $217.3 million was invested in mergers and acquisitions in 2014, including Sunstone, a Calgary based pipeline consultancy; CapeSoftware, a Texas based training and process simulation company; Meesters, a specialist fabrication business in the Bakken shale region; and Agility Projects AS, an offshore greenfield and brownfield company in the Norwegian sector of the North Sea. 

Meanwhile, Wood Group will see changes to its leadership team take place in 2015, following a string of changes last year. Allister Langlands retired as chairman in May 2014, having held the role since 2012, being CEO prior to that. 

CFO Alan Semple is due to retire in May 2015, with Wood Group PSN CFO David Kemp taking his place. A new role of Chief Operating Officer (COO) will be filled by Robin Watson, currently CEO of Wood Group PSN, during 1H 2015. 

Michel Contie is also due to step down from the board in May having served for five years as a non-executive director.

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