10 May 2017
Annual General
Meeting Statement
Trading performance
The oil & gas market has continued to present challenges and
as expected, year to date performance is down on 2016. Improved
activity levels in offshore greenfield project engineering and
commissioning in the West, have been more than offset by weaker
activity elsewhere including further reductions in North Sea
Projects & Modifications work in the East. Our Industrial
Services business has performed robustly and Automation activity
has increased.
Overall, year to date performance has been weaker than
anticipated. However, recent awards and renewals demonstrate good
customer support and we are seeing the enduring benefit of
structural cost reductions achieved in 2016. We anticipate stronger
performance in the second half of the year and as a result,
management’s expectations of full year trading performance are
broadly unchanged.
Asset Life Cycle Solutions
Western Hemisphere
In Operations and Maintenance, activity is broadly in line with
the prior year overall. In East
Canada we are seeing increased activity from work on the
Hebron hook up and commissioning
and our scope on the Hibernia Platform in Newfoundland. Activity in the US onshore shale
market has modestly improved since the start of the year but is
down on 2016. Some weather related delays have been encountered. We
are encouraged by rig count increases, bidding activity and
contract awards. In March we secured one of our largest onshore
civil works and infrastructure construction projects with Sofidel
in Ohio.
In Projects and Modifications, increased greenfield engineering
activity has been more than offset by a reduction in onshore
project work. We secured a number of detailed offshore engineering
awards in 2017. In March, we announced our $80m detailed engineering and procurement scope
for Samsung Heavy Industries on BP’s Mad Dog 2 project and the
$95m topsides and jacket detailed
engineering scope on Noble Leviathan. We also secured a multi
million dollar engineering, procurement and construction award in
Alaska. We remain active on other
projects including Statoil Peregrino 2, BP South Pass and our SAGD
well pad engineering programme for Suncor. Work in refinery and
pipeline projects is down as expected, following completion of a
number of significant workscopes in 2016.
Eastern Hemisphere
In Operations & Maintenance, activity is down on 2016. In
the North Sea, our duty holder scope operating the CATS pipeline
and terminal for Antin Infrastructure and our operating partner
scope for Ancala on their midstream assets are both progressing
well. In March we also renewed our $50m contract with Premier Oil for operations and
maintenance services on the Balmoral Floating Production
Facility. However, overall we are seeing lower activity and
the impact of competitive pricing on contracts renewed over the
last 18 months. Our industrial services offering is performing
robustly. Asia Pacific is
performing robustly. Activity levels have increased on our Exxon
contracts in Papua New Guinea, and
in Australia we recently renewed
our contract with Melbourne Water. We also commenced work on our
five year managed services scope from Hess Malaysia for their
offshore facilities in the North Malay basin. In our turbine
related activity, we continue to pursue our strategic options for
Ethos Energy.
In Projects & Modifications, we have seen a further
reduction in brownfield modifications and upgrade work in the North
Sea but have good visibility on a number of opportunities in the
second half of the year. In April we were awarded the FEED
work for the Tolmount offshore field development in the Southern
North Sea. Work under our General Engineering Services
Plus contract in Saudi Arabia is
being released at a slower rate than expected although this is
anticipated to accelerate in the remainder of the year. The pace of
activity on our contracts with Exxon in Iraq and BP in Azerbaijan is also slower than
anticipated.
Specialist Technical Solutions
In subsea, we are working on a number of early stage, tie back
and verification scopes. Under our master service agreement with
Statoil, we secured the FEED for the subsea flow line system on the
Snorre Expansion Project in April. We were also awarded a
$5m contract for subsea engineering
and project management services on the Mad Dog 2 project.The market
remains subdued for larger projects and we continue to expect
subsea activity overall to be down in 2017. Performance in our
technology related business including asset integrity solutions and
clean energy remains robust.
Automation is up on 2016 and our main automation contractor
scopes for Chevron on the Tengiz expansion project and for
ExxonMobil on the polyethylene plant in Texas are progressing well. In April we also
secured the $8m automation
engineering work for TPC Group for their manufacturing facilities
in Texas.
Update on acquisition of Amec Foster
Wheeler
On 13 March, we announced our all share offer to acquire Amec
Foster Wheeler as recommended to shareholders by the Boards of both
companies. The combination will create a global leader in project,
engineering and technical services delivery across a diverse range
of industrial sectors, primarily focussed on oil & gas. On 5
April, as a result of further work and integration planning, the
expected level of pre-tax cost annual synergies arising from the
transaction was increased by 36% to at least £150m by the end of
the third year following completion. It is anticipated that
the circular and prospectus documents seeking shareholder approval
for the offer and the listing of shares to effect the acquisition
will be posted in May 2017. Subject
to shareholder and regulatory approval, we currently expect the
transaction to close in the second half of 2017.
Financing and dividend
Our balance sheet remains strong with net debt to EBITDA within
our preferred range of 0.5x to 1.5x. There is no change to
our intention to pursue a progressive dividend policy taking into
account cash flows and earnings.
A trading update for the first half of the year will be provided
on 29 June 2017.
- ends -
Notes to Editors:
Wood Group is an international energy services company
with around $5bn sales and operating
in more than 40 countries. The Group designs, modifies, constructs
and operates industrial facilities mainly for the oil & gas
sector, right across the asset life cycle. We enhance this with a
wide range of specialist technical solutions including our world
leading subsea, automation and integrity solutions. Our real
differentiator is our range of services, the quality of our
delivery, the passion of our people, our culture and values. We are
extending the scale and scope of our core services into adjacent
industries. Visit Wood Group at www.woodgroup.com and connect with
us on LinkedIn and Twitter.
Company compiled publicly available consensus 2017 EBITA on a
proportionally consolidated basis is $339m and AEPS is 59.6c, last updated on
20 March 2017.
(https://www.woodgroup.com/investors/investor-information/analyst-consensus)
Wood Group Investor Relations
Andrew Rose
+44 (0)1224 532 716
For media enquiries contact:
Carolyn Smith
+44 (0)1224 851 099
Wood Group Press Office
Email: press.office@woodgroup.com
Brunswick
Patrick Handley
+44 (0)20 7404 5959