Scottish energy services giant Wood Group yesterday secured a $750 million deal with oil major BP as it said it was on track to hit its full-year financial targets.
The Aberdeen headquartered firm also confirmed the $36.3m acquisition of Oregon-based civil construction and fabrication business Swaggart Brothers, which employs around 200 staff.
Wood Group, which has a workforce of more than 40,000 people and operations in more than 50 countries. is due to publish full-year results in February. However, it used an interim update to tell investors it expects to beat 2013’s pre-tax return of $412.8m from turnover in excess of £7 billion.
It expected growth in its PSN production services business to offset previously flagged reductions in its Engineering and Turbine divisions.
The BP deal is a five-year contract for PSN to provide engineering, procurement and construction (Epic) services to six of the company’s North Sea assets and for the onshore Forties Pipeline System (FPS) facility at Grangemouth on the Forth.
The agreement is the biggest secured by PSN this year and could be extended for up to two years. It protects more than 700 jobs and will create a further 150 posts.
It is also the first time PSN has agreed a contract for an onshore element of FPS, although the company already works with BP on aspects of its Sullom Voe Terminal operation in Shetland.
“Wood Group has more than 40 years of experience working with BP globally, and this new contract is testament to the partnership and understanding we have developed,” said Dave Stewart, UK managing director of WGPSN.
“Providing this combined service across upstream and midstream operations for the first time positions us well for continued excellence in delivering safe, collaborative and innovative services directed at maximising productivity and efficiency across BP’s assets in the UK.”
In its trading update, Wood Group said it was confident a combination of long-term contracts and business spread meant it had “relative resilience” for next year, despite operators reconsidering their spending plans in the face of a sharp fall in the price of oil in recent weeks.
The firm now anticipates reduction in earning in its engineering division to be less than the 15% drop it previously guided, and said its turbine business had seen improved trading in the second half of the year although income will still be significantly below 2013 levels.
However, the firm expects its PSN operation to deliver strong full-year growth, an uplift primarily attributable to its performance in the major US shale plays where it significantly increased its presence following the acquisition of Elkhorn last year.
It also said its North Sea business had been “robust” throughout this year even before the BP contract was signed.
“Our balance sheet remains strong and supports our continued investment in further acquisitions and organic growth,” the company told the City yesterday.
“Cash flow generation remains a focus. In line with the typical seasonal movement, we expect to deliver a significant improvement in working capital in the second half of the year.
“The group anticipates full-year 2014 performance in line with expectations and up on 2013, with growth in Wood Group PSN Production Services offsetting the reduction in Wood Group Engineering and Turbine Activities.”
Wood Group shares rose 6.50p to 569p.