Shares in Wood Group pushed ahead yesterday after the energy services giant confirmed it was on track to hit its full-year financial targets despite the challenges facing the industry.
In a pre-close update for the year to December 31, the Aberdeen-headquartered group said its outlook for the year remained unchanged.
The company said earnings before interest, taxation, depreciation and amortisation (EBITDA) is expected to be in line with previous guidance of around $465 million.
The firm said its adaptability and strong focus on driving down costs it has cut more than 5,000 jobs this year had helped it maintain its performance.
“In what is expected to be a prolonged period of challenging market conditions we are benefiting from our flexible business model and are focused on managing utilisation, delivering overhead cost savings in excess of estimates at the half year and working with customers to develop efficient solutions,” the firm told investors.
“Our balance sheet and cash-flow generation remain strong, supporting the delivery of strategic acquisitions and our previously stated intention to increase the dividend by a double-digit percentage in 2015.”
Despite being financially on track, the firm has seen a significant pressure on its main trading divisions.
The firm reported that performance in its PSN production services business had been hit by lower activity and pricing pressure” in its US onshore shale oil operations and reduced work volumes on the UK Continental Shelf.
“In the North Sea, volumes under longer-term contracts have been impacted by the continued reduction in project and non-essential maintenance work,” the company stated.
“More recently we have seen the impact of efficiency initiatives including changes in offshore work-shift rotation.
“These factors continue to contribute to headcount reductions. We remain focused on cost leadership and customer alignment in this mature basin.”
Wood said order backlogs in its engineering division were “slightly below” normal for the six to nine months ahead, and its turbine activities had been impacted by oil and gas customers deferring maintenance work and the “very disappointing” second-half performance of its power business EthosEnergy.
The firm said it was likely to take an exceptional non-cash hit on the value of that business at the year end.
Shares in Wood Group closed trading up 4.71% at 578.5p last night.