Wood Group (John)PLC Pre-close trading update to 31 December 2016

 
TIDMWG. 
 
14 December 2016 
 
Pre-close trading update for the year to 31 December 2016 
"Financial performance in line with expectations" 
 
Oil and gas markets remain challenging in 2016. Lower oil prices have endured 
and activity has fallen across the sector. In response, we have significantly 
reduced our cost base, worked alongside customers to improve efficiency and 
refined our operating structure to enhance customer delivery1. 
 
We anticipate full year 2016 financial performance in line with current market 
expectations2. Our balance sheet remains strong and our intention remains to 
increase the dividend for 2016 by a double digit percentage. 
 
Looking ahead, the market continues to present significant challenges and 
although these are likely to persist during 2017, in selected markets we do see 
indications of modest recovery. We are confident that our focus on delivering 
value through our asset life cycle and specialist technical solutions, together 
with our customer relationships, global footprint and strong financial footing 
position us well. 
 
Asset Life Cycle Solutions 
 
Western Hemisphere 
(c40% of Total Revenue) 
 
Operations and Maintenance activity is up on 2015 due to the impact of Infinity 
and Kelchner acquired in 2015 more than offsetting lower underlying activity. 
Our US onshore shale business has been significantly impacted but remains the 
largest contributor to this service line in the West.  We are encouraged by the 
positive rig count movement in the second half of 2016, although we have yet to 
see any significant improvement in activity. We are confident that our 
differentiated capability in the Permian, Eagle Ford, Marcellus & Utica and 
Bakken basins will benefit us as the market recovers. We are seeing a good 
contribution from our work in the Gulf coast petrochemical market following the 
acquisition of Infinity, and the US offshore business has been less affected 
than onshore. Performance in East Canada has grown; we continue to work on our 
hook up and commissioning scope on the Hebron topsides and we recently secured 
a five year contract on the Hibernia platform. 
In our Projects and Modifications business, US onshore work including the ETC 
Dakota access pipeline, the Flint Hills refinery project and activity on 
process plants and transmission pipelines more generally, will be down on 2015. 
A number of these projects are concluding in 2016. Overall activity in 
greenfield offshore work has been robust. Major activity included the detailed 
design on Stampede for Hess and Peregrino 2 for Statoil, the FEED and detailed 
scope for Noble Leviathan and ongoing FEED activity for Anadarko Shenandoah. We 
also recently commenced detailed engineering for Kiewit on the BP South Pass 
Platform expansion project in the Gulf of Mexico, and we see further projects 
with the potential to proceed. 
 
 
Eastern Hemisphere 
(c50% of Total Revenue) 
 
Our Operations & Maintenance activities faced a tough market in the North Sea 
for operations and maintenance work, which is down on 2015. We are maintaining 
our leading position, having renewed a majority of contracts over the last 18 
months which secures access to work as volumes recover. We are well placed to 
partner with new entrants into the basin; our duty holder scope operating the 
CATS pipeline and terminal for Antin Infrastructure is progressing well, and we 
recently secured the operating partner role for Ancala Midstream on assets 
acquired from Apache.  Elsewhere, 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 recently secured a five year managed 
services scope from Hess Malaysia for their offshore facilities in the North 
Malay basin. 
In our turbine related Operations & Maintenance activity, we have seen weaker 
than expected performance in our EthosEnergy joint venture. It is likely that 
this will lead to a further non cash impairment of the carrying value of our 
investment in EthosEnergy at the year end and we are actively considering our 
longer term strategic options. 
 
In Projects & Modifications work, we have now completed the later stage 
follow-on engineering and construction support scope on Det Norske's Ivar Aasen 
project. In the UK North Sea, we have seen a significant fall in brownfield 
modifications and upgrade activity under existing contracts. Activity on our 
Saudi Aramco contracts has grown and we renewed our General Engineering 
Services Plus frame agreement in October. Work on our recently secured 
contracts with Exxon in Iraq and BP in Azerbaijan is ongoing, although the pace 
of activity has been slower than anticipated. In Kazakhstan, we saw stronger 
activity on our work with NCOC. During the year we also benefitted from the 
commercial close out of projects. 
 
Specialist Technical Solutions 
(c 10% of Total Revenue) 
 
We have seen significantly reduced Subsea services activity. We are working on 
a number of early stage, tie back and verification scopes, but there are 
minimal large projects coming to market. Relationships with our customers 
remain positive, evidenced by a number of master service agreements including 
Statoil, Apache, BP and Chevron. Within our technology offering, we saw growth 
in our smart asset integrity services. 
 
Our Automation activity has seen growth in 2016. We were formally awarded the 
$700m main automation contractor scope for Chevron's Tengiz expansion project 
in 2016, and this was followed up with a $40m award from ExxonMobil Chemical to 
provide main automation contractor services for a Texas polyethylene plant 
following completion of the FEED work. 
 
We anticipate full year 2016 financial performance in line with current market 
expectations2. Our balance sheet remains strong and our intention remains to 
increase the dividend for 2016 by a double digit percentage.  Full year results 
will be announced on 21 February 2017. 
 
 
Conference Call 
A telephone conference call for analysts will be held at 8:30am today; 
participant dial-in details below: 
 
UK: 01296 480 180 
International: [phone] 
Passcode: 735112# 
 
 
- ends - 
 
 
Notes to Editors: 
Wood Group is an international energy services company with around $6bn sales 
and operating in more than 50 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 http://www.woodgroup.com/ and connect with us 
on LinkedIn and Twitter. 
 
1 As announced at the interim results, Wood Group has changed its reporting to 
align reportable segments with our new operating structure effective July 2016. 
Results for the year ended 31 December 2016 will comprise three reportable 
segments, being; Asset Life Cycle Solutions West, Asset Life Cycle Solutions 
East and Specialist Technical Solutions. A historical analysis of financial 
performance under our old and revised reportable segments from 2012 to H1 2016 
was released on 30th November. 
 
( https://www.woodgroup.com/investors/financial-information/ 
financial-and-regulatory-news/2016/ 
revised-reportable-segments-historical-analysis) 
 
2Company compiled publicly available consensus 2016 EBITA on a proportionally 
consolidated basis is $370m and AEPS is 64.9c, last updated on 26th October 
2016. 
( https://www.woodgroup.com/investors/investor-information/analyst-consensus) 
 
Wood Group Investor Relations 
Andrew Rose        [phone] 
 
For media enquiries contact: 
Carolyn Smith         [phone] 
Wood Group Press Office 
Email: [e-mail] 
 
Brunswick 
Patrick Handley        [phone] 
 
 
 
END 
 

(END) Dow Jones Newswires

December 14, 2016 02:00 ET (07:00 GMT)