Wood shares jump on upbeat trading and Amec merger boost

Shares in Wood Group, the Aberdeen-headquartered energy services firm, rose strongly yesterday as it told investors at its annual general meeting that it is seeing good momentum across its business and that its integration with Amec Foster Wheeler is progressing ahead of schedule.

Inanupbeatfirst-quartertrading update, Wood said it was confidentofreturningtogrowth during 2018 as a whole, helped byincreasedinvestmentbycustomers on capital projects.

The group also said it is looking to dispose of its global power generation services business Ethosenergy which has sites in Cumbernauld, Dundee and Aberdeen in a move likely to contribute “significantly” to the group’s asset disposal target of $200 million. Chief executive Robin Watson said the good trading performance the company was seeing across the group was being predominantly led by investment by customers in capital projects across shale, power, downstream oil and gas and chemicals in its Americas business.

“The first quarter has demonstrated the significant benefits of the operational platform we have created. Our integration programme is ahead of schedule and we are seeing good momentum in trading, cost and revenue synergy delivery,” he said.

Watson said the firm expects to deliver revenue and earnings growth as well as a benefit from cost synergies related to its merger with Amec of more than $50m this year.

The group is confident of delivering annualised cost synergies of at least $170m by the end of the third year following the deal completion.

In addition to reducing operational costs, it said interest payments of the combined group will fall by around $15m-$20m compared to 2017.

Watson also said that the group had leveraged its combined strength to secure new work worth more than $300m on a number of contracts, including an agreement with Saudi ARAMCO/SABIC on a crude oils to chemicals complex and an engineering, procurement & construction contract in Trinidad.

Wood said reducing debt levels remains a key priority for the group and that selling Ethosenergy was the “current focus” of its asset disposal programme.

Overall, the outlook for 2018 is unchanged and the timing of cost synergies, projects and market recovery is expected to result in around 60 per cent of its annual earnings falling in the second half of the year.

businessdesk@scotsman.com