Our actions to date have been focused on rationalisation at top levels
WOOD chief executive Robin Watson has said the engineering giant expects a modest recovery from a low base in the North Sea this year and reiterated confidence its £2.2 billion takeover of Amec Foster Wheeler would benefit Scotland.
Speaking after Aberdeen-based Wood revealed the costs of the acquisition pushed it $30 million (£21m) into the red last year Mr Watson said the deal set the firm on a growth path that could see it creating jobs in its home city.
While there were fears the takeover could result in hefty job cuts in Scotland, Mr Watson said it had had minimal to no impact so far.
“If anything we have taken work into Aberdeen,” said Mr Watson, who noted Wood had closed Amec Foster Wheeler’s head office in London.
The all share acquisition of Amec Foster Wheeler was the most dramatic move Wood has made under Mr Watson’s strategy to reduce the group’s reliance on the North Sea oil services market in which it made its name.
Wood was hit hard by the downturn in the North Sea that set in after the crude price plunged in 2014 as growth in global supplies ran ahead of demand.
The company has shed thousands of jobs in the area since 2014, amid deep cuts in spending by oil and gas firms on new facilities and upgrades.
However, the results announcement came a day after Oil & Gas UK said investment in new North Sea projects is set to increase strongly this year helped by the partial recovery in the crude price since late 2016.
Asked if Wood had seen any sign of recovery, Mr Watson told reporters the group anticipated it would be better in the North Sea in 2018 than in 2017.
“I think it would be modest and I think it would be from a low base,” said Mr Watson.
He added: “I certainly don’t anticipate an enhancement in margins or anything like that.”
The tone of the comments was restrained but they will be welcomed by sector watchers in the North Sea. They follow three grim years during which Wood appeared to take a resolutely gloomy view of the outlook for the area.
Mr Watson noted Wood remains a leading player in the North Sea oil services market.
He said the company has positioned itself to benefit from moves by independents such as Chrysaor to acquire assets that majors decided were non-core.
The takeover of Amec Foster Wheeler has had limited impact on operations offshore.
Amec Foster Wheeler sold its North Sea oil services business to Australia’s Worley Parsons to help it win regulatory clearance for the takeover by Wood.
Mr Watson said developments since the deal completed in October have left him firmly convinced of its benefits. Wood has gained big positions in attractive growth markets such as environmental engineering.
The integration is progressing ahead of schedule. The group has achieved annualised cost synergies of greater than $40m to date. Directors are confident of delivering at least $170m in three years.
Wood recorded around $118m transaction and integration costs in respect of the deal, including redundancy charges.
“Our actions to date have been focused on rationalisation at the top levels of management and the initial stages of property rationalisation,” said Wood. The group employs around 4,000 people in its North Sea operations, with 50% on shore. It employs 13,500 in the UK.
Wood lost $30m after exceptionals in 2017. It made $34m profit in the preceding year. Revenues increased to $6.2 billion from $4.9bn.
Core earnings before interest tax and amortisation increased to $372m, from $363m. The company said it expects to achieve modest EBITA growth in 2018 reflecting factors such as early stage recovery in certain oil and gas markets and cost synergies.
Wood proposed a final dividend of 23.2 cents taking the annual total to 34.3c, up 3% on 2016.