Oil services firm Wood Group (LON:WG.) expects full-year figures to be in line with analyst expectations, although it warned market conditions remain challenging.
In an AGM statement, the FTSE 250 company said its overall performance for the year to date, whilst down on 2014, reflects the “relative resilience of its business model”.
Last year, Wood Group posted revenues of US$6.6bn, up 14.3% on the previous 12 months against a backdrop of a steep decline in oil price towards the end of the year.
Many of its clients cut capital expenditure due to the collapsing Brent crude price, which has recovered slightly this year to trade at US$65 a barrel.
To deal with the slump, Wood Group has been working with customers to cut costs and improve efficiency, as well as axing jobs and finding other savings from its own operations.
Today, it said: “We are confident that we can deliver SG&A (selling, general & administrative) cost reductions of over US$30mln in 2015 and anticipate that full year EBITA will be broadly in line with analyst consensus.”
“Looking further ahead, we remain confident of delivering good growth as market conditions improve.”
The company, which will send out a first-half trading update on 25 June, still intends to increase its dividend per share by a double digit percentage from 2015 onwards.
JP Morgan said the key issue is whether investors accept as realistic WG’s projections for a rapid cost base adjustment, given its clients are feeling pain and are hungry for further price discounts.
“We are now 5-6% below prior consensus in 2015 and 22% below in 2016 and remain ‘underweight’ on Wood Group, reflecting the 2016 earnings drift risk," the broker said today.
In a separate statement, Wood Group told investors it had landed a five-year contract with BP (LON:BP.) in Trinidad & Tobago.
Under the deal, worth US$250mln, subsidiary Massy Wood Group will provide engineering, procurement and construction services to BP's 13 upstream offshore rigs located within the Greater Cassia and Greater Mahogany areas off the east coast of Trinidad.
It’s the second major contract Wood Group has secured with BP in recent months. In December, the Aberdeen-based business was awarded a five-year (US$750m) deal with BP covering offshore installations and onshore facilities in Grangemouth, Scotland.
Wood Group has also signed five year contract awards this year with Total and Enquest in the North Sea.
Shares were 12p higher at 712p this morning. Year-to-date they are up 20%.