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Wood Group shares drop on oil price caution

Oil price warnings aside, the update for the current financial year was more positive

oil well drilling
Wood shares dropped 9%

Wood Group PLC (LON:WG.) shares dropped in Wednesday’s early deals after it cautioned that recent volatility in commodity prices may impact confidence and the pace of contract awards.

It was a shot across the bows for investors which would otherwise have found comfort in a trading update that boasted “good organic growth” in the current financial period.

Wood shares were down 59p or 9.19%, changing hands at 585p each.

The company told investors that its positive trading momentum had continued, and, highlighted a stronger second half - reflecting its typical bias towards the latter part of the year - boosted by cost synergies, projects and a wider market recovery.

It said that full-year revenue is expected to be in the region of US$10.9bn to US$11.1bn, up more than 10% from the prior year, and, full-year earnings (EBITDA) is anticipated at U$620mln to US$630mln.

READ: Wood Group wins US$43mln Texas pipeline construction contract

The expected financial performance is in line with previous guidance, from August as well as market expectations.

The oil and gas services provider noted that is making progress with its deleveraging plan, meanwhile, it described the outlook as generally favourable in its end markets – but, cautioned that recent volatility in commodity prices may impact confidence and the pace of contract awards.

Nevertheless, the company said it anticipated further earnings growth through 2019, thanks in part to US$60mln of cost synergies.

"Wood returned to growth in 2018 and performance is in line with guidance and expectations. In 2018 good momentum in trading has driven revenue growth of over 10%; we secured revenue synergies of over $500m and increased our cost synergy targets to over US$210mln,” said Robin Watson, Wood chief executive.

“Integration is complete and our unique platform is generating strong operational cash flows which are supporting good progress on our deleveraging plan."  

Quick facts: Wood Group (John) PLC

Price: 404 GBX

Market: LSE
Market Cap: £2.77 billion

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