Interim Management Statement and AGM Statement
John Wood Group PLC ("Wood Group", the "Group")
Annual General Meeting ("AGM") Statement and Interim Management Statement
("IMS")
Wood Group, the international energy services company, issues the following IMS
which the Chairman, Sir Ian Wood, will deliver at the AGM, today, 13th May:
Performance in the year to date has been in line with expectations, with our
continuing focus on production support and longer term capital projects, wide
international spread and high quality customer base.
Market conditions remain similar to those at the start of the year:
* global E&P spend will likely reduce by around 10-15% during 2009, resulting
in lower service company activity with the most significant reductions for
Wood Group being in the North American gas market and in Canadian oil sands
activity;
* customers are focused on cost reduction and efficiency improvements, and we
are successfully applying our differentiated services, products and
expertise to lower customers' overall project and operating costs;
* although some projects are subject to delays, larger customers are
generally continuing to make major project decisions based on oil and gas
prices increasing in the medium term.
Across the Group we have implemented a range of efficiency and cost reduction
measures, particularly in areas of business where activity has reduced.
Engineering & Production Facilities
In Engineering, we have a reasonable level of activity and prospects, although
there are project delays in upstream and oil sands, in part due to clients
seeking to benefit from the anticipated reduction in overall project costs.
Recent awards include FEED (Front End Engineering Design) services for
Chevron's Jack and St Malo project in the Gulf of Mexico and pre-FEED work for
ExxonMobil's Scarborough development in Western Australia. Subsea and pipelines
spending by clients continues to be robust. In the US, our downstream business
is benefiting from high levels of regulatory work, although there has been some
reduction in chemicals activity. We are continuing our focus on developing our
world leading engineering capabilities into new markets, particularly the
Middle East, West Africa, and Asia Pacific.
In Production Facilities, our customers' focus on maintaining production
levels, lowering unit production costs and ensuring asset integrity is
providing a number of good opportunities. In the North Sea, we are winning an
increasing share of work from new entrants, including TAQA. We are continuing
to increase our presence in international markets and are seeing an increasing
level of international opportunities. We have recently strengthened our
position in Asia Pacific through the acquisition of Proteus in Australia, a
provider of commissioning, operations support and engineering services.
Well Support
As anticipated, 2009 is a challenging year for Well Support, with low gas
prices resulting in the US gas rig count being down by over 50% from its peak
in September 2008. These rig count reductions impact the US activities of
Pressure Control and Logging Services (about 6% of Group revenue in 2008) and
in these areas we have reduced our workforce by around 25% and are
significantly reducing other costs. Internationally, Pressure Control activity
remains more resilient with good progress in Latin America and the Middle East.
In Electric Submersible Pumps, our strong production related content, good
international exposure and flexible approach to markets are contributing to a
good performance.
Gas Turbine Services
In Gas Turbine Services, our oil & gas related activities are benefitting from
the focus on production support and the longer term contracts in place. In the
power sector, demand for our aftermarket services has remained steady in spite
of the anticipated small reduction in overall power demand in the US in 2009.
Across our activities, we are augmenting our product capabilities and customer
focused solutions. Overall, our aftermarket related activities (representing
around 85% of the Division's revenue in 2008) should remain resilient. The
balance of our revenue in fast track power package activities is subject to the
impact of tight credit markets, although we continue to see strong enquiry
levels.
Cash flow, financing and foreign exchange
We expect to deliver strong operating cash flow in 2009 and, as reported in
March, we have renewed our bank facilities of $950m until 2012, ensuring we
have the financial resources to take advantage of the opportunities that we
believe will arise as the energy services market recovers. If the current
stronger US dollar rates prevail for the remainder of the year, there will be a
negative impact on our reported results from the translation of non US dollar
profits, however given the majority of the Group's profit is generated in US
dollars, there should be a significant net benefit for shareholders in
sterling.
Outlook
Performance in the year to date has been in line with expectations, with our
continuing focus on production support and longer term capital projects, wide
international spread and high quality customer base. We believe the longer term
fundamentals for our products and services remain strong and we will continue
to extend our services and broaden our international presence to ensure we are
well positioned to resume good growth as the energy market recovers.
ENQUIRIES:
Wood Group, 01224 851000
Nick Gilman / Carolyn Smith
Brunswick, 020 7404 5959
Patrick Handley / Nina Coad
ND
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