June 28, 2018 / 6:21 AM / in 4 months

Wood Plc sees stagnant prices despite recovery in demand

(Reuters) - Oilfield services company Wood Plc (WG.L) said it was not yet able to demand higher prices for its products despite an oil market rally that has been helping energy companies.

The changed landscape comes as a relief for service providers after a slump in crude prices that forced producers to cut spending and defer or cancel contracts.

“We do feel like we are coming out of that (oil and gas) down cycle,” Wood Chief Financial Officer David Kemp said.

“We have not seen additional pricing pressure but generally we have not seen any uptick in pricing yet,” he added.

Aberdeen-based Wood Plc’s market comments echo those of smaller rivals Petrofac Ltd (PFC.L) and Hunting Plc (HTG.L).

Hunting said on Thursday it saw strong activity levels onshore U.S., but was more cautious on the rate of recovery for the rest of the year in the wider market. The company said it remained comfortable with the market consensus for 2018

In a trading statement on Thursday, Wood said its revenue is expected to have risen to $5.1-5.2 billion for the six months ending June 30.

It had reported revenue of 2.33 billion pounds ($3.05 billion) a year earlier, before it closed the acquisition of smaller rival Amec Foster Wheeler in October.

Core earnings are expected to be between $250 million to $260 million. That would be below the $288 million estimated by brokerage Jefferies.

Its shares reversed course to fall as much as 3.7 percent in morning trading as investors focused on the cautious market outlook.

Jefferies analysts said weak first half EBITA margin suggested tough trading, despite the company guiding to improvement in the second half.

Wood said U.S. shale activity had improved, mainly in the Permian basin of West Texas and New Mexico, and Niobrara basin, which spans states including Colorado and Wyoming. About half of Wood Plc’s revenue comes from the country.

Reporting by Muvija M in Bengaluru; Editing by Amrutha Gayathri/Keith Weir

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