August 21, 2018 / 6:40 AM / 8 months ago

UK's Wood sees slow recovery in oilfield services pricing

(Reuters) - British oilfield services firm Wood Plc (WG.L) hit the top end of its forecasts for first-half profit in an improving global oil market, while warning its ability to raise prices was still limited to buoyant U.S. shale markets.

Shares in Aberdeen-based Wood rose 5 percent, initially topping gainers on the midcap FTSE 250 .FTMC, after it also raised its prediction of cost-savings from its takeover of smaller rival Amec Foster last October.

The company has seen demand for services recover in its core oil and gas market over the past two years as prices of crude tripled from 2016 lows, ending a period of aggressive cost-cutting by producers.

But Chief Financial Officer David Kemp told Reuters that improvement was still only slowly showing up in Wood’s ability to increase prices, with U.S. shale markets roughly 6 to 12 months ahead of the rest of the business.

“In ‘18 we don’t expect that pricing uplift outside of U.S. shale whereas when we get part way through the cycle, we expect pricing (more generally) to improve,” he said.

“Revenue has grown over 13 percent in the first half. We see that momentum continuing into the second half and that creates the right ambition for pricing improvement in the future.”

Wood, which operates in more than 50 countries, expects to see a further pick-up in activity, including higher spending by international oil and gas explorers.

Cost-savings from integrating Amec Foster, which it bought last year, are now expected to be at least $210 million, compared with an earlier forecast of at least $170 million(133.30 million pounds), Wood said.

Shares of the company were up 4.7 percent to 692.6 pence at 0830 GMT.

Wood stuck to its full-year forecast and said it was on track to deliver earnings before interest, tax and amortization (EBITA) growth in line with market expectations.

“A slight disappointment is that WG (Wood) has not raised EBITA expectations for 2018 on the back of such strong topline growth,” JPMorgan analysts said in a note.

Revenue rose 13.4 percent to $5.38 billion as demand for its oilfield services and products picked up due to higher spending by oil producers after a prolonged crude price slump.

Wood’s order book stood at about $10.6 billion as of June 30, with about 85 percent of expected 2018 revenue delivered or secured.

Lower project completions - normal for the first half - reduced EBITA to $260 million from $264 million a year earlier on a pro forma basis, with margins dipping 0.8 percentage points to 4.8 percent.

The company did not give figures stripping out the impact of the merger with Amec Foster for other measures of profit.

The company posted a loss of $52 million for the first half, compared with a profit of $6 million a year earlier, hurt by a non-cash amortisation charge of $125 million and exceptional costs of $101 million.

Reporting by Muvija M, Arathy S Nair in Bengaluru and Shadia Nasralla in London; Editing by Patrick Graham and Mark Potter

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below