WOOD chief executive Robin Watson has highlighted signs of recovery in the North Sea as he hailed the benefits of the blockbuster takeover the Aberdeen giant completed to help reduce its reliance on the area.
Mr Watson said the £2.2bn acquisition of Amec Foster Wheeler last year had left Wood in a good position to capitalise on opportunities in a wider range of engineering markets.
With the integration progressing well Wood is confident of returning to growth in 2018, he told the company’s annual general meeting yesterday.
Shares in the company surged ten per cent after the update.
Speaking following the meeting Mr Watson noted that the North Sea only accounts for around five per cent of the enlarged business.
However, Wood expects to remain a major player in the North Sea oil services market for years. It helps firms develop, operate and maintain facilities.
Mr Watson welcomed encouraging indications that brighter times lie ahead for the industry following the long downturn triggered by the slump in the oil price since 2014.
“We do see activity levels increasing,” said Mr Watson, who noted the company expects to achieve growth in the North Sea this year.
Activity levels are unlikely to recover at the same rate as they fell during the downturn. Companies slashed spending in response to the oil price fall.
However, Wood’s experience suggests there has been a significant change in conditions for the better.
In updates last year Mr Watson said he saw no sign of recovery.
Yesterday he noted that operators have started spending on the kind of modification work they shelved during the downturn.
The increase in the crude price since late 2016 has helped along with measures that industry players took to cut costs and increase efficiency during the downturn.
“We’re getting back into a place where there’s a bit more cash,” said Mr Watson.
Wood indicated the recovery is gathering steam.
“North Sea activity is showing moderate growth on 2017 from a low base and is expected to strengthen in the second half,” the company said.
Noting there is still lots of oil and gas to be produced in the North Sea, Mr Watson said: “It’s still a significant part of the business and we’re still a significant player and we intend to be for the long term.”
He said directors have been really pleased with the results of the acquisition of Amec Foster Wheeler. This helped Wood develop big positions in markets such as environmental and infrastructure engineering.
The company is confident of achieving annualised cost savings of at least $170m by the end of the third year.
Mr Watson noted Wood has shed around 400 senior management jobs under the integration programme, adding: “We see the majority of the significant losses behind us.”
Wood closed Amec Foster Wheeler’s head office in London.
Regarding the impact on Aberdeen, he said: “We have not cut any jobs locally as a result of the integration. We have taken some jobs in.”
Mr Watson has expressed confidence that the AFW takeover will be good news for Aberdeen, as the home city of a broader-based engineering giant with global operations.
The group has around 55,000 employees. These include 4,000 in the North Sea business and 9,500 in other UK operations.
Wood has also started to achieve the kind of business wins Mr Watson hoped would be made possible by combining the firms’ skill sets. The value of such revenue synergies exceeds $300m already.
Mr Watson was re-elected a director by 99.91% of votes cast at the AGM. The directors’ remuneration report was supported by 99.46% of votes cast.