UPDATE 2-Wood Group says 2008 profit jumps 48 percent

* Profit in line with expectations

* Sees 10-15 pct drop in exploration & production spending

* Says current market conditions challenging

* Shares down 3.1 percent

(Adds detail, comment from conference call, shares)

By Julie Crust

LONDON, March 3 (Reuters) - British energy services company John Wood Group Plc (WG.L) posted a 48 percent jump in full-year profit on Tuesday, but warned that market conditions would be challenging in 2009 and beyond due to lower oil and gas prices.

Pretax profit surged to $384 million, in line with the average forecast from 16 analysts. Revenue rose 18 percent to $5.24 billion, exceeding analysts' expectations of $5.19 billion.

The Aberdeen-based group, a provider of equipment and services to oil and gas explorers in the North Sea and elsewhere, said it was working with customers on cost cutting and efficiency improvements to mitigate the effects of lower commodity prices.

"Overall we are facing a challenging one or two years," Chairman Ian Wood said on a conference call.

"The perceived wisdom is that commodity prices will begin to pick up again in 2010, and this will be a lead indicator for a pick-up in service activity in the second half of 2010 and 2011."

The company said it remained confident of its prospects and planned to pay a full-year dividend of 9 cents, up from 7 cents in 2007.

"The dividend increase was more than we forecast and confirms management confidence in the outlook," said Oriel Securities analyst Andrew Whittock.

Wood Group anticipates a 10-15 percent reduction in global exploration and production spending and a decrease in service company activity in 2009.

It expects smaller independent oil producers to cut spending the most, due to lower commodity prices and tight credit markets, while expenditure by international oil majors and national oil companies (NOCs) are likely to be pretty robust.

More than half of Wood Group's business comes from the international oil companies and the NOCs, it said.