LONDON Aug 21 British energy services company
John Wood Group is working hard to resolve problems with
two key contracts that are holding it back, its chief executive
said on Tuesday.
Delays in a contract with Petroleum Development Oman have
ratcheted up losses on the project and weighed on John Wood's
shares, but the company said that it expects improvement in the
next year. It said that losses in Oman would be $15 million to
$20 million in 2012.
"The financial performance on that contract has been
disappointing but ... we've got a really good dialogue going
with the client in a range of areas," Chief Executive Allister
Langlands said in a conference call.
"Through those discussions and improvement in efficiencies,
we'll get people on the contract for longer, and we do see the
performance improving a bit in the second half and improving
again in 2013."
The company also said that it is seeking to build up its
power solutions business, which provides engineering and
construction for power facilities. However, it added that
contract awards have been held back by the gloomy economic
environment and there has been a delay on a contract with power
plant operator GWF.
"We have had a small delay on that project," Langlands said.
"we think overall we'll continue to make a reasonable profit
margin, and we do expect to complete that contract by the end of
quarter three this year."
The contract doubts partly eclipsed strong growth in other
parts of the business, with demand from companies working in the
North Sea, Gulf of Mexico and in U.S. shale helping to drive
first-half revenues up 27 percent at its engineering unit.
Shares in Wood Group were down 1.6 percent at 822 pence at
0827 GMT, underperforming the FTSE mid-cap index and erasing
modest gains made over the past two weeks.
The company said that it expects to meet full-year
expectations and intends to pay a total dividend of 17 cents per
share, up 26 percent, reflecting its confidence in the long-term
"Despite the recent volatility in financial and commodity
markets, Wood Group continues to see good momentum across the
business," said analysts at Oriel, retaining its "add" stance on
Earnings before interest and tax were $205 million in the
six months to June 30, up 53 percent year on year. Revenues rose
36 percent to $3.35 billion.