Wood Group to increase full year dividend by double digits

14th Dec 2016 08:15

(ShareCast News) - While the oil and gas market remained "challenging" during 2016, Wood Group expects its performance for the fiscal year to be in line with expectations and intends to increase the dividend by a double digit percentage.In 2016, the Aberdeen-based company "significantly reduced" its cost base, improved efficiency and refined its operating structure in response to the lower oil prices. Currently Brent crude is hovering around $55 a barrel, marking an increase from previous lows due to a recently agreed OPEC-led production cut.For the eastern hemisphere, which accounts for about 50% of revenue, activity was "tough" in the North Sea, but it has renewed a majority of contracts over the last 18 months which secures access to work as volumes recover.In the North Sea, the company said there has been a fall in brownfield modifications and upgraded activity under existing contracts.Elsewhere, activity levels increased on Exxon contracts in Papua New Guinea, in Australia it recently renewed a contract with Melbourne Water, while its Saudi Aramco contracts have grown and renewed the general engineering services plus frame agreement in October.Work on our recently secured contracts with Exxon in Iraq and BP in Azerbaijan is ongoing, although the pace of activity is slower than anticipated.In the western hemisphere, which counts for about 40% of revenue, activity was up from last year due to the impact of acquisitions of US oil company Infinity Group, which was bought for $150m, and Kelchner, a construction provider, which offset lower activity.The US onshore shale business was "significantly" affected but "remains the largest contributor to this service line in the West" as the company was encouraged by the positive rig count movement in the second half of the year.It remains confident that its Permian, Eagle Ford, Marcellus and Utica, and Bakken basins will benefit as the market recovers.In east Canada the company recently secured a five-year contract on the Hibernia platform and also stated engineering for Kiewit on the BP South Pass Platform expansion project in the Gulf of Mexico.For the specialist technical solutions division, which contributes about 10% of revenue, there has been "significantly reduced subsea services activity", while it said it is working on early stage scopes but there are minimal large projects coming to market.Automation activity grew as it was awarded the $700m main automation contractor for Chevron's Tengiz expansion project in, followed up with a $40m contract from ExxonMobil Chemical to provide main automation contractor services for a Texas polyethylene plant.Looking ahead, the company said that "the market continues to present significant challenges and although these are likely to persist during 2017, in selected markets we do see indications of modest recovery".It added: "We are confident that our focus on delivering value through our asset life cycle and specialist technical solutions, together with our customer relationships, global footprint and strong financial footing position us well."