NORTH Sea oil services heavyweight Wood has seen revenues plunge as the fallout from the coronavirus crisis hit oil and gas market activity but has noted signs that conditions are improving.
The Aberdeen-based giant announced that first half revenues fell by 21 per cent, to around $3.2bn (£2.3bn) due to the impact of Covid-19, sending its shares tumbling.
The turmoil in oil and gas markets triggered by the coronavirus crisis has led companies to slash spending on new facilities and to cut discretionary spending on operations to the bone.
Wood is active in oil and gas markets around the world. It noted that work on new conventional energy assets in the first half was limited to smaller early-stage projects.
However, Wood said the division that works on existing assets has seen its order book increase since the end of last year. The company cited a recovery in demand in the conventional energy sector.
The improvement in the order book may reflect an increase in confidence among oil and gas firms following the strong recovery in crude prices that has accompanied the roll out of coronavirus vaccines around the world.
Brent crude sold for around $75 per barrel yesterday, compared with less than $20/bbl in April last year.
North Sea-focused Siccar Point Energy has provided a clear sign that firms are starting to consider making big investments in North Sea projects again, with news that it is seeking regulatory approval to develop the giant Cambo field West of Shetland. Royal Dutch Shell has a 30 per cent stake in Cambo.
In March last year private equity-backed Siccar Point said the firms had deferred making a decision on whether to develop Cambo citing the “unprecedented worldwide macroeconomic dislocation” resulting from Covid-19.
Siccar Point’s decision to apply to the Oil and Gas Authority for approval for Cambo this month has outraged environmentalists.
Friends of the Earth Scotland said the climate impact from producing and burning the oil and gas from the Cambo field alone would be equivalent to ten times Scotland’s annual emissions and that it would be completely indefensible for the UK Government to approve the development.
However, Siccar Point insists its plans are compatible with the drive to achieve net zero in terms of carbon dioxide emissions.
Chief executive Jonathan Roger said: “West of Shetland is being transformed into an energy hub with huge potential for both oil and gas and renewable developments, which are equally important to the energy transition over the next two decades, ensuring secure homegrown supply for homes and businesses and reducing the requirement for costly imports from less regulated parts of the world.”
He said Siccar Point has taken significant steps to minimise the emissions footprint of the Cambo development through the design phase and carried out thorough environmental consultations and extensive liaison with regulators.
Industry body OGUK said yesterday that projects are only brought to the development stage after a lengthy process involving rigorous assessment of all aspects, including environmental management, and extensive engagement with all stakeholders to take account of societal concerns.
Katy Heidenreich, OGUK’s supply chain and operations director said: “The UK offshore oil and gas industry is changing and applying low carbon thinking to all its projects, including the Shetland-based Cambo project, to support the transition to greener, cleaner energy.”
Led by chief executive Robin Watson, Wood has moved to reduce its reliance on the oil services business that used to account for the bulk of its earnings.
The company has moved into markets such as environmental engineering helped by the £2.2 bn acquisition of Amec Foster Wheeler in 2017 and developed a significant renewables operation.
In an update on trading in the six months to June 30, the company noted that its operations order book had increase by around 14% since the end of last year.
The consulting division’s order book had increased by 13% since December 31. Wood said: “ Recent awards reflect our strategic positioning for growth opportunities from the energy transition and drive for sustainable infrastructure.”
Wood said it expected to achieve underlying first half earnings of $255m to $265m , down around 12% on the first half of 2020 but was confident of returning to growth in the second half . The outlook for the projects division, which works on new developments, is improving.
However, shares in the group closed down 22.4p at 206.6p.
Separately, the Centurion Group oil services business, which is also based in Aberdeen, has signalled confidence in the prospects for the market by making its biggest acquisition to date.
The company has bought United Arab Emirates-based Specialist Services Group in a deal it said provided it with a strong platform for growth in the Middle East and South East Asia.
The price of the deal was not disclosed. However, private equity-backed Centurion said the acquisition was the biggest it has made to date.