Wood Group profits hit by lower customer spending

Oil services provider Wood Group has reported a 23% drop in pre-tax earnings to $363 (£291) million for the year ended 31 December 2016.

The Aberdeen-based company also posted a 16% fall in revenue to $4.9 billion for the 12-month period.

Wood Group, which operates in more than 40 countries, said oil and gas markets were "very challenging" in the 12 months as a result of low oil prices impacting on the budgets of producers, sending customer spending down by 20%. These challenges are predicted to continue in the year ahead.

"Despite challenging conditions in our core oil & gas market in 2016 the group delivered financial performance in line with expectations," said the firm's chief executive Robin Watson. Results benefited from the robust management of utilisation and costs and one-off benefits, he added.

“We enter 2017 as One Wood Group, repositioned to enhance customer delivery and we are encouraged by their support for our services, albeit in a competitive pricing environment. The oil & gas market continues to present challenges and we remain cautious on the near term outlook," said Watson.  

The company said it reduced overhead costs by a further $96 million in 2016. As well as restructuring operations, it has reduced its headcount by 36% over a two-year period.

Watson said the company will continue to seek merger and acquisition targets. “Opportunities have been less than anticipated in 2016 and we have remained disciplined as regard to potential targets. We continue to focus on opportunities that may better consolidate our offering or accelerate delivery against our strategic objectives, including broadening our end market exposure,” he added.