Wood Group profit falls 86 pct on low North Sea activity and exceptional costs

Oilfield services firm Wood Group reported an 86 percent drop in its profit for the first half of the year, citing, among other factors, weak contribution from the North Sea activity.

The UK-based company posted a profit of $6 million, down from $45 million in the first half of 2016.  Profit for the period was impacted by exceptional costs of $47.6 million.

This included $25.2m in respect of costs relating to the acquisition of Amec Foster Wheeler, comprising advisory fees of $19.7 million and underwriting fees in respect of new debt facilities of $5.5 million.

Revenue fell to $2.27 billion, down from $2,56 billion a year ago.

Presenting its result on Tuesday, Wood Group said there was a sense of recovery in certain markets despite tough conditions in the oil and gas sector overall.

“Robust performance in the West including, improved activity in offshore greenfield project engineering and commissioning and modest improvement in US onshore activity, was more than offset by weaker activity in the East, where we have seen a significant reduction in projects & modifications work, particularly in the North Sea,” Wood Group said.

The company expects to complete the proposed acquisition of Amec Foster Wheeler in the fourth quarter of 2017. The company expects the merger will deliver significant cost synergies of at least $170 million.

To remind, the proposed merger had risen competition concerns in the UK, in the supply of engineering and construction (E&C) services and operation and maintenance (O&M) services on the UK continental shelf, however this has now been resolved, in principle.

Namely, in order to address the Competition and Markets Authority’s (CMA) competition concerns, the companies have recently offered to sell off almost all of Amec Foster Wheeler’s assets which contribute to these services in its upstream offshore oil and gas business in the UK.

According to a statement by Wood Group on Tuesday, the CMA has recently approved in principle the proposed remedy.

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