Yahoo Finance Wood Group warns the struggle against oil downturn to continue
Wood Group remains gloomy about the oil market after the fallout of the market crash wiped out half its profits last year.
The Aberdeen-based company provides services work to oil projects across the global market but has been hard hit by spending cuts across the sector following the oil price crash.
Although oil prices have started to rise activity on new projects has been slow to ramp up, and Wood Group warned that it remains cautious about the market in the near term.
Oil companies put the brakes on projects and demanded far lower rates for those that moved ahead, cutting the group’s earnings before interest, tax and amortisation by over 22pc to $363m (£291m) for the year to December 31 from $470m in 2015.
Wood Group reported pre-tax profit of $66m, down from $138m in 2015, even after slashing its workforce by almost a fifth to reduce its overhead costs by $96m.
The company has cut more than 8,000 jobs from its global workforce since the start of the downturn.
Wood Group boss Robin Watson fuelled investors' jitters with a lukewarm outlook for the company that could threaten future shareholder payouts.
Under the company’s new policy dividends will be linked to earnings and are likely to be less than the 10pc payout for 2016 at 33.3 cents a share.
“The oil and gas market will remain under pressure in 2017 with a few bright spots,” Mr Watson said.
The company said it expected only a modest recovery in selected areas such as US onshore and greenfield offshore projects.
One particular “sweet spot” for the company is in the Permian shale basin in West Texas, which is already seeing a return of shale rigs as oil prices creep higher above $55 a barrel. The low-cost shale region is primed for a resurgence of activity and is where roughly half of Wood Group’s shale capacity is based, Mr Watson said.
Wood Group says cost saving measures will continue, which should safeguard the company’s long-term future.
Its shares closed down 7.7pc after the update.
