WOOD Group has shed around 1,000 jobs in the UK North Sea since June and indicated more could be cut as it prepares for a prolonged slowdown in oil and gas markets amid the crude price plunge.
The Aberdeen-based oil services giant made the cuts in addition to axing 1,000 jobs in the UK in the first half of the year.
They provide further evidence of the severity of the downturn in the North Sea where oil and gas firms are slashing spending in response to the 60 per cent fall in the oil price since June last year.
The impact is being felt across the supply chain as companies like Wood, which helps firms maintain offshore platforms and the like, face cuts in workloads and pressure on pricing.
Oil and gas firms are estimated to have shed around 5,500 jobs in total in the UK in the first half.
Led by chief executive Bob Keiller, Wood Group has reduced its UK workforce numbers by around 20 per cent since the start of the year, to 10,000 from 12,000.
In an update on trading Wood Group signalled further jobs losses could be in prospect in the North Sea as oil and gas firms look to take more costs out.
The company said: “In the North Sea, volumes under longer term contracts have been impacted by the continued reduction in project and non-essential maintenance work. More recently we have seen the impact of efficiency initiatives including changes in offshore work-shift rotation. These factors continue to contribute to headcount reductions.”
Wood said it remains focussed on cost leadership and customer alignment in the North Sea “in what is expected to be a prolonged period of challenging market conditions”.
The comments could provoke renewed concern about the scale of the damage that the crude price slump could eventually do to the UK industry. With global supplies running well ahead of fairly muted demand the oil price could remain in the doldrums for months.
Brent crude fell to below $40 for the first time since 2009 on Tuesday after Opec failed to take any action to support prices at its latest meeting.
Analysts think members of the producer group, led by Saudi Arabia, have decided to let oil prices remain low in an attempt to force US shale producers out of the market.
Industry leaders hope oil services firms may be able to win more work overseas to offset the slowdown in the North Sea.
However, Wood’s update shows it is facing challenges in key markets such as the US.
The company said it had experienced significant pressure on volumes and pricing in the US onshore market this year.
Wood has used acquisitions to build a significant position in the market for supplying maintenance services for companies that produce oil and gas from shale areas.
The engineering division, which helps develop new oil and gas facilities around the world, has been impacted by the slow pace of significant fresh awards in the exploration and production market.
Chief financial officer David Kemp told analysts the company would cut around 8,000 jobs globally this year, up from 5,000 in June.
However, Wood Group said it is in good shape to cope with the downturn.
“Our balance sheet and cashflow generation remain strong, supporting the delivery of strategic acquisitions and our previously stated intention to increase the dividend by a double digit percentage in 2015,” it said.
The group said ongoing dividends, organic investment and mergers and acquisitions remain its preferred uses of cash.
Last week Wood Group agreed to buy a business that focuses on the US refining market, Infinity, for up to $192m. In September it bought the Automated Technology Group to help it move into new markets such as car manufacturing. The deals will reduce Wood's reliance on the oil and gas production market.
The company said it expects to achieve earnings before interest, tax and amortisation of $465m (£305m) this year, in line with previous guidance.
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