WOOD chief executive Robin Watson has said the engineering giant expects to remain in the North Sea oil services business for years although the sector faces huge challenges.
The slump in oil and gas market activity in areas like the North Sea triggered by the coronavirus crisis took a toll on Aberdeen-based Wood last year.
The company plunged deep into the red after providing an additional $150 million (£108m) in respect of the possible settlement of historic investigations into conduct issues at companies it acquired.
READ MORE: North Sea oil services giant cuts jobs and dividend amid turmoil in market
Wood also incurred $101m of redundancy and restructuring costs as it moved to offset the impact of the downturn in oil and gas markets and get in shape for the energy transition. The company has invested heavily in growing its presence in markets such as renewables in recent years under Mr Watson’s drive to reduce its historic reliance on the oil and gas services business.
However, Mr Watson said Wood’s North Sea oil services operation remains core to the business. Wood expects oil and gas to remain a key part of the energy mix for years.
The company has strong positions in the market to help firms to develop and then maximise production from North Sea assets and in the growing decommissioning sector.
While spending on new assets fell sharply in the North Sea last year, Mr Watson held out the prospect that newcomers to the area could fuel an increase in activity levels.
“We can envisage a time when there’s another wave of new entrants potentially coming into the North Sea,” said Mr Watson.
READ MORE: US oil giant sells bumper North Sea portfolio as shake-up in area continues
He noted that Wood can harness the expertise and capability offered by its operations in Scotland to win work around the world. The engineering centres in Aberdeen and Glasgow feature in a list of global hubs that Mr Watson noted also included Houston and Milan.
“We view that as an essential part of our reputation and capability,” said Mr Watson of the Scottish operation.
However, employee numbers fell in Scotland last year. Wood has around 3,500 employees working in or offshore Scotland, compared with around 4,000 in April last year.
Wood’s chief financial officer, David Kemp, said Rishi Sunak’s decision to increase the Corporation Tax rate to 25 per cent from 2023, from 19%, will not affect the group’s decision making in any way. He noted that Wood is a globally diverse business.
It generated $715m revenues from UK projects last year, compared with $1.15 billion in the preceding year. Global revenues fell to $7.5bn from $9.9bn.
Wood made an underlying profit of $630m, against $855m last time. It lost $228m net of exceptional costs, after making $73m profit in 2019.
READ MORE: Scots engineering heavyweight wins praise in City for response to renewables revolution
Wood expanded into a wide range of engineering markets, including environmental and infrastructure engineering, through the £2.2bn acquisition of Amec Foster Wheeler in 2017.This left it exposed to potential liabilities in respect of conduct issues.
The group said yesterday it has made $197m provisions in respect of the amounts it expects to pay to achieve resolutions with the Serious Fraud Office and US, Brazilian and Scottish authorities.
The bulk of the provisions relate to investigations that are being completed into conduct issues at Foster Wheeler, before that business was acquired by Amec for $3bn in 2014. The SFO launched an investigation into the matters concerned in 2017.
Wood noted: “The investigation focuses on the past use of third parties and possible bribery and corruption and related offences and relates to various jurisdictions. The Group is co-operating with and assisting the SFO in relation to this investigation. “
Wood has agreed to pay around $9m to the Crown Office in Scotland in connection with payments made in Kazakhstan between 2008 and 2010 by a venture formed by PSN. Wood acquired PSN in 2011 for £600m. It reported the matter of the payments to the authorities after conducting an internal investigation.
Wood previously provided $46m in respect of all the investigations.
READ MORE: Petrofac hit by fallout from bribery scandal
Mr Watson said: “We are pleased to be nearing resolution of the legacy investigations so that we will be able to draw a line under them and while near-term headwinds remain in 2021, we saw improving momentum in awards in late Q4 and are encouraged by the medium-term outlook for our markets.”
Wood cut net debt to $1.014bn in 2020, from $1.424bn helped by disposals. It does not propose to pay any dividends in respect of last year.
Shares in Wood closed down 16.1p at 301.1p.
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