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Financial Times: Oil boom boosts John Wood

By Ed Crooks
Published: March 7 2007 02:00 | Last updated: March 7 2007 02:00

The boom in demand for oil services helped push John Wood Group’s pre-tax profits up 47 per cent last year to $184m (£96m), but the company warned thatsuch rapid growth was unlikely to be continued this year.

As oil companies developing new sources of oil and gas have been hit by shortages of skilled staff and equipment, Wood has been among the beneficiaries.

Wood increased its staffing by 4,000 during the year to more than 20,000, in part through acquisitions, and invested $137m in acquisitions and capital spending, up from $99m in 2005.

Sir Ian Wood, chairman, said he expected sustained growth in spending by oil companies, which “should enable us to continue our strong growth”, if not quite at the same pace.

Credit Suisse forecast earnings per share growth of 29 per cent for 2007; Teather & Greenwood predicted 23 per cent.

Peter Hitchens of Teather & Greenwood said: “The operating environment in oil services is one of the best there has ever been, and the companies are making a fortune.”

Wood’s oil services business includes engineering design and project management, subsea engineering and submersible pumps, with customers such as BP and Royal Dutch Shell, among others. Roughly half of that business is in developing new fields, and half from production from existing fields.

Allister Langlands, who stepped up to chief executive at the beginning of the year, replacing Sir Ian, said he wanted to keep that balance. “As we have seen strong growth in the development end, we are keen to maintain a strong production side as well,”he said.

The dividend for theyear is raised 25 per centto 5 cents. Shares in the company, which floatedin 2002, rose 2¾p to 272½p.

FT Comment

*John Wood’s 47 per cent profits growth last year puts Shell’s 21 per cent rise and BP’s 15 per cent into perspective. It was a good year to be an oil company; an even better year to have things that oil companies needed. The important point is not just that crude went over $78 a barrel lastyear – it is also that in the past few years oil companies have been steadily revising upwards their ideas of the credible long-run price, and that underpins their investment plans. At about 18 times this year’s earnings, the shares are in line with the sector average, but as a long-term play on the tightness of the balance of supply and demand for energy, they are still attractive.

Copyright The Financial Times Limited 2007

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