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Bloomberg: Wood Group Rises to Record on Higher Profit Forecast (Update6)

By Alexander Kwiatkowski

Aug. 28 (Bloomberg) — John Wood Group Plc, the U.K.’s largest oilfield services provider, rose to a record in London trading after saying full-year profit may beat forecasts.

The shares closed at a 352.5 pence, up 4.7 percent, valuing Aberdeen, Scotland-based Wood Group at 1.85 billion pounds ($3.72 billion). They had climbed as much as 9.1 percent to 367.25 pence. First-half profit rose 65 percent and full-year results will be “ahead of expectations,” the company said today.

Oil and gas companies such as Royal Dutch Shell Plc and BP Plc are being forced to drill for harder-to-reach deposits amid increasing demand and high crude prices, which have more than doubled since 2003. Wood Group helps producers pump more oil from mature fields and engineer wells at deep-water projects.

“All of the existing operations are performing substantially better than market expectations,” Alex Brooks, an oil services analyst at UBS AG in London, said in a telephone interview. “First-half operating profit is about 15 percent ahead of market consensus.”

The company’s first-half net income rose to $81.2 million, or 15.7 cents a share, from $49.2 million, or 9.6 cents, a year earlier. Revenue advanced to $2.12 billion from $1.57 billion, the company said in a statement.

Outlook Improves

The company predicted full-year results will be bolstered as it expands outside the U.K. and in the power industry. Wood Group increased its interim dividend 33 percent from last year to 2 cents a share.

“Once again management has raised the bar for the full year,” Merrill Lynch & Co. analyst Alejandro Demichelis in London, who has a “neutral” recommendation on Wood Group shares, said in a note to clients. “Results were well ahead of our expectations on the back of a solid performance.”

Engineering and production services generated more than half of Wood Group’s sales, as demand increased from oil and gas companies developing new reserves and eking out more crude from older fields. The company is involved in engineering projects in the North Sea, India, West Africa and the U.S. and provides subsea facilities for developments offshore Angola and Australia.

“The engineering and production facilities segment continues being the star of the business, showing sustained growth as a result of strong demand for subsea activities,” Merrill’s Demichelis said.

North Sea oil and gas projects account for about two-thirds of the group’s revenues from production services, the company said. Projects in the region include the upgrading of Shell’s assets and the development of fields recently purchased by Talisman Energy Inc. International contracts include the maintenance of BP Plc facilities in Trinidad and engineering support for Algeria’s state- owned Sonatrach.

Revenue from gas-turbine services increased by 58 percent to $478.2 million on rising demand from the oil and gas industry and growth in the global power industry, according to the company statement.

To contact the reporter on this story: Alexander Kwiatkowski in London at [email protected]

Last Updated: August 28, 2007 12:41 EDT

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