Wood Group hit by uncertainty in Canadian oil

ENERGY services company John Wood Group said yesterday it expects weakening Canadian demand to restrict earnings growth for its oil and gas engineering division this year and into 2014, sending its shares sharply lower.

The firm has been a strong performer in the European oil services sector while others have suffered from project delays this year. But delivering first-half profit growth broadly in line with analysts’ expectations, chief executive Bob Keiller said it was “not immune” to that trend.

“We have seen some reduction in western Canada ... where uncertainty over oil export routes is causing some of our customers to rethink their investment options and to delay projects,” he said yesterday.

Canada’s land-locked western province of Alberta is home to the tar sands, one of the world’s largest crude oil deposits. Plans to carry the oil west to the coast for export to Asia and south to US markets have been mired in political and environmental controversy. The company is a leading service provider to the tar sands sector.

Wood Group downgraded the outlook for 2013 growth in its engineering division’s earnings before interest, tax and amortisation (Ebita) to 10-15 per cent, from 15 per cent previously, and said there are “challenges to growth in 2014”.

Groupwide Ebita was $243.2m (£155m), up 18.6 per cent from a year earlier, driven by a strong performance in its oilfield services arm, PSN, and in the engineering division, which together account for more than three quarters of its business.