Financial News

John Wood Group (LSE: WG.L - news) , the Aberdeen-based oil services provider, shrugged off doubts over slowing demand in the sector on Wednesday as it insisted its performance in the year to date was in line with expectations.

The company pointed to the strengthening in the price of oil in recent weeks though it added market conditions remain broadly similar to those outlined in a cautious trading update made in May.

The statement, described by brokers Oriel Securities as Wood Group's "customary, succinct mid-year trading update", argued that "the longer term market fundamentals for our services and products remain strong".

However, at its annual meeting seven weeks ago, the group highlighted signs of softening in long-term orders following the boom-then-bust in oil prices last year.

It then indicated that larger customers were "continuing to make [important] project decisions based on oil and gas prices increasing in the medium term". However, it accepted that some projects were being delayed and predicted a 10-15 per cent contraction this year in exploration and production spending.

Its shares have fallen from 494½p last June to a low of 157¾p in December due to the oil price collapse. They have since recovered, along with their peers, to enjoy a rally and traded above 300p in early June.

Since then its shares have since lost ground to trade at about 250p, not helped by reports of its exposure to lost contract work after the nationalisation of oil interests in Venezuela, in which Wood Group has an interest.

On Wednesday, they traded up 2½p at 269½p, down 45 per cent over the year.

Oriel said it expected to leave unchanged its forecasts of a fall in adjusted earnings per share from 52 cents last year to 46 cents in 2009, but maintained its "buy" recommendation, arguing its estimates "already anticipate the current weakness in North American markets".