Oilfield services and energy industry suppliers look set for a bumper year ahead with growth, particularly within the energy sector, and across built environment projects, according to the John Wood Group's order book.
In a full-year trading update, published on Thursday, the engineering and consulting company reported a decline in core profit but said it was in line with expectations as it wrestled challenging market conditions.
The Aberdeen-based firm, however, noted a stronger second half of trading – with “improving momentum” across its businesses.
Its margin for the year was also up and the group said its order book at year-end was significantly up year-on-year, supporting its expectations for increased activity in 2022.
“2021 saw improving momentum across our businesses, against a backdrop of continued challenging market conditions,” chief executive Robin Watson said.
“Together with significant growth in our order book, this enables us to start 2022 confident that activity levels are improving. We also continued to make good progress in de-risking the group's project portfolio and in driving margin improvement in 2021,” Watson added.
The business also announced its plans to sell its built environment business.
Following the update, shares surged 15% to 229.90 pence in London on Thursday morning.
Energy service sector outlook
The John Wood Group is anticipating a good year – but can other energy service suppliers look forward to one too?
Share prices this morning appear to indicate so with oilfield service provider Petrofac’s shares up +6.5%; and stock also up +3.6% in Hunting, which provides products and services to the upstream oil and gas industry.
Capital.com asked energy analyst Osama Rizvi at Primary Vision for his view.
“The energy sector and the oilfield services especially may benefit from the recent rally in prices. According to an estimate, oil production in the US may hit 11.85 mbpd in 2022 from 11.18 mbpd in 2021. The recent energy crisis has also become a cause of concern and US companies are pushing for an increase in production,” Rizvi said.
“One thing that may hinder such a push is the movement of climate change. However, chances of it having a significant effect on actual production levels are thin.
“Lastly, this has become a very interesting dynamic ever since the onset of oil price war going back to 2014. Prices increase, shale production goes up, prices come down. One may say it is almost a self-correcting mechanism. Albeit, it isn't relevant but I'd like to mention this might be a very strong reason that prices may never touch $100,” he added.
Energy service demands
To bolster demand for services, providers like John Wood Group is among those that have adjusted business offerings - and highlighted in its trading update that it is developing its presence in hydrogen.
“We became a steering member of the Hydrogen Council in the UK and agreed a Memorandum of Understanding with HYGEN Energy to accelerate the production of green hydrogen for decarbonising transportation in the UK,” it said.
“We also continue to win significant work in conventional energy, increasingly helping our customers on their decarbonisation journey. In the fourth quarter, we secured around $160m of contracts for oil and gas operations work in the UK's North Sea. This work will include optimising operations, increasing production efficiency and driving decarbonisation. We also won a large two-year contract to deliver engineering and project management services on the Safaniyah and Manifa fields for Aramco,” John Wood Group added.
Meanwhile Petrofac said on Thursday that it has appointed Phaedra Pritchard as its new head of wind operations and maintenance (O&M), boosting its global offering in the wind sector.
A press release on the company's website said she will be responsible for building and supporting Petrofac’s O&M service capability within the offshore wind sector in the UK and globally.
“Formerly of Semco Maritime, Phaedra brings more than 14 years’ industry experience and has a varied background in O&M, project management, and business support roles,” Petrofac said.
It comes as the UK government has committed to installing 40GW of offshore wind capacity by 2030.
“We have been deploying our expertise in support of renewable energy projects since 2008 and our teams are expertly placed to leverage this experience and help advance the energy transition,” John Pearson, chief operating officer of Petrofac's new energy services, said.
“Working alongside our O&M team, Phaedra will play a key role in leveraging our existing strengths and capabilities to grow our presence in the offshore wind market. Not only does she have a wealth of industry experience, but her extensive knowledge of working in the sector means that she is perfectly positioned to help support our goals for the region and beyond,” he added.
Such repositioning puts energy service suppliers in a more stable position for growth as the world transitions to a low-carbon future.
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