In recent times, John Wood Group (WG.) has taken measures to reduce its exposure to oil & gas markets, while trimming its overall debt burden. That is probably just as well given the energy-focused engineer has foreshadowed a 19 per cent fall in first-half cash profits (Ebitda).
The group is on track to deliver around $200m (£161m) in cost savings through 2020, and it has taken measures to maintain utilisation rates (as far as possible), though you would get a better idea of the likelihood of a favourable outcome if you knew the split between capital and operating expenditure within its oil & gas contracts. At any rate, management implied that a 70-basis point decrease in the underlying profit margin shows that remedial measures are having a positive impact, though we think it merely underlines how dire the trading backdrop remains.
There is only so much you can do in the face of collapsing oil prices and a steep fall in related demand brought about by the global lockdowns. But even if the oil & gas market begins to gradually rebalance in reaction to the observance of production quotas by Saudi Arabia and Russia, activity in the industry will only recover haltingly, based on the after-effects of the oil price slump of 2014.
