13th Jul 2016 10:43
LONDON (Alliance News) - John Wood Group PLC on Wednesday said it will continue to provide subsea engineering and consultancy services to one of its clients in the UK North Sea for at least one more year after an existing contract was extended.
The oilfield services company secured its first contract from Apache Corp in 2012 and has already supported the company on a number of major projects in the UK North Sea, including the project to modify the subsea isolation valves on the Brae and Export pipelines, the Aviat development and most recently the Ness Nevis development.
The FTSE 250-listed company offers a range of engineering, production support and maintenance management services to the industry through three businesses - Wood Group PSN, Wood Group Kenny and Wood Group Mustang - which all specialise in different areas.
The existing agreement between the pair has been extended by one year, with the option to extend the deal by one further year.
No financial details were disclosed on the contract extension, but John Wood Kenny, the unit providing design, support, assessment and management services, was the business to sign the original three-year deal with Apache back in 2012 and that was worth USD7.5 million.
"The extension of this contract to provide our technical solutions support across Apache's North Sea portfolio is testament to our strong, collaborative working relationship with Apache and their confidence in our high standard of service delivery," said Robin Watson, chief executive of John Wood.
Apache is a US-headquartered oil and gas firm with assets across the globe including in the UK North Sea where it is currently producing well over 70,000 barrels of oil equivalent per day - only around 13% of its overall production, which also comes from the US, Canada and Egypt.
Apache's operations in the North Sea are the most expensive to operate within the portfolio. Each barrel costs around 51% more to produce than its cheapest operating area in the US.
John Wood will continue to deliver subsea engineering and consultancy services in support of Apache's routine operation and maintenance works, as well as detailed engineering for future subsea developments across its entire North Sea portfolio.
Future developments will emerge within Apache's Forites and Beryl areas, on the Scottish Area Gas Evacuation pipeline, otherwise known as SAGE, and the facility that processes the gas transported through that pipeline.
Forties is one of the largest projects in the UK North Sea, producing 2.6 million barrels in its lifetime, and houses five offshore platforms: Alpha, Bravo, Charlie, Delta and Echo - all lying roughly around 110 miles east of Aberdeen.
The SAGE pipeline is part-owned and used by Apache, which operates the asset on behalf of other owners of the pipeline. SAGE is comprised of the 323 kilometre pipeline and the SAGE gas processing terminal, which is located 65 kilometres north of Aberdeen.
Nine producing fields transport gas using the SAGE pipeline, some of which are owned by Apache. Those fields are Beryl, Brae, Alvheim, Maclure, Scott, Ettrick, Golden Eagle, Devenick and Rochelle - with more projects being developed to join the pipeline system in the future.
"We look forward to bringing Wood Group's breadth of subsea consultancy and detailed engineering knowledge and expertise to support this key client in enhancing and optimising their current assets and effectively delivering future subsea developments in the North Sea," said Watson.
John Wood recently said earnings in the current financial year would be around 20% lower in 2016 compared to last year but reiterated its commitment to deliver a significantly higher dividend for the year after pledging to increase the annual payout by a "double digit percentage".
John Wood shares were trading 0.9% higher on Wednesday at 704.50 pence, 15% higher than at the start of 2016.
By Joshua Warner; [email protected]; @JoshAlliance
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