WOOD Group has been awarded a multi-million dollar contract to work on a field off Brazil for Statoil, which will provide some compensation for the downturn in North Sea activity amid the crude price plunge.
The company announced the award yesterday when Brent crude recovered some of the ground lost after the shock vote in favour of Brexit on Thursday sent markets plunging.
Brent crude rose $1.22. 2.6 per cent, to $48.38 per barrel yesterday morning as some investors appeared to conclude the latest sharp fall in the price of the commodity was not justified.
"Oil is recovering on some bargain hunting after the drop below $47 a barrel proved unsustainable and news of a possible strike in Norwegian oil and gas industry," Commerzbank analyst Carsten Fritsch told Reuters.
However, with Brent trading at around $48/bbl yesterday afternoon, well under half the $115/bbl reached in June 2014, the latest bout of volatility has posed renewed challenges for firms operating in the North Sea.
Many have cut investment leaving services firms such as Wood Group facing big cuts in workloads.
The group has shed more than 2,000 jobs in the UK since the crude price started tumbling.
Against that backdrop the news that the company has been appointed to provide engineering services on the development of the second phase of the Peregrino field off Brazil will provide a valuable boost for Wood.
It represents a vote of confidence in the firm on the part of Statoil.
The company said its proven ability to deliver cost-effective and efficient solutions was a key enabler to obtaining the contract.
Led by chief executive Robin Watson, Wood is working on facilities installed for the first phase of Peregrino.
The largest field Statoil is operating outside its home Norwegian market, Peregrino is producing 100,000 barrels oil equivalent daily.
Oil and gas majors have been focusing investment on big fields amid the crude price plunge. Production costs per barrel tend to be lower on these than on smaller developments.
Wood Group has been diversifying in recent months as the company looks to reduce its reliance on exploration and production activity in the North Sea.
The company has bought firms that are active in the US refining sector and the European automotive engineering industry.
Shares in Wood Group closed up 10p at 641.5p.