John Wood Group Plc capped off the 2016 year bringing a mixed bag of offshore news in its pre-close trading update for the year, stating its financial performance was “in line with expectations.”

Greenfield offshore work was described as “robust,” while operations and maintenance in the North Sea was called a “tough market” with the engineering company seeing less subsea services activity overall.

The U.K.-based company said its balance sheet remains strong despite challenging market conditions.

Lower commodity prices, the result of too much oil and not enough demand, have hit companies’ financial coffers hard in the last two years. Sinking profits have led to widespread cost cuts and a push toward operational efficiency and technology for the industry’s oil and gas players, which also have stalled projects and chopped exploration spending in an effort to salvage budgets.

Recent agreements by OPEC and some non-OPEC members to cut output have added to optimism that better days are ahead. But the damage already has been done, and some don’t expect spending to pick up for offshore projects anytime soon.

“Looking ahead, the market continues to present significant challenges and although these are likely to persist during 2017, in selected markets we do see indications of modest recovery,” Wood Group said. “We are confident that our focus on delivering value through our asset life cycle and specialist technical solutions, together with our customer relationships, global footprint and strong financial footing position us well.”

Wood Group expected EBITA to be in line with its consensus of $370 million for the full-year ended Dec. 31. The company anticipates full-year 2016 revenue of just under $5.2 billion with pretax profit of $247 million.

For asset life-cycle solutions, which accounts for about 40% of the company’s revenue, Wood Group saw robust offshore greenfield work. Among the major activity in the Western Hemisphere cited were:

  • Detailed design on Hess Corp.’s Stampede in the Gulf of Mexico (GoM);
  • Engineering and design work for Statoil’s Peregrino 2 project offshore Brazil;
  • FEED and detailed scope for the Noble Energy-operated Leviathan in the Mediterranean Sea;
  • Ongoing FEED activity for Anadarko’s Shenandoah in the GoM; and the
  • Start of engineering work for Kiewit on the BP South Pass Platform expansion project.

“We see further projects with the potential to proceed,” the company added.

The picture wasn’t so rosy farther east, where operations and maintenance activities were down in the North Sea compared to 2015. The Eastern Hemisphere makes up about 50% of Wood Group’s revenue.

Wood Group also reported a “significant fall in brownfield modifications and upgrade activity under existing contracts” in the U.K. North Sea and a slower than expected pace of activity in contracts secured with ExxonMobil Corp. in Iraq and BP in Azerbaijan.

Good news on the projects and modifications front is that the company “saw stronger activity” in the Middle East, relating to its work with North Caspian Operating Co. in Kazakstan and activity on its Saudi Aramco contracts.

In addition, Wood Group said it has renewed most of its contracts over the last 18 months, referring to operations and maintenance activity.

“Activity levels have increased on our Exxon contracts in Papua New Guinea, and in Australia we recently renewed our contract with Melbourne Water,” Wood Group said. “We also recently secured a five-year managed services scope from Hess Malaysia for [its] offshore facilities in the North Malay Basin.”

Dire market conditions have slowed the need for subsea services.

“We are working on a number of early stage, tieback and verification scopes, but there are minimal large projects coming to market. Relationships with our customers remain positive, evidenced by a number of master service agreements including Statoil, Apache, BP and Chevron.

On a positive note, Wood Group saw growth in its smart asset integrity services and automation activity, evidenced by its receipt of a $700 million automation contract for Chevron’s Tengiz expansion project among other contracts.

—Velda Addison