Surprise warning at oil giant Wood

OIL services giant Wood Group dropped a pre-Christmas bombshell today by warning that tough trading in the US electricity market would hammer profits in its power arm.

Shares in the family-controlled business plunged 14% or 21 1/2p to 128p, after it said overcapacity and pricing problems in the US had cut margins and earnings in its gas turbine services division.

The division repairs and maintains power turbines and was one of the main planks of last year's float in which the Aberdeen-based group gained a price tag of £1bn. Its shares are now 67p below their listing price.

Wood Group insisted that overall profits for 2003 would be marginally ahead of last year's, but analysts are likely to scale back their forecasts. Tony Alves of Investec, said: 'It looks to me like a bit of a profit warning.'

Wood Group's executive chairman Sir Ian Wood gave investors little in the way of hope by reiterating that the core oil services business was suffering from lower spending on deep-water drilling.

The likes of BP and Shell have delayed projects to concentrate on pumping more oil from existing fields to cash in on the high crude price.

Yesterday, Abbot Group tumbled 9% after warning it was suffering from lower North Sea drilling activity.