Hello. Welcome to Company Focus. My name is Aamer Nawid, Analyst at Fat Prophets and today I'm going to be taking a look at the energy-focused support services companies AMEC, Petrofac and Wood Group.

Given that the last time we reviewed this area of the market these three stocks was pre-Deepwater Horizon it's probably quite a good time to visit them now.

The oil industry is undergoing some major changes. What we'll do, we'll look at which of the companies has been hardest hit and which is actually best placed to actually benefit from the changes in the industry.

First things first, let's look at how they performed since the actual mid April explosion (April 20th). As you can see, they've all demonstrated share price weakness. As you can see from the pink line, mid April was also the start of the broader market selloff. So how much of this weakness is down to the Gulf of Mexico and how much is actually down to just sort of the broader selloff is uncertain.

What is more certain is that Wood Group has been the hardest hit of all of the three companies. It's been more active in the Gulf of Mexico than the others. As recent as January this year, the company actually just entered into an agreement with Statoil to basically provide designer engineering services for its upcoming Gulf of Mexico prospects.

Although the offshore drilling moratorium implemented by the US administration has been overturned, investors have kind of cottoned onto the fact that there are going to be delays in projects emanating from the area. That's mainly due to increased regulation and renewed safety standards and that's basically dampened down the investor enthusiasm for Wood Group, which basically had been prevalent at the beginning of the year. It did have a flying start to the year.

Petrofac meanwhile has been moving along quite well. It outperformed the market. A recent sort of upbeat trading statement underscored where the company is at right now. The order backlog, as at the halfway point of this year, is around about $6.9b. Although that's back a little bit on the $8.1b from the year end, this was expected. Fundamentally really strong as well. $1bn in the bank, so positives there.

The good thing about Petrofac is its exposure to basically deepwater drilling is fairly minimal. They prefer to concentrate on onshore projects and shallow water.

The Group also has a major foothold in the Middle East. That's an area where tendering activity and investment activity is actually sort of flying given that the Iraq oilfields have opened as well. It's quite an exciting time for anyone operating in the Middle East right now.

In addition, Petrofac does have the very real possibility of a $4bn contract at the South Yoloton Scheme in Turkmenistan, so plenty of reasons to be positive for the outlook for Petrofac.

Last but not least, AMEC. Although the company does have deepwater exposure and Gulf of Mexico exposure it's share price has actually held up best out of all three since the mid April explosion and that's basically as a result of the fact that there is growing feeling that it is actually going to benefit from the industry changes that are going to be implemented as a result.

The key thing with AMEC is it has a heavy bias towards the environmental and engineering consulting. This business unit of AMEC contributes around about 10 per cent of revenues and given the calls for higher safety standards and tighter regulation, I think this revenue portion is actually going to be increased and it could be a much more contributory factor towards earnings in the long-term.

What this part of AMEC's business does, it basically partners with oil majors and makes them aware and gets them to implement environmental features on energy based products. Really important. Looking at BP's plight recently, I can see every oil major clambering for AMEC's expertise in this particular field.

In summary, I think the changes to the oil industry are going to affect all three of AMEC, Petrofac and Wood Group. I'm positive for the share price outlook for all three of them. I'm positive for the outlook on crude oil. However, it's going to be plain sailing. I think increased regulation, increased safety standards, as well as increased management accountability when it comes to assessing risks are all going to weigh down on earnings.

In addition to this, I think that increased costs of people, systems and procedures will also increase the cost base and cutting back on outsourcing may appear on the agenda for some.

Thanks for watching. Make sure you tune in again next week.