In a development that has sent tremors through the energy services sector, WoodGroup plc announced yesterday that an internal accounting investigation has revealed “potentially significant financial irregularities” in its North American operations. The revelation comes at a particularly vulnerable time for the Aberdeen-based engineering firm, which has been navigating challenging market conditions amid the global energy transition.
According to company statements, the irregularities were discovered during a routine financial review and appear to involve revenue recognition practices dating back to 2021. While the company has yet to quantify the full impact, preliminary assessments suggest the discrepancies could affect reported earnings by as much as $80-120 million over the affected period.
“This is obviously concerning for investors who have been betting on WoodGroup’s turnaround story,” said Maria Chen, senior energy analyst at Barclays Capital. “The timing couldn’t be worse, as the company was just beginning to show signs of stabilization after several difficult quarters.”
Trading in WoodGroup shares was temporarily suspended on the London Stock Exchange following the announcement, with the stock plummeting nearly 18% when trading resumed. This represents the steepest single-day decline for the company since the oil price crash of 2020.
The Financial Conduct Authority has been notified, and WoodGroup has appointed external forensic accountants from Deloitte to conduct a comprehensive investigation. CEO Ken Gilmartin, who took the helm in 2022, addressed the situation in an emergency investor call, emphasizing that the company is committed to full transparency.
“We take these matters extremely seriously,” Gilmartin stated. “Our priority is to complete a thorough investigation, implement any necessary remedial actions, and ensure the continued integrity of our financial reporting.”
The irregularities reportedly center on how certain long-term contracts were accounted for in the company’s engineering and consulting divisions. Sources familiar with the matter suggest overly aggressive revenue recognition may have boosted short-term performance metrics at the expense of accuracy.
Industry observers note this investigation comes amid increased regulatory scrutiny of accounting practices across the energy services sector. The Securities and Exchange Commission has intensified its focus on revenue recognition practices following several high-profile accounting scandals in adjacent industries.
“This follows a pattern we’re seeing across the oil and gas services space,” remarked Jonathan Turner from the Financial Times. “As traditional energy companies diversify and transform their business models, financial reporting complexities increase, creating more room for error—or in some cases, manipulation.”
The timing is particularly problematic as WoodGroup had recently secured several major contracts in renewable energy infrastructure, signaling its strategic pivot away from traditional oil and gas services. The company had been touting these wins as evidence of successful repositioning in the energy transition landscape.
According to data from Energy Intelligence Group, WoodGroup derives approximately 32% of its current revenue from renewable and transition-related projects, up from just 15% three years ago. This transformation has been central to the company’s narrative with investors.
Market analysts remain divided on the long-term implications. “While concerning, accounting irregularities of this nature typically represent a contained problem rather than fundamental business failure,” noted Sam Weatherby of Goldman Sachs in a research note to clients. “The key question is whether this reflects isolated misconduct or deeper cultural and control issues.”
WoodGroup has established an independent board committee to oversee the investigation and implement necessary remedial measures. The company has also engaged legal counsel from Freshfields Bruckhaus Deringer to advise on potential regulatory implications.
Industry veterans point out that WoodGroup’s situation highlights the broader challenges facing traditional energy service providers as they navigate the complex transition to new business models. The pressure to maintain growth and profitability while fundamentally restructuring operations creates tension that can sometimes lead to questionable decisions.
“These companies are effectively trying to rebuild the airplane while flying it,” explained Dr. Elena Vasquez, energy transition expert at Imperial College London. “The financial pressures during this transition period are immense, particularly when legacy businesses are contracting faster than new revenue streams can compensate.”
For investors, the revelations represent a sobering reminder of governance risks in the sector. The Aberdeen-based company had previously enjoyed a reputation for solid financial management, making the current situation all the more surprising to market observers.
Pension funds with significant holdings in WoodGroup expressed concern but stopped short of abandoning their positions. “We’re closely monitoring the situation,” said James Henderson, head of equities at Scottish Widows Investment Partnership. “The company’s response in the coming weeks will be crucial in determining our long-term confidence.”
WoodGroup has promised to provide regular updates as the investigation progresses and expects to deliver preliminary findings within 60 days. Meanwhile, operations continue across the company’s global footprint, with management emphasizing that day-to-day business activities remain unaffected.
The company’s upcoming quarterly earnings report, originally scheduled for next month, has been postponed pending the completion of the accounting review. This delay itself may trigger additional disclosure requirements under UK listing rules.
As this story continues to unfold, the energy services sector will be watching closely. For WoodGroup and its stakeholders, the challenge now lies in demonstrating that these irregularities represent an isolated issue rather than a symptom of deeper problems within the organization.
