Goldman Sachs concerned about Wood Group's working capital

Wood Group shares fell after Goldman Sachs downgraded the company from ‘neutral’ to ‘sell’ and cut its target price from 639.6p to 517.6p.

In a note on Monday, the investment bank focused on working capital analysis, which it believed would be the key there for the oil services sector this year.

“As low oil prices lead to negative free cash flow generation for oil producers, we believe oil services companies will face delayed payments that they will largely have to accept given the high competition for new orders created by a lack of order intake in the industry.”

It said it sees working capital risks for Wood Group, saying the market overestimates the company’s resilience.

“We see risks of a material miss vs. 2016 consensus expectations given indications of spending cuts from US E&Ps and muted North Sea activity.”

Shares in the company were down 57p (9.04%) to 573.50 at 1513 GMT.