By Rhiannon Hoyle 

SYDNEY--As sharp declines in prices of commodities ranging from iron ore to gold roiled the global mining industry, engineering contractor WorleyParsons Ltd. turned to what was a still-booming oil-and-gas sector to drive profits.

Now, the rout in global oil markets has that strategy in a chokehold.

Shares in WorleyParsons, which has operations across America, Europe and the Asia-Pacific region, plunged by as much as 15% Wednesday after management forecast thinner margins and falling revenue from an oil and gas business that accounted for nearly 90% of its earnings in the six months through December.

The problem for WorleyParsons is that energy-industry customers are scaling back spending on exploring for more oil and gas, and delaying investments in new projects. In doing so, energy companies are mirroring the response by global miners such as BHP Billiton to falling metals prices.

"I don't think anyone was forecasting the oil price would fall to the level that it did," said Andrew Wood, WorleyParsons's chief executive.

The company isn't alone in feeling the pain. Earlier this month, the chief executive of Transocean Ltd. stepped down abruptly, a casualty of the plunge in oil prices and the deep-water drilling company's ill-timed expansion. In mid-January, Schlumberger Ltd.-the world's largest oil-field service company-said it laid off 9,000 workers late last year to protect profits.

WorleyParsons said its net profit fell 7% to 104.3 million Australian dollars (US$81.7 million) in the six months through December.

Australian investment bank Macquarie said investors were focused on how deeply lower oil prices would eat into the company's earnings. WorleyParsons said it only expected a modest decline in sales and margins, but the outlook remained very uncertain.

"Impacts to date are limited, but are still playing out," Macquarie said in a client note.

Analysts believe several projects from Australia to North America could be scaled back, delayed or even scrapped altogether due to the oil-price fall.

Already, Woodside Petroleum Ltd. and partners including Shell said they were pushing back a final investment decision on the proposed Browse LNG project in northwestern Australia until next year. Malaysian state-owned energy company Petroliam Nasional Bhd., or Petronas, has said it would delay making a final decision on building a multibillion-dollar gas-export plant on Canada's Pacific coast.

WorleyParsons has been cutting costs to cushion any blow to profits from lost contracts, including axing or not replacing thousands of workers in recent years. The company said conditions in the minerals and metals sector "remain flat," with mining companies continuing to cut costs and budgets for new projects as oversupply of many commodities keeps prices low.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

Access Investor Kit for Schlumberger NV

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=AN8068571086

Access Investor Kit for WorleyParsons Ltd.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=AU000000WOR2

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

Worley (ASX:WOR)
Historical Stock Chart
From Mar 2024 to Mar 2024 Click Here for more Worley Charts.
Worley (ASX:WOR)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more Worley Charts.