Wood Affirms O&G Focus Post AmecFW Deal
Monday 13 March 2017
Wood Group remains committed to oil and gas as its main market going forward following its $2.7 billion takeover move for Amec Foster Wheeler, with the North American unconventionals market one possible area of expansion for the enlarged services player.
Aberdeen-based Wood is also confident that the combined company’s presence in the North Sea maintenance market will not see the proposed deal fall foul of antitrust authorities.
Wood and AmecFW revealed on Monday that Wood has launched an all-shares offer that values the latter at £2.225 billion ($2.7 billion). Cost-cutting synergies of some £110 million on an annualised basis have been identified, although these will incur one-off costs of £190 million in the first three years.
Wood chief executive Robin Watson, who will also lead the enlarged player, said the combined market capitalisation is £4.8 billion and sees Wood’s current headcount of around 29,000 joining with AmecFW’s headcount of 35,000.
However, job losses are inevitable, with offices set to close and corporate overlaps to be cut – with Wood group’s corporate suite taking up the helm at the new company.
Watson said three main areas have been identified for cost cutting, with cuts to corporate spending to contribute about 30% of the savings, cuts to administrative functions also chipping in around 30% and operational synergies contributing some 40%.
The administrative cuts will involve job losses and amalgamation of offices in certain locations, while the operational cuts will come from procurement speed and economies of scale, among other things.
Watson said oil and gas will still represent around 60% of the total portfolio of the combined company. Wood’s oil and gas portfolio has itself fallen from 95% of the total two years ago to around 85% today, as the UK player sought to reduce its exposure to the upstream sector.
However, Watson reaffirmed the company’s commitment to oil and gas after the proposed deal is pushed through. “Having a 60% oil and gas portfolio is a good position for us to be in.” At the same time, Wood gaining exposure to other sectors, such as environmental and infrastructure, and mining consultancy.
Watson said Wood maintained its capital discipline in the past year as there were no attractive merger and acquisition (M&A) targets. However, in the fourth quarter the company ploughed resources into scouring the market for any larger, transformational M&A deals – leading to Monday’s announced takeover.
The chief executive denied, however, that Wood felt under pressure to complete such a large deal to compete in the oilfield services market, which has seen significant consolidation in the past 18 months. “No, we don’t feel we need to be bigger to compete. This isn’t about size; it is, however, about speed,” he told investors.
Watson hinted that the North American unconventionals market may be one that the combined company targets, saying AmecFW’s current engineering and construction footprint in the Lower 48 is “very impressive”, adding: “And our shale footprint is very impressive.”
The Wood boss said the company is aware that the respective services players’ current positions in the North Sea market will come under scrutiny from antitrust authorities, but is confident the deal can be pushed through.
“This is about global capability – we do have significant overlap in the North Sea ... We are confident that the merits of the overall deal are not compromised by the North Sea situation in any way.”
He added: “We don’t see any challenges in terms of the cultural alignment of the two businesses.”