Moving into the North Sea as a major player is a “unique opportunity” according to the head of the firm who snapped up Amec Foster Wheeler’s UK business this week.
Andrew Wood, the WorleyParsons chief executive, believes the Australian engineering group’s purchase of one of the biggest service providers in the North Sea’s oil and gas sector represents the right deal at the right time for the resurgent company.
The company is currently raising capital to cover the consideration for the UK-based oil and gas maintenance business of Amec Foster Wheeler.
It comes following the completion of Wood Group’s acquisition of the rest of Amec Foster Wheeler on Monday.
The Amec deal represents WorleyParsons’ biggest acquisition in a decade.
It will be funded through a £182million entitlement offer, with its major shareholders — Middle Eastern peer Dar Group and Worley founder John Grill — both committed to taking up their allocation.
“The UK North Sea is one market we had not really played in over the years because there were a couple of really, really strong competitors in Amec Foster Wheeler and Wood Group, so to be able to move into the North Sea as a major player, as one of the leaders in that, is a really unique opportunity,” Mr Wood said.
“We’re excited about getting into the North Sea, but this is a far bigger play that just that,” Mr Wood said.
“This is an absolutely world-class MMO (Maintenance, Modifications, and Operations) capability, and this group has demonstrated under Amec Foster Wheeler their ability to win work around the world for the services they provide. We’re really looking forward to having them as part of our group and helping us expand our MMO business globally.”
Worley has been generating annual earnings before interest, taxation, depreciation and amortisation (EBITDA) in recent years of between £40m and £55m. The new business will be established by about £20m a year in “maintainable” EBITDA unrelated to capital expenditure.
The firm’s new focus will be on oil and gas maintenance as opposed to the engineering and construction work from which most of its revenue is currently derived.
Australia’s Macquarie Research analyst John Purtell has already endorsed the acquisition as “strategically sensible, reasonably priced and at or close to the bottom of the cycle”.
“Worley previously didn’t have a presence in the UK North Sea and this acquisition increases Worley’s MMO exposure to 18 per cent from 7 per cent previously,” Mr Purtell explained.
“We note that the UK North Sea is relatively low growth and mature, however should benefit from gradual improvement in global oil and gas capex.”
The Austrialian firm has raised £149 million at a price of £7.67 per share for its purchase of Amec’s UK units.
The company will now proceed to the next stage of its fundraising via the retail market to raise a further £40.7 million to complete its £190 million pro-rata takeover next week.
The strong impetus of initial funding suggests that WorleyParsons will easily reach its target. Retail funding is scheduled to close on October 25 when the final amount will be announced.
“We are pleased with the extremely strong support for WorleyParsons’ acquisition of AFW UK demonstrated by the response shown by our institutional shareholders,” said Mr Wood.
“We believe this response is an endorsement of the compelling strategic rational of the transaction.”
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