Two Aberdeen-based oil services firms are to join forces in a deal creating a business with 22,000 staff and revenues of around £2 billion a year.
In one of two major deals announced in the UK energy sector on Monday, Wood Group is to buy rival PSN in an agreement worth 955 million US dollars (£600 million) before merging the acquisition with its own production services business.
Wood – which is listed in the FTSE 250 Index and has separate operations in engineering, well support and gas turbines services – said the tie-up extended its reach in the oil and gas markets focused on mature fields.
Its production arm currently generates 47% of its revenues from the UK North Sea, but the addition of PSN in areas such as North America, the Caspian and Russia will reduce Wood’s dependence on the UK and offer higher margin work.
PSN operated as a division of US oil services firm Halliburton until a buy-out by its management in a deal backed by Bank of Scotland in 2006.
Bob Keiller, one of those involved in the deal four years ago, will become chief executive of the combined production services business – to be called Wood Group PSN – and join the board of Wood Group.
He said: “Since the management buyout in 2006, we have achieved significant success and expansion. This transaction positions us for the next stage of PSN’s development.”
Wood said the deal strengthened its standing in the sector, with customers of the merged group to include BP, Shell and Total.
Chief executive Allister Langlands said: “The combined business will be better positioned to help tackle current key industry issues, including operational assurance, competency, reliability and asset integrity.”
Wood’s shares jumped 6% after it said the acquisition would be significantly earnings enhancing following its completion, which is expected to be in the second quarter of 2011. It added that overall performance for the group this year was likely to be slightly ahead of expectations.