WOOD Group has returned to the acquisition trail with the $14 million (£9m) takeover of a Canadian oil and gas engineering firm, which signals confidence in the prospects for the industry in spite of the crude price plunge.
The takeover of BETA Machinery Analysis will result in Aberdeen-based Wood Group increasing its exposure to the market for developing and maintaining oil and gas facilities in North America and in Asia.
Wood Group has made the move at a time when firms are cutting activity in shale areas in North America in response to the sharp fall in the oil price since last June.
Last week Wood Group said its US onshore business had been affected by reduced demand and pricing pressure.
However, BETA is the second North American firm Wood Group has acquired in quick succession.
The company bought Swaggart Brothers for an initial $36m in December, increasing its investment in shale areas in the process.
The BETA deal provides a clear signal Wood's directors still believe they can use acquisitions to boost growth amid tough market conditions.
Wood Group paid $164m for Norwegian offshore engineering specialist Agility Projects in July last year, soon after the oil price peaked at $115 per barrel.
The company does not seem to have been deterred by the tough conditions it has faced since then.
Brent crude traded at around $62.50 yesterday. Industry body Oil & Gas UK has warned that North Sea firms should prepare for a long period of $60 oil.
In a trading update issued last week Wood Group said it was seeing the impact of reduced project and non-essential maintenance work in the North Sea.
Wood Group has cut costs in the North Sea in response to tough conditions. In April the company said up to 80 onshore jobs could go in the UK under a review of operations intended to cuts costs and increase efficiency. It slashed the rates paid to contractors by 20 per cent last year.
The acquisitions agreed in the last year have shown Wood Group's desire to extend the range of services it can offer to clients.
Some oil and gas firms are trying to reduce the number of suppliers they use as they look to squeeze efficiencies out of the supply chain in areas such as the North Sea.
While oil and gas firms have said the Government needs to do more to boost activity in the North Sea, experts have highlighted the need for greater collaboration between companies.
"With subdued oil prices set to continue, it's more important than ever that companies look at what could be gained by working more closely together to bring down costs, reduce complexity and boost efficiency," said Justin Watson of professional services firm Deloitte.
However, it is not clear what this will mean in practice.
"What collaboration means for the oil and gas industry is not well understood," said Mr Watson.
Deloitte has launched a survey which will try to identify what collaboration means and find examples of effective practice. The survey will be supported by Oil & Gas UK.
Wood Group is working in an industry forum that has been looking at subsea engineering issues, and which has been extended for a further three years.
Kieran Kavanagh, technology development director at the Wood Group Kenny division, which works on new facilities, said: "The Network represents a significant collaboration among its participants to provide solutions that will help to reduce risk, improve reliability and minimize life-of-field costs."
The $14.3m acquisition of BETA Machinery Analysis will enhance Wood Group Kenny's integrity management offering.
BETA provides vibration analysis services that can be used to help monitor the condition of facilities.
It has around 100 staff in the US, Canada, China and Malaysia.
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