When a young Ian Wood splashed out on an imposing presence for his family’s company at the inaugural Offshore Europe conference at the University of Aberdeen in 1973, his father John was aghast.
Sir Ian — he was knighted in 1994 — has recalled since how Wood senior, head of the family’s fishing company, thought his son was spending far too much on marketing the enterprise’s offshore expertise to the nascent North Sea oil sector.
But the gamble paid off handsomely for the offshore engineering arm, which was spun out of the family company in 1982 and listed 20 years later. Wood Group became synonymous with the transformation of Aberdeen from a fishing port to an oil and gas boomtown renowned for exporting its energy expertise across the world.
Yet, as Aberdeen grapples with the maturing of the North Sea basin, the group’s struggles with a heavy debt load and disappointing earnings performances have come to symbolise the city’s decline.
Wood Group had been one of the few homegrown success stories of the UK’s development of the North Sea, becoming a true multinational with global partnerships with titans of the oil industry such as ExxonMobil and Chevron. Its market value reached a peak of £5.3bn in 2018.
Paul de Leeuw, director of the Energy Transition Institute at Aberdeen’s Robert Gordon University, said Wood was an “iconic company” with a “whole legacy” in Aberdeen.
“For most of the duration of the industry, it’s been consistent through all the twists and turns,” de Leeuw said.
However, a decade of global expansion, launched after Sir Ian retired in 2012, has proved disastrous. The push ended in a debt-laden struggle for cash, haemorrhaging talent amid cost-cutting drives.
The company’s market value slid from that 2018 peak at first because higher interest rates and a slowdown in industry activity hit its business model. It tumbled by more than 60 per cent this February, to less than £200mn, after Wood revealed it was continuing to burn cash. A Deloitte review also uncovered “material” governance weaknesses in its projects division.
In addition, chief financial officer Arvind Balan was forced to step down on February 19 after admitting misstating his accountancy qualifications, following questions from the Financial Times. Iain Torrens, former CFO of brokerage ICAP, was brought in as an interim replacement this week.
Wood has $1.4bn in various debt facilities to refinance by October 2026, leaving it in a perilous position.
One industry veteran who has tracked the company’s travails closely said Wood had spun “its own death spiral”.
“This is a crisis that went slowly, slowly, slowly then suddenly, and that’s because the board has been much too hesitant to admit that things were unravelling,” the veteran said.
In less than two years, the company has failed to reach agreement on a takeover offer from private equity group Apollo that would have valued it at about £2.2bn and another from Dubai-based rival Sidara that would have valued it at £1.6bn. Sidara this week returned for its second buyout attempt at what is now expected to be a significantly lower price.
The veteran said Wood had ignored “multiple escape chutes on the way down”, particularly the takeover approaches.
“Now shareholders are going to presumably get a much worse deal,” he said. “Shareholders have a right to be angry.”
According to people close to the original discussions with Sidara last year, there was a perception that the Wood board scarcely believed a UK institution might be sold to a Middle Eastern rival.
That was a “failure to read the room”, one adviser said.
“There was a sense that these guys weren’t truly serious about a sale — that despite having completed due diligence that this was only the start of a discussion, rather than a precursor to hammering out the final details,” another adviser said.
The deal was “not existential” for Sidara, the person added.
“When they felt they weren’t being treated with enough respect, it made it easier to walk away,” the person said.
Wood Group’s problems also reflect wider challenges for its home region.
Melfort Campbell, an entrepreneur and veteran of the North Sea oil industry, described Wood as “hugely emblematic” of Aberdeen, saying its “core home business” in the North Sea had “dried up”.
Higher energy taxes have undermined investor appetite, fuelling fears of a brain drain among Aberdeen’s executive and corporate base, as the debate rages over new drilling for fossil fuels.
Reflecting widespread local anger at successive governments’ handling of the sector, Campbell said: “It’s been cut off at the knees for political expediency.”
Scotland’s highest civil court, the Court of Session, in January ruled that two of the few offshore UK oil and gas developments still being considered had been granted their consents incorrectly because their downstream emissions were not considered. The UK government will now have to reconsider whether they can go ahead.
With roughly 4,500 of its 35,000 global work force based in Aberdeen, Wood accounts for about one in 10 of north-east Scotland’s oil and gas jobs.
From the moribund housing market to empty stores on Aberdeen’s once-grand Union Street, residents feel that the city has, unlike in previous economic cycles, not benefited from the revival of the oil price since the 2014 crash.
Sir Ian, now 82, can still sometimes be seen driving around the “Granite City” in an Aston Martin sports car. He is working on philanthropic ventures around post-oil innovation and education.
His last corporate hurrahs were the 2011 sale of Wood’s well support division to General Electric for £1.75bn and the £600mn acquisition of rival PSN in 2010.
Around that time, it was spending about £200mn a year on mostly bolt-on acquisitions. That “slow, steady, but safe” approach changed with the £2.2bn acquisition of Amec Foster Wheeler in 2017, according to Mark Wilson, head of European energy research for investment bank Jefferies.
“The company has never really been the same since,” he said.
The big takeover offered diversification into new sectors, such as renewables and civil engineering. But it came with legal liabilities, including a corruption settlement. Net debt also jumped from $350mn in 2016 to $1.7bn in 2017. The latest update put average net debt at $1.1bn.
“The truth is they have struggled to get it down, even with asset sales,” Wilson said of the debt. “There is something in the business . . . that keeps on generating cash outflow each year.”
Wood Group declined to respond to questions about its recent performance.
Chief executive Ken Gilmartin in February claimed he had laid out “a very clear route to positive free cash flow in 2026.”
Investors are likely to be wary about performance after multiple previous promises of an imminent turnaround. It had been a “horror story” said one fund manager said. “They keep finding new losses, taking more writedowns.”
For the immediate future, however, the renewed Sidara talks are critical to Wood Group’s future.
One person close to Sidara said the company, founded in the 1950s by four university professors in Beirut, had a “strong strategic conviction” about Wood.
The two companies shared similar business outlooks, with a focus on “people and clients”, the person said.
Another person, who insisted Sidara had no intention of moving Wood out of Aberdeen, said Wood had expertise in both legacy and new energy industries.
Both agreed there would be challenges clarifying any outstanding governance issues and incentivising staff to stay.
The two sides were deep in late-night talks in an Aberdeen hotel last summer, only for the deal to collapse as Middle Eastern tensions rose ahead of Israel’s offensive against Lebanon in late August.
Yet industry observers in Aberdeen hope, on the basis of the understanding forged between the two groups last year, that Sidara could revive a company they regard as crucial to the area.
One said there were “enormous opportunities” for decades to come for the company, including offshore wind, gas production, well decommissioning, carbon capture and storage and hydrogen production.
Robert Gordon University’s de Leeuw said Wood was “a microcosm” of the oil and gas industry in the city.
“If Wood is busy, the industry is busy,” he said. “They are the early warning radar.”
Additional reporting by Emma Dunkley