400 jobs at risk as oil services firm loses battle with debts

FEARS for 400 jobs were raised yesterday after Aberdeen-based energy services firm Sovereign Oilfield succumbed to administration.

Bruce Cartwright and Graham Frost of PricewaterhouseCoopers were yesterday appointed joint administrators to the group, which has been struggling to cope with debts accumulated in its drive for growth before the credit crunch.

Sovereign employs about 400 people across its nine operating subsidiaries. These subsidiaries are continuing to trade as normal, a PWC spokeswoman said, with no jobs affected at this time.

The holding company, led by newly installed chief executive John Strachan, has been striving to bring its debts under control since announcing last year that it had breached banking covenants with its lenders.

Sovereign has already closed one loss-making subsidiary, precision engineering firm Fingolden, and was looking to sell other parts of the operation before administrators were called in. It was in formal talks over the sale of Maxwell Downhole Technology, and had begun discussions about the sale of French-based Secro.

"The board has reluctantly concluded that it is no longer feasible to continue to explore this option (of disposals] without the protection of an administration order," PwC said yesterday.

Established in 2003 and floated on the Alternative Investment Market in September 2005, Sovereign's revenues during the year to 31 March were some 56.6 million. Strachan was appointed chief executive in December after his predecessor Graham Burgess left the post.

Sovereign's request for its shares to be suspended from Aim looks set to further diminish Scotland's shrinking pool of listed firms. Ironically, the news emerged on the same day as trading began in shares of Aim-listed Scotgold, the first Scottish IPO since July 2007.

Cartwright said yesterday that administrators would be "urgently reviewing the group position" to determine whether it remains feasible to sell the subsidiary businesses.

"While the group position has become financially unsustainable, we are hopeful that potential acquirers will recognise the inherent quality within some of the trading entities as well as the scope to further develop these businesses," he said.