US giant pays Wood Group extra $50m after talks fail

ENERGY services heavyweight Wood Group yesterday revealed that American conglomerate General Electric (GE) will pay the Aberdeen-based firm an extra $50 million (£31m) for its well support division, on top of the $2.8 billion agreed in February.

The additional payment was triggered when talks collapsed over GE's possible commercial involvement in Wood's gas turbine business.

Negotiations over a possible gas turbine partnership had begun following the agreement to sell the well support arm.

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Wood has promised to return at least $1.7bn to shareholders as a result of the deal with GE, with more details of the pay-out expected this month.

Founder and chairman Sir Ian Wood stands to receive at least 50m from the pay-out based on his stake of 5.2 per cent.

The wider Wood family, along with a charitable trust that mainly works in Africa but also throughout Scotland, will share a further 100m.

Some of the cash raised by the sale has also gone towards buying fellow Aberdeen-based energy services firm Production Services Network (PSN), which Wood snapped up in December for about 600m.

The deal, which was completed last month, involved former PSN chief executive Bob Keiller joining the main board of Wood as an executive director and heading up the newly-combined Wood Group PSN production services business.

Buying the well support division is part of GE's oil and gas expansion strategy. In December, it bought UK engineering firm Wellstream for about 800m. Wood said: "In connection with the disposal of the well support division, Wood Group and GE agreed to discuss the possibility of some commercial co-operation in part of Wood Group's gas turbine activities.

"Such negotiations have not resulted in agreement of a mutually-acceptable commercial co-operation and GE will therefore pay Wood Group an additional $50m, in line with the agreement of 14 February."

At the group's AGM earlier this week, Wood warned the company saw the potential for its work in the North Sea to slow down as its clients digest the Chancellor's surprise tax hike.

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The chairman said: "In our production facilities business, the North Sea has seen reasonable activity levels and we have extended a number of longer-term contracts. Project-related activity has been healthy, although we see the potential for projects to be delayed as field economics are reassessed."

News of Wood's extra payment from GE came as Stirling-based electrical engineering contract Dron & Dickson announced that it had won a 45m contract from an "oil major".

Dron & Dickson refused to reveal the name of the customer, but said that it had held contracts with the client since 2004.

The latest deal will last for five years, with a possible extension for a further four years.