AS I SEE IT: TERRY MURDEN says the First Minister cannot rely on virtue signalling… and why it is make your mind up time for Wood Group
Credit where it’s due. Humza Yousaf made a quick trip to the north east to at least register an interest with Scotland’s, and the UK’s, energy capital. After a series of setbacks over exploration plans, the windfall tax and the failed carbon capture bid, he knows he needs to placate those who feel that politicians from both Holyrood and Westminster are paying lip service to the region.
What sort of energy policy the First Minister will pursue beyond the grand transition plan is yet to be determined, but according to the Aberdeen and Grampian Chamber of Commerce he is indicating a “more pragmatic view on oil and gas”.
So, is he backing more investment in the sector? Or does his commitment to “continuity” mean sticking to the presumption against more exploration that was the policy of his predecessor?
The Sturgeon government, egged on by its Green party partners, came close to alienating the industry and the thousands of workers who keep the lights on and industry powered up. While the new FM will be keen to stick to the transition plan, he has to explain exactly how a pragmatic view on oil and gas squares with the Greens’ demand for a quick exit.
Of course, Mr Yousaf’s government is in the handy position of being able to fudge it because the big decisions on exploration, carbon capture and the windfall tax are reserved to Westminster. That means he can continue to press the argument for moving the industry from fossil fuels to clean energy without being responsible for how we get there.
Get it right and he’ll claim the credit, get it wrong and it will be Westminster’s fault. But more virtue signalling is no substitute for having a clear route map for the energy industry.
While the north east awaits further clarity on the government’s plans for the region Apollo Global Management is clearly determined to get its hands on one of its key players.
Aberdeen-based Wood Group’s shares ticked up yesterday after the fifth – and final – takeover proposal from the US private equity company. At 212p they’re still well short of Apollo’s 240p proposal, suggesting some scepticism among investors that a deal will be concluded. Having rejected four previous approaches from Apollo, the Wood board is not in a hurry to surrender its independence.
However, everything has its price and Ken Gilmartin, who only took over as CEO last year, last month gave a frank assessment of the company’s underperformance and failure to deliver for shareholders. If that’s the case why are they not eager to accept Apollo’s chunky premium?
On the face of it they’re buying into Mr Gilmartin’s strategy which argues that the price undervalues the company’s prospects and that the shares are cheap relative to industry peers, such as Worley in Australia. As such they are putting their trust in the CEO quickly reversing a full-year operating loss that missed consensus.
Wood Group has been hit by lower spending among oil and gas producers and charges linked to its 2017 acquisition of UK Amec Foster Wheeler, a deal steered by former CEO Robin Watson. His last big decision was to sell its built-environment consulting business to WSP Global for just under $2 billion to help pay down debt. We may see more restructuring as the group repairs its balance sheet.
Apollo is one of the world’s biggest private equity investors but it has missed out on possible acquisitions of education publisher Pearson and the bookmaker William Hill.
In a generally tight market for deals made tighter by recent bank failures, it is known for its reluctance to overpay for assets. For Wood Group, therefore, this might be as good as it gets.
Terry Murden held senior positions at The Sunday Times, The Scotsman, Scotland on Sunday and The Northern Echo and is now editor of Daily Business