‘Slowly then suddenly’: Wood Group’s slide from North Sea champion to struggles with debt
Problems of Aberdeen-based group reflect decline of city built on oil and gas
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.”
This Company Gets 98% of Its Money From the U.S. Government. DOGE Is Coming for Firms Like It.
Memo calls for review of $65 billion in contracts that go to Booz Allen Hamilton and other big firms that do government work
The Trump administration is looking to cut federal contracts. Few companies stand as exposed as Booz Allen Hamilton BAH -2.84%decrease; red down pointing triangle.
The venerable Washington, D.C., area firm works on projects across the U.S. government. It operates a website visitors use to reserve campsites at national parks. It is modernizing healthcare records for veterans, beefing up technology at the Federal Bureau of Investigation, and rolling out a suite of artificial-intelligence and cybersecurity tools across the Department of Defense and other federal agencies.
A memo sent this week from Stephen Ehikian, the acting administrator of the General Services Administration, calls on procurement officials at federal agencies to list and justify consulting contracts from 10 companies—including Booz Allen, Accenture, Deloitte and International Business Machines—that the agencies intend to keep. The responses are due March 7.
Booz Allen generates 98% of its roughly $11 billion in annual revenue from contracts in which the end client is a U.S. government agency or department. It has told investors that it sees the U.S. government as the world’s largest consumer of management consulting and technology services. Since the election of President Trump in November, its stock is down about 30%.
In the memo, viewed by The Wall Street Journal, Ehikian said the GSA has identified that the 10 highest-paid consulting firms are set to receive more than $65 billion in fees in 2025 and future years. “This needs to, and must, change,” Ehikian wrote, bolding the sentence for emphasis.
Some consulting firms say it is unclear how the $65 billion figure was calculated.
Ever since 1940, when Booz Allen took on a project advising the secretary of the Navy ahead of World War II, the company has had a foothold in the federal government. Booz Allen separated its corporate-consulting arm from its government-advisory business in 2008, with the government business retaining the original name.
Today, the company, which employs more than 34,000 people, operates not as a consulting firm but as a technology company, Chief Executive Horacio Rozanski said in an interview. Booz Allen says it now has one of the largest AI businesses in the federal government. About 70% of its employees work in technology today, up from about 20% in 2012.
Booz Allen has been through presidential transitions before, and will weather the reviews of federal contracts, Rozanski said. The company’s work also aligns with the Trump administration’s priorities, he said.
“We recognize that in the short term there could be some disruption to the market, but in the long term we are really well aligned,” he said. “If the government wants to operate with fewer people, it will need to operate with more technology, and technology that works. And our stuff works, and it works beyond the prototype.”
The Elon Musk-led Department of Government Efficiency has already claimed to cut a small number of Booz Allen contracts, including at the Labor Department and the Commerce Department. Some of the company’s competitors, such as Accenture and Deloitte, have also had contracts cut. Spokespeople for Accenture and Deloitte didn’t respond to requests for comment.
Accenture got 17% of its North American revenue from the U.S. government last year. Another big federal contractor, Leidos, got about 87% of its revenue from the government providing national security and technology services, including scanners at airport checkpoints.
The memo this week came after the GSA earlier asked federal agencies to explain why consulting contracts were necessary as part of the Trump administration’s “efforts to weed out fraud and waste,” a GSA spokeswoman said. “We determined a need for more in-depth responses, and are in the process of collecting additional information at this time.”
A range of government officials have recently taken aim at consultants. In a post on X Tuesday, Doug Collins, the Department of Veterans Affairs’ newly confirmed secretary, said the VA was canceling nearly $2 billion in contracts. “No more paying consultants to do things like make Power Point slides and write meeting minutes!” he wrote.
The VA said earlier this week that no final decisions have been made, but nonmission-critical contracts, in areas such as executive support and coaching, will be eliminated.
Booz Allen’s Rozanski said the company is already talking to Trump officials about how the government can deploy its technology on everything from space defenses to using AI to reduce fraud.
“We are not in the business of writing PowerPoints. We’re in the business of writing code and of using commercial technology to create real results in the federal government,” he said.
The GSA memo also asks that agencies justify consulting contracts by explaining why they are “mission critical” and provide substantive technical support. The exact impact of the review remains to be seen, said Stan Soloway, CEO of the consulting firm Celero Strategies, and the former head of the largest trade association of government-service contractors.
“There’s a lot of questions,” Soloway said.
It is unclear what “mission critical” means, and how it might align with existing agency budgets and goals, said Soloway, a former defense official under President Bill Clinton. Executives within firms are trying to meet with Trump administration officials or explain the value of their services, but see the potential cuts as a risk.
“A lot of these companies are doing serious technology work,” Soloway said. “Now they don’t even know what the next six months or year might hold. Nothing disturbs a market more than uncertainty.”
Europe’s car suppliers warn they will be unable to absorb Trump tariffs
US shares in Valeo and Forvia fall sharply amid uncertainty over protectionist measures
Valeo and Forvia, two leading French car suppliers have warned they would be unable to absorb the costs of US President Donald Trump’s tariffs, which are set to hit Europe’s struggling automotive supply chain.
Trump on Thursday threatened to impose 25 per cent tariffs on EU goods, including on the car sector. The threat comes as the industry waits for a US decision on similar duties on goods from Canada and Mexico.
“There are no margins in the car industry and in particular among car suppliers to absorb even a part of these tariffs . . . I don’t know what the carmakers will do,” said Christophe Périllat, Valeo chief executive, on Friday.
He added that the costs would be passed on to clients, a point reiterated by Patrick Koller, his counterpart at rival Forvia.
Koller said at a results presentation that Forvia faced significant tariff risk for its operations in Mexico. “We’re almost absent in Canada . . . but we’ve got significant flows from Mexico to the US,” he said.
The tariffs threaten to hit an industry already weighed down by a slowdown in demand for cars and an expensive transition towards battery-powered vehicles, amid growing competition from Chinese EV start-ups.
Shares in Valeo dropped 15 per cent and Forvia fell almost a fifth on early trading on Friday. The businesses reported falling profits on Thursday evening and Friday morning respectively. Both businesses said that they expected largely flat sales in 2025.
Shares in German automotive suppliers Continental and Schaeffler, which in recent years have shed thousands of jobs, on Fridays sunk nearly 2 and 3 per cent, respectively.
Both business leaders said there were limits to how much they could adapt to tariffs, if Trump follows through on his threat to raise trade barriers with America’s closest neighbours.
Despite the warnings from the executives, it is unclear to what extent the companies could negotiate higher prices with the carmakers they supply. They both work with European, Asian and American carmakers.
“We can’t adapt in terms of industrial footprint or the footprint of our suppliers in the space of a few days or months; that takes years. In the US, we’ve got a historic base with experienced factories,” said Périllat.
“Today, we’re trying to understand because it’s complicated and it changes every day,” he added.
Europe’s automotive supply chain has seen increasing levels of job cuts as companies have turned to cost-cutting for survival. Lay-offs by European car suppliers doubled across the continent in 2024, according to figures from the European Association of Automotive Suppliers. Some 11,000 jobs were last year lost in the German sector alone, according to industry group VDA.
Margins for traditional automotive suppliers fell an average of between 3 and 5 per cent in the five years to 2022, according to analysis by Lazard and Roland Berger, as companies took on large costs to develop products for electric cars and sales in Europe slowed drastically amid higher living costs.
The Increasingly Crowded AI App Sector
If you’re one of those people who likes to download all the new artificial intelligence model apps—Grok, Gemini, ChatGPT, Claude, and so on—then prepare for another one. Meta Platforms is planning to launch a stand-alone app for its Meta AI chatbot, CNBC reported on Thursday. The company also plans to test a paid subscription version of the chatbot.
Launching a stand-alone app suggests that CEO Mark Zuckerberg has realized the existing distribution strategy of making Meta AI available through the company’s various social media apps isn’t enough to get people to use it. Consumers now have so many choices of AI chatbots—with similar capabilities—that it’s difficult to choose. At some point, there’ll be a shakeout. Who will be the survivors?