Wood Group acquisition of Mitchell's Oil Field Services significantly increases presence in US Bakken shale region

Sep 21, 2012, 12:56 ET from Wood Group

HOUSTON, Sept. 21, 2012 /PRNewswire/ -- Wood Group has agreed to acquire Mitchell's Oil Field Services, Inc. ("Mitchell's"), a provider of maintenance, installation and fabrication services in the oil-rich Bakken shale region for an initial consideration of $135m. Further earn out payments due in the period to 2015 based on Mitchell's future performance may be payable. The acquisition is expected to be earnings enhancing from completion.

The transaction is subject to anti-trust approval in the US, with completion expected in the fourth quarter of 2012.

Mitchell's will operate within Wood Group PSN, and will complement the division's existing operations & maintenance, construction supervision and survey services in the region. Mitchell's will continue to be led by the existing management team. 

"We are pleased to welcome Mitchell's into the Wood Group PSN family," said Derek Blackwood, president – Americas for Wood Group PSN. "The addition of Mitchell's significantly expands our service offering and increases our presence in the region to approximately 650 personnel operating from nine locations. We look forward to extending relationships with existing clients and building relationships with new clients in the Bakken by offering them our full range of complementary services. 

"This acquisition is in line with our strategy to expand our presence in the US oil shales and follows our purchase earlier this year of Wood Group Duval, which services the Eagle Ford shale region in South Texas."

Todd Appel, president of Mitchell's said, "We are extremely excited to be joining Wood Group. Mitchell's has achieved strong growth over recent years, and we anticipate the strong oil shale market, momentum in our business and the support of Wood Group will enable continued growth."

Notes to Editors
Wood Group (John Wood Group PLC) is an international energy services company with $6.0bn sales, employing more than 41,000 people worldwide and operating in 50 countries. The Group has three businesses – Engineering, Wood Group PSN and Wood Group GTS - providing a range of engineering, production support, maintenance management and industrial gas turbine overhaul and repair services to the oil & gas, and power generation industries worldwide. www.woodgroup.com

Wood Group PSN is a global provider of pre-operations, hook up & commissioning, operations & maintenance, engineering, construction, project management, training and decommissioning services to the energy industry. Employing over 26,000 people in more than 35 countries, Wood Group PSN offers high integrity, brownfield services that support customers to optimise performance, maintain production, reduce operating costs and provide integrity assurance. www.woodgroup-psn.com

Mitchell's Oil Field Services, founded in Sidney, Montana, in 1977, provides maintenance, installation and fabrication services to the North Dakota and Montana onshore oil & gas market. Mitchell's is owned by Stone Arch Capital, a Minneapolis-based private equity group, www.stonearchcapital.com, and management.  www.mitchellsoilfield.com

Additional information in relation to the transaction

The total consideration is made up of an initial payment of $135m, plus three additional annual earn out payments of up to $47.5m in aggregate. The consideration will be satisfied from the Group's existing bank facilities. The gross assets at 31 December were $72m, and profit before tax for the year ended December 2011 was $13m. Annualised pro forma EBITA, adjusted for certain non-recurring items, for the year ended December 2011 was $19m

The Bakken Shale is one of the most active exploration and production oil formations in the US.  Stretching over 200,000 square miles of the Williston Basin, the Bakken region, located in the states of North Dakota and Montana and the Canadian provinces of Manitoba and Saskatchewan, has been actively producing oil using conventional methods since the 1950s. Since the recent advent of unconventional drilling and production technology (e.g. horizontal drilling and hydraulic fracturing) the Bakken has experienced strong growth.

In 2008, the US Geological Survey estimated that there was between 3 - 4 bn barrels of recoverable oil in the Bakken. This figure was later revised in 2010 by the North Dakota Industrial Commission ('NDIC') to 6.2 bn barrels. Oil production in the US Bakken Shale has increased from about 98,000 bpd in 2005 to 310,000 bpd in 2010 and an average of more than 630,000 bpd in May 2012[1].  Daily production growth is anticipated to continue.

[1] Source: US Energy Information Administration

SOURCE Wood Group