Sunday, May 16, 2021

Scottish energy firm Wood Group sets aside $190m to settle bribery case

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Wood Group is aiming to settle long-running investigations into bribery allegations by paying about $197 million.

The engineering company confirmed yesterday that it will pay almost $9 million to Scotland’s Civil Recovery Unit.

That is in relation to conduct in a joint venture in Kazakhstan between 2008 and 2010 which paid Unaoil, the oil consultancy which has been under investigation by the Serious Fraud Office (SFO) since 2016, almost $8.7 million in fees.

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Wood inherited the issue when it acquired PSN, an oil services firm, and after an internal investigation it reported itself to the Crown Office in Scotland.

Robin Watson, Wood Group’s chief executive, said: “The investigation shone a light on behaviour that was quite simply unacceptable. While we didn’t own the [PSN] business until 2011, we take responsibility for dealing with the consequences and have taken steps to further strengthen our culture and processes to ensure it does not happen again.

“We continue to insist on the highest standards of integrity in every country and community in which we operate.”

The Aberdeen-based Wood Group is hopeful of settling with the SFO, as well as the authorities in the United States and Brazil, on a separate case, also involving Unaoil, relating to allegations of bribery and corruption at Amec Foster Wheeler, the rival that Wood paid £2.2 billion to buy in 2017.

Four people have been convicted so far as part of a wide-ranging SFO investigation. That has already uncovered $17 million of bribery payments in return for securing $1.7 billion of contracts for Unaoil and its clients.

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Yesterday Wood Group said that it had increased its provision in relation to the cases it has exposure to from $46 million to $196.7 million. It is hopeful that the remaining settlements can be agreed before the end of June.

David Kemp, 50, chief financial officer at Wood Group, said: “We are not quite at the end but we are pretty close. We have spent a lot of time, money and effort helping the SFO with their investigation and we are glad to nearly get it in the rear-view mirror.”

It came as Wood Group announced results for 2020 showing a 23 per cent decline in revenue to $7.6 billion, mainly as a result of less work in the oil and gas sector.

It cut about 5,000 staff and suspended its dividend as part of cash preservation measures as some customers paused or indefinitely delayed projects.

More than $250 million of exceptional costs meant that it booked a pre-tax loss of $148.6 million, compared with a near $149 million profit in the previous 12 months.

The company gave no firm commitment to reintroducing its dividend.

Wood had net debt of $1 billion at the end of December and an order book worth $6.5 billion.

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Watson, 54, said he was encouraged that the business had continued to win work throughout the coronavirus pandemic and had seen improved sales momentum towards the end of last year and in the early weeks of this year.

A new medium-term efficiency strategy is expected to lead to $40 million of savings this year as Wood aims to embed more digital capabilities across its workforce.

Watson said: “We are able to respond to market conditions as they ebb and flow as we have an asset light model.

“The encouraging thing for us is we are seeing a broad order book pick- up, but one swallow does not make a summer.

“We do think there is still a bit of headwind [to come] in some areas but we do not think that we have lost any market share.”

Shares were down 16p yesterday, or 5.1 per cent, at 301p.

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