Wood Group chief says company will remain grounded in Aberdeen after acquiring Amec Foster Wheeler

The deal made Aberdeen-based Wood one of the biggest engineering firms in the UK, but Glasgow-born Mr Watson appears keen to play down suggestions he is a big shot.

“I’m very grounded in terms of normality and the reality of what the world’s like.”

The reference to his background forms part of a retort to suggestions Wood has not played fair by all stakeholders in its response to the downturn that has hobbled the key North Sea market since 2014.

Cuts in spending by oil and gas firms since the crude price started tumbling in that year have taken a heavy toll on Wood, which helps develop and run offshore facilities.

The deep cost-cutting programme initiated by Wood in response has resulted in more than 2,000 job losses in the UK, and around 15,000 globally.

While Wood has increased dividend payments in line with commitments to investors, Mr Watson insists the job cuts were essential.

“I don’t earn any medals from retaining a head count that we can’t sustain because activity has fallen off and then we get taken over and if we get taken over by someone who’s much more hostile than us ...”

The process has been painful nonetheless.

“Is it difficult to make people redundant? Folks say you guys are experienced you know what you’re doing and it must get easier. We’ve laid off 15,000 people, at the end of the day that’s 15,000 husbands, wives, fathers, daughters.

“The minute you don’t feel anything in this sort of downturn you should really walk away from it.”

Mr Watson, 50, notes he has been subject to the pay freeze initiated under the cost cutting drive.

While his move into the top job at Wood in January 2016 followed years spent in executive positions, the engineering veteran stresses he has worked his way up from the bottom.

He entered the oil and gas industry in his twenties after joining the merchant navy as a cadet from school and has spent plenty of time on rigs offshore.

“I think one of the things that stood me in good stead was a good upbringing that made me work hard and try to get on.”

Mr Watson reckons Wood Group is also grounded. He appears determined its culture will not change following the integration of the sprawling Amec Foster Wheeler business. This was run from London, where some have dismissed Wood as a Scottish pretender with ideas above its station.

“We feel the style and corporate culture we’ve got is something we need to retain and sustain right across the newly formed organisation.”

The company only made its audacious move on Amec Foster Wheeler after finding suitable bolt-on acquisitions were in short supply.

Amec Foster Wheeler was chosen following an analysis of a wide range of targets by a team charged with coming up with a transformational acquisition.

There was some opportunism involved.

The timing of the bid reflected directors’ belief that Amec Foster Wheeler would face challenges winning support for the rights issue it planned to complete to take the pressure off its balance sheet.

While Mr Watson was determined Wood should take control of the enlarged business, the terms of the deal were agreed fairly quickly. This followed an initial approach by Wood’s chairman Ian Marchant to his opposite number John Connolly.

Mr Watson’s enthusiasm for the acquisition reflected the belief Wood needed to reduce its dependence on the North Sea, which he has held since joining its board in 2013.

The dad of three notes that the North Sea is a mature basin and markets such as US shale offer brighter growth prospects. Wood’s work off the UK left it heavily reliant on a relatively small number of clients.

The plunge in activity since 2014 only added urgency to the quest to diversify.

With the acquisition, Wood has gained exposure to a range of markets that appear to offer good long term growth potential, such as infrastructure engineering, while extending its geographic reach.

Mr Watson expects the enlarged group will shed around 1,100 jobs to achieve the expected deal synergies but has signalled the impact on Aberdeen will be limited.

The group will generate around seven per cent of its revenues in the North Sea. The area accounted for 40 per cent of Wood’s revenues five years ago.

However, Wood expects to remain a major player in the North Sea for a long time yet.

There will be lots of decommissioning work available as hundreds of facilities reach the end of their working lives. But the challenge will be to ensure the UK makes the most of the oil and gas reserves it has left.

“ There’s enough potential projects around, there’s still 20 billion barrels in the ground that’s producible, it’s making it commercially viable that is the task we all have.”

Against an uncertain backdrop for the North Sea, Mr Watson is glad to be running a broadly-based business he feels can make an important contribution in Scotland, where it employs around 5,500 people.

”Most of our revenue and profit is earned outwith Scotland, we pay our taxes, we don’t take money from the public purse and we provide really good career opportunities and good quality jobs for highly qualified people.

“I’m very proud to be at the helm of an organisation like that.”