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London’s small and mid-cap oil and gas companies serve up plenty of drama. In the past 10 years there have been boardroom clear-outs, misjudged M&A, bribery probes and forecasting errors. But their record does not make the drama unfolding at Wood any less extraordinary.
The Aberdeen-headquartered oil and gas services group warned on Monday that it would have to restate accounts for its three most recent financial years after an independent review into its Projects business, its second-biggest division by revenue, found a series of failings. These included “instances” of information being withheld from its auditors at KPMG. It will also delay the publication of 2024 numbers, which had been expected by April 30.
Even for a company whose investors have absorbed many blows in the past 10 years — including its disastrous 2017 acquisition of rival Amec Foster Wheeler — the latest disclosures are difficult to swallow.
Shareholders will want several questions answered. For starters: what, exactly, happened? Wood said the independent review, carried out by Deloitte, found “inappropriate management pressure” was exerted to “maintain previously reported [financial] positions”. Wood said this management pressure included “unsupported dispensations”. What were these exactly? Secondly, investors will be keen to understand who is responsible, and whether they are still with the company. And third, they will want details of remedial plans, or whether Wood intends to take punitive action.
While it has not disclosed these details, Wood insisted there has been “significant change” at the company during, and since, the period covered by the review. It has appointed a new interim president of financial planning and analysis and interim group financial controller, for instance.
Wood said in Monday’s statement that it remained in talks with the UAE’s Sidara about a possible takeover. Good luck with that. The group is losing cash and faces the expiry in October next year of some $1.4bn of debt facilities. As a result of the independent review, it has been forced to secure temporary waivers for “historical non-compliance” with covenants under its lending facilities related to previous financial periods. These are only currently valid to April 30.
Wood, which once had a market capitalisation of more than £5.3bn, fell a further 30 per cent on Monday to about £191mn. Its shares may have to be suspended from the end of next month, as it tries to complete 2024 results.
Its shareholders will be incredulous. So, too, will critics who brand the UK as over-regulated and corporate governance requirements too strict. Smaller UK oil and gas companies offer up plenty of evidence to the contrary.
nathalie.thomas@ft.com
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