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Costain targets oil and gas with £9.6m acquisition

Costain has acquired oil and gas project management firm EPC Offshore for an initial £9.6m and has launched a new oil and gas asset services division.

EPC Offshore was founded in 2009, has a workforce of 75 staff and is a field development and project management specialist providing client-side services to North Sea oil and gas companies.

The move comes less than three months after Costain chief executive Andrew Wyllie insisted to Construction News that the contractor would “not slow down on acquisitions” following its failed May Gurney bid.

At the time, Mr Wyllie hinted at more deals of a similar size to consultancy ClerkMaxwell and industrial support services firm Promanex, both completed in 2011 and worth around £20m in total.

He said: “We have continued looking at a number of other [acquisition] opportunities and what you can expect in the medium term is to be reading about other acquisitions that Costain has done, like the two we did in 2011.”

Costain Upstream will provide services across the lifecycle of upstream offshore oil and gas assets.

EPC Offshore had revenue of £11.7m, adjusted EBITDA of £2m and profit after tax of £1.1m for the year ended 31 July 2012. It had gross assets of £3.3m.

The acquisition is expected to be earnings-enhancing to Costain in the first full year of acquisition and the deal includes £1m of excess cash included within the company.

Further cash may also be payable depending on the financial performance of the business in the financial years ending 31 December 2014, 2015 and 2016 and the retention of certain key employees in 2016.

This would be worth a minimum of £2m and a maximum of £14.4m. The consideration funding will be provided from Costain’s existing debt facilities.

In its accounts for the year to 31 December 2012, Costain’s energy and process revenue (including share of joint ventures and associates) for the year was £137.7m, slightly down on its 2011 revenue of £143.4m, with adjusted profit from operations of £2.5m (2011: £4.7m).

Costain Upstream will combine ClerkMaxwell, the oil and gas engineering and support services provider, which has more than doubled in size since its acquisition in 2011, and EPC Offshore to increase the scale of the group’s services in the growing, high-value North Sea upstream oil and gas market.

Costain said it would be strongly positioned in the UK offshore field development market where investment in 2013 is forecast at £13bn according to the Oil & Gas UK Activity Survey 2013.

Costain Upstream will deliver engineering, capital projects and asset support services across four principal service lines: Field Development, Subsea Facilities, Topside Facilities and Floating Systems, and comprises a resource pool of more than 350 people. 

It will be led by EPC Offshore chief executive Keith Wallace, supported by the leadership teams of both ClerkMaxwell and EPC Offshore. They will be based in Aberdeen with operating and support units in Maidenhead, Teeside, Manchester and Abu Dhabi.

Mr Wyllie said the acquisition would accelerate its strategy of broadening capabilities for “major blue-chip customer” requirements.

He added: “The formation of Costain Upstream will significantly enhance our position in this sector, and the acquisition of EPC Offshore will boost its growth, complementing the front-end engineering and operations capabilities we acquired with ClerkMaxwell two years ago. 

“There is a sizeable addressable market for these highly complex services and we see further compelling opportunities to grow our oil and gas footprint both in the UK and internationally.”

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