IN a nation where world-class business heroes are in
short supply, the rangy figure of energy services entrepreneur
Sir Ian Wood stands tall.
Creating a global operation with revenues of more than $2
billion (£1.07bn) from a modest Scottish family fishing
business with half a dozen ships is no mean feat.
After decades of growth at the Wood Group whose 14,000
employees now span 36 countries, it is tempting to believe
that success has become easy and that the man at the helm can
walk on water.
But Sir Ian, a down-to-earth Aberdonian, who recently
presided over the company~ez_rsquo~s second fall in profits since
flotation in 2002, is probably the least likely Scottish
business leader to succumb to notions of invincibility.
Reflecting on the last year~ez_rsquo~s trading at Wood Group, Sir
Ian says: ~ez_ldquo~We got our feet wet last year but we~ez_rsquo~ll try to
avoid doing that again ~ez_hellip~ I hope we~ez_rsquo~ve reacted fast enough and
made changes quick enough.~ez_rdquo~
Taking a company from private ownership to the full glare
of public scrutiny on the stock market is a tough task for any
founding chief executive, especially one whose vision,
intellect and energy has played such a huge part in charting
For Sir Ian, the initial transition was a smooth one ~ez_ndash~ the
IPO in 2002 was seven times oversubscribed ~ez_ndash~ and Wood~ez_rsquo~s
enviable growth record looked unshakeable.
But 2004 brought a rude awakening, as earnings (before
interest tax and amortisation) tumbled 15% to $117 million
(£63m), largely due to difficulties in its gas turbines
division and lower volumes in the deepwater engineering
Wood still managed to notch up a 15% increase in revenues
to $2.28bn (£1.22bn) but Sir Ian admits: ~ez_ldquo~We did the IPO in
the belief that we could continue with our super record of
growth and last year we stumbled badly ~ez_hellip~ In terms of being a
[relatively] new IPO, it was a great disappointment.~ez_rdquo~
Wood says his senior management team has worked hard to
tackle problem areas, notably gas turbines (now under the
leadership of deputy chief executive Allister Langlands) and
he is confident of a return to acceptable growth in 2005.
Sir Ian says Langlands has taken a number of steps to cut
costs, increase efficiency, focus on high-tech component
repair contracts and extend long-term maintenance agreements.
~ez_ldquo~We moved into that market when the Enron issue changed its
status overnight from believing there was an under-supply to
an over-supply. I believe last year is the bottom [for gas
turbines],~ez_rdquo~ he says.
Sir Ian adds that staff morale remains high, despite the
dip in profits last year.
~ez_ldquo~No-one, frankly, within Wood felt as depressed as the
public markets coverage might have implied ~ez_hellip~ My colleagues
look back at last year and see revenues went up, we continued
our international development and we made a big development
Wood, which has developed a global reputation for creating
innovative technical and engineering solutions, made an
investment and capital spend of $131m (£70.2m) in 2004, up
from $99.6m (£53.4m) in 2003, as part of its efforts to
enhance products and services.
Wood Group had a range of private equity backers, including
prominent Scottish institutional investors, long before its
IPO and Sir Ian says this paved the way for the transition to
public company status.
~ez_ldquo~We~ez_rsquo~ve had institutional shareholders since 1981, so
[flotation] wasn~ez_rsquo~t as traumatic a change as it might have been
if we had just been a purely private company,~ez_rdquo~ he says.
Some of Wood Group~ez_rsquo~s long- standing backers, which included
Aberdeen Asset Management, made as much as 25 times their
original stake when the company floated on the London stock
market in June 2002.
Growth rocketed in the decade running up to the IPO, with
revenue doubling from just under $400m in 1993, to $800m by
1997, shooting through the $1bn in 2001 and passing $2bn in
Although the North Sea remains a key market for Wood, in
the past few years there has been a gradual reduction in the
proportion of revenue derived from that area, which now stands
at less than 25% of total sales, reflecting growth in earnings
from other oil provinces.
As joint chairman of the UK~ez_rsquo~s oil industry leadership team,
Sir Ian is a passionate advocate of the need to prolong the
productive life of the UK continental shelf (UKCS).
He is adamant that, with the right kind of incentive and
risk-sharing agreements in place, significant new finds can be
made, particularly in new areas such as west of Shetland.
He recently gave a presentation to the trade and energy
ministers entitled ~ez_ldquo~A tale of two futures~ez_rdquo~, one being rapid
decline of the UKCS with 40% of the infrastructure
decommissioned by 2020 and game over effectively by 2030.
The upbeat alternative is an extended life scenario where
production continues to 2050 or beyond and at least another 28
billion barrels of oil are produced.
For this to happen, Sir Ian says operators must invest in
exploration and production; contractors must improve
efficiency to contain unit costs; there must be more
outsourcing; more adoption of new technology; skilled staff
must be retained and recruited; and government must minimise
regulation and maintain fiscal stability.
He argues that the prize for maximising recovery is
~ez_ldquo~The difference between the high 28 billion [barrels of oil
equivalent per day] and low 14 million at $40 a barrel
represents $560bn of economic value to the UK,~ez_rdquo~ Sir Ian says.
An outspoken character, he got angry back in the 1970s when
local people in Aberdeen were fearful of what US oil companies
might do to them instead of figuring out how they could get a
slice of the action for themselves.
Back in 1979, Sir Ian shocked his father by spending the
equivalent of the cost of one and a half fishing vessels to
mount a lavish stand at an oil exhibition. It was a typically
prescient action, demonstrating his ability to anticipate
change and plan accordingly.
He inspires a strong loyalty among his workforce and is as
comfortable chatting to staff in Aberdeen in his old cardigan
as he is addressing workers in his shirt-sleeves in Caracas or
With a first-class degree in psychology, he is adept at
reading people and warns of the insidious effect on
recruitment of continually referring to the North Sea as a
sunset industry, which he warns is ~ez_ldquo~damaging and potentially
He believes the industry has to do more to attract new
recruits and says in future they may come from other nations
as the global competition for human capital hots up,
particularly China which turns out two million engineering
graduates every year.
~ez_ldquo~You can see that as a threat or an opportunity; we see it
as an opportunity,~ez_rdquo~ he says.
~ez_ldquo~There is a significant resource shortage right now. Some
companies are not bidding for contracts right now on the basis
they have not got the people,~ez_rdquo~ warns Sir Ian.
In an industry where the average age of workers is roughly
50, grooming the next generation of leaders is important. Sir
Ian says that at Wood Group, succession plans are in place.
This summer marks Sir Ian~ez_rsquo~s 63rd birthday, and he remains
committed to steering the group until he is 65. ~ez_ldquo~I won~ez_rsquo~t
become a 70-year-old Scottish chairman,~ez_rdquo~ he promises.
But the former chairman of Scottish Enterprise is not
planning to retire to the golf course. ~ez_ldquo~I enjoy being
constructive and I will certainly carry on doing things.~ez_rdquo~
For now, his vision remains global and his appetite to grow
the business he created, undiminished.
CONGRATULATES SIR IAN WOOD ON CONTRIBUTION TO OIL
AND GAS INDUSTRY
23 Feb 2006
Energy Minister, Malcolm Wicks
MP, and key oil and gas industry leaders
joined together at a dinner at Lancaster House
in London to recognise and thank Sir Ian Wood,
chairman and managing director of Wood Group,
for his contribution to industry on the
occasion of Sir Ian stepping down from his
role on the PILOT forum.
Mr Wicks hosted the dinner in his role as the
current chairman of PILOT. Industry was
represented by its current members of PILOT
and some distinguished past members including
Francis Gugen, ex managing director of Amerada
Hess and now chairman of CH4 Energy, Syd
Fudge, former chief executive of Kvaerner Oil
and Gas and Malcolm Brinded, executive
director of exploration and production and Tom
Botts, executive vice president - Europe, for
Shell International Exploration and
Production, as well as Alan Jones, formerly
head of BP operations in the UK.
Mr Wicks said: 'This evening is dedicated to
the celebration of Sir Ian's contribution.
Over the past 30 years he has built the Wood
Group into a major global company operating in
more than 40 countries worldwide from its
headquarters in Aberdeen. He has applied the
same level of passion and effort to the
benefit of the whole industry through his
contribution to PILOT. He has been a constant
driving force and I know that the industry
will continue to benefit from his efforts for
his own company and his generous counsel to
PILOT is chaired by the energy minister and
brings the government and industry together to
help strengthen the North Sea's position as a
key centre for exploration, development and
production, against fierce competition from
other oil and gas provinces around the world.
The forum is unique, both in UK industry and
the global oil and gas business, and Sir Ian
played a key role in establishing its
predecessor in 1998 the Oil and Gas Industry
Task Force (OGITF), which set a number of
tough goals that PILOT is aiming to achieve by
· Sustaining investment at £3billion per annum
from North Sea activity
· Maintaining production at 3 million barrels
of oil equivalent per day
· Prolonged self-sufficiency in oil and gas
· A 50% increase in exports in oil and gas
· £1 billion additional value from new
· Supporting 100,000 jobs more than there
otherwise would have been
· The UK to be the safest place to work in the
oil and gas industry world wide.
Sir Ian has co-chaired the ILT (Industry
Leadership Team) since it was created six
years ago. ILT is the industry side of PILOT
and includes high-level representatives from
operators, contractors, SMEs and the trade
Tom Smith, managing director of the
telecommunications specialist company Nessco
Ltd will now take the role as co-chair of ILT
along with Dave Blackwood, director of BP's
North Sea business.
On behalf of ILT Tom Smith says: 'Sir Ian
brought an unrivalled wealth of experience to
the industry at a particularly challenging
time, when the OGITF was established. Since
then Sir Ian has helped us to understand how
best to work alongside government and we've
all benefited and will continue to benefit
from his contribution. He is a hard act to
follow and I look forward to taking the goals
of PILOT forward with the dedication and
enthusiasm that Sir Ian has.'
ILT Communications Executive
c/o UKOOA, 3rd Floor, The Exchange 2, 62
Market Street, Aberdeen AB11 5PJ