Out of the Wood

When trading is tough, and market expansion unattainable, companies often turn inwards. Faced with a moribund outlook for the oil services it provides, Wood Group (WG.) has done the opposite, at least at first reading. In March, it looked outwards, and sanctioned the all-share takeover of rival Amec Foster Wheeler (AMFW) in a deal we were told would lower volatility and add diversification and scale. Unfortunately, we fear the merger's much-vaunted cost synergies have been oversold, and that consolidation of two North Sea operators will merely multiply the combined group's problems. What’s more, we think Wood Group's issues have only grown in the course of a lengthy and complicated takeover process, and that shares could weaken further ahead of the tie-up, currently slated for the final quarter of 2017.