Duratec to take on offshore Santos maintenance contract after buying out Wilson’s for $18m

Duratec (ASX:DUR) shareholders watched shares sink into the red today down -1.18% to 42c as the company buys out competitor Wilson’s Pipe Fabrications (WPF) for $18m. Heading into the last hour of trade, however, shares are up 2.3%.

The company had previously published a trading halt on Friday, hinting at the deal, but as the US Jobs report sinks world markets, Duratec was not able to firmly shake off declines on a red Monday. 

Regardless, the deal is one to take note of. With a slate of decommissioning works set to begin offshore Australia in the coming years, and a likely strong flow of maintenance jobs also on the horizon, Duratec predicts the buyout to be a strategic choice. 

Cool $18m depends on earnings 

Ultimately, Duratec strengthens its capacity to take on offshore O&G jobs in Australia with the purchase of privately held competitor WPF. 

The former is picking up WPF for a total of $18m; an initial consideration of $9m will be followed by a contingent payment (which could actually be less than $9m). 

The size of that second contingent payment depends on whether WPF posts earnings of $5m in FY23. If it doesn’t, it will get less than the full $18m. 

The contingent payment is due September next year. 

Who are WPF, anyway? 

WPF has operated for a quarter of a century with a focus on fabrication of pipelines and Duratec notes it maintains relationships with several bluechip energy companies here at home. 

Those relationships come in the form of ongoing service contracts with undisclosed large companies, including Santos Limited (ASX:STO). 

It also works for Canadian heavyweight Vermilion’s operations in Australia, which see Vermilion retain a stake in offshore acreage off the lucrative North West Shelf (NWS) of WA. WPF is headquartered in Perth.

WPF’s Michael Wilson will remain with Duratec as a director on the board following completion of the deal. 

Acquisition to boost earnings: Duratec 

“With Duratec’s organic growth, the acquisition of Wilson’s will add to earnings growth into the future,” Duratec MD Phil Harcourt said. 

“The acquisition also provides Duratec exposure to a sector that is difficult to penetrate…with significant capex spend recently by energy companies, we foresee large spend in maintenance budgets into the medium to long term.” 

“Wilson’s is a well run business with strong growth prospects and stable management. We believe we can grow the business by introducing our [complementary engineering] services to their customers.”