PERTH, AUSTRALIA: Duratec Limited (ASX: DUR), has signed a share purchase agreement to acquire 100% of the shares, business assets, intellectual property and undertakings owned and used by Wilson’s Pipe Fabrication (WPF) for Up to a maximum total of $18.0 million.
Commenting on the acquisition, Duratec’s Managing Director, Phil Harcourt, said: “Wilson’s Pipe Fabrication is a well-run business with strong growth prospects and a stable management team.
We believe we can grow the business by introducing our services to their customers (3D reality modelling, asset condition surveys, cathodic protection and blast and painting services), expanding its services via our geographical footprint and expanding the business to other potential larger customers with new balance sheet and backing.
The acquisition provides Duratec Limited exposure to a sector that is difficult to penetrate organically, and with significant capex spend recently by oil and gas companies, we foresee large spend in maintenance budgets into the medium to long term. With Duratec’s organic growth, the acquisition of Wilson’s Pipe Fabrication will add to the group’s EBITDA growth into the future.”
Based in Perth, Western Australia, WPF provides onshore and offshore mechanical engineering services to tier 1 oil and gas producers. Its services include maintaining and/or upgrading of drill rigs, original equipment manufacturers, fabrication, assembly, site installation, decommissioning and commissioning.
Wilson’s Pipe Fabrication holds direct service agreements with several blue-chip oil and gas producers with long-standing relationships. The business has strengthened and maintained its relationships with key clients Santos Ltd and Vermilion Oil & Gas Australia Pty Ltd.
Revenue over the past four years has averaged $20.5m annually, with an average operating profit of just under $3.0m (values sourced from WPF unaudited management accounts).
Wilson’s Pipe Fabrication is well-positioned to achieve continued growth via a significant pipeline of brownfield works with key clients Santos Ltd and Vermilion Oil & Gas Australia Pty Ltd (among others), as well as upcoming tenders for new and existing clients and an expected increase in ongoing maintenance and decommissioning activities for oil and gas producers on the back of greater enforcement from regulatory bodies.
Australia is also the largest LNG exporter in the world, with several producers expected to resume capital investment to support their large-scale LNG plants in WA.
WPF’s specialist provision of integrated on-site services and off-site fabrication to tier 1 WA and NT oil and gas producers, provides a significant opportunity for the introduction of Duratec’s skills and capabilities to a market that Duratec Limited has, to date, been unable to penetrate. This is an opportunity to potentially leverage the business’s long-standing relationships with Santos Ltd, Vermilion Oil & Gas Pty Ltd and Jadestone Energy Ltd and establish a market share using its early contractor involvement and remediation business model.
With Duratec’s national geographical footprint and reputation, WPF’s skillsets and services can over time be potentially expanded to service the other geographic markets, as well as providing synergies and capacity opportunities in the Oil & Gas market.