JOHN Wood Group is set to double its bet on the US shale industry despite the controversy about fracking by acquiring a local specialist in a deal that could be worth more than $200 million (£125m).
The Scottish oil services giant has agreed to buy Elkhorn Holdings in the expectation of a massive increase in activity in shale areas across the USA in coming years.
The deal is the latest in a series of shale-focused acquisitions the company has made in spite of the concerns critics have expressed about techniques used to produce from such rocks.
Some claim the hydraulic fracturing process used to release tightly held oil and gas from shale, dubbed fracking, could damage the environment.
However, Wood Group has said it would support companies in the UK if society decided they should be able to frack.
In August its chief executive Bob Keiller said: "I think people have got concerns that need to be aired and debated, but ultimately if it was to go ahead and that was the settled view of society that it should then we would like to think the expertise that we've got could be used to service that market."
The acquisition of Wyoming-based Elkhorn looks like the biggest in a series of chunky bets Wood Group has placed on the US shale market.
The company claims a 5% share of the market.
Robin Watson, chief executive of the Wood Group PSN unit, said: "The acquisition of Elkhorn is an important part of our US shale strategy and will expand our service portfolio for our US onshore customers."
In September last year the company agreed to pay up to $182m to buy Mitchell's Oil Field Services, focused on the Bakken shale in North Dakota.
Wood Group did not provide any indication for how much it paid for Elkhorn. However, the company said it paid a competitive price in line with a transaction of the size and sector concerned.
The details provided about Elkhorn suggest it is a much bigger business than Mitchell's.
Elkhorn had $250m revenues in 2012. It has 2200 employees. Wood has around 2300 employees working in shale currently.
Mr Watson said after the acquisition of Elkhorn, Wood Group PSN will have about 4500 US shale-focused personnel, around double the number before the deal.
At the time of the Mitchell's deal Wood Group said the acquisition would increase its employee numbers in the areas served to 650.
The acquisition of Elkhorn, from management and employees of the company, will help Wood Group increase its presence in a range of significant shale areas.
These include the Niobrara shale in Colorado and the Marcellus shale in West Virginia.
In August 2012 the company bought Duval, which is focused on the Eagle Ford Shale in Texas, for an undisclosed sum.
A number of shale plays have been opened up after independent oil and gas firms pioneered the use of fracking combined with horizontal drilling in areas like the Barnett shale in Texas.
Hydraulic fracturing involves forcing sand, water and chemicals into rock formations under high pressure.
Wood said US experts have predicted production from shales in North America would increase from an average of 6.6 million barrels oil equivalent (boed) daily in 2012 to 11.8m boed in 2016.
Last month David Cameron said the UK should make it easier for firms to develop shale reserves. The prime minister said production from shale in the US had led to a big drop in gas prices and provided a boost to the economy.
Shares in Wood Group closed up 0.5p at 777p.
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