Acquisition of ECL Group Ltd (“ECL”)
RPS announces the acquisition of ECL a leading provider of services to the exploration and production phase of the oil and gas sector, for a maximum consideration of approximately £27 million.
Introduction
RPS’s strategy is to enhance its market position by developing its range of services, employing highly skilled staff and making acquisitions of quality businesses in order to extend its expertise and geographical presence.
ECL (www.ecqc.com)
ECL has been providing consultancy services to the international oil and gas industry since 1969 working in most countries where exploration and production has taken place. The business has operating offices in the UK (Henley-on-Thames, London, Aberdeen and Winfrith), USA (Houston), Canada (Calgary) and Australia (Perth), supported by a global network of agents and representatives.
The business is organised into two operating divisions: consultancy services and operations, the latter comprising seismic and well site geological services. Consultancy services involve, for example, prospect identification, block selection and licence application, reserves quantification and project economics. The range of services ECL offers enables it to assist clients at all stages of the exploration and production cycle.
ECL employs 125 full time staff, many of whom are shareholders. In addition, as is common in this sector, the business utilises a number of specialist consultants, the majority of whom have long term relationships with the company. The four Directors of ECL will be remaining with RPS following completion and will have important roles in the enlarged RPS energy division.
Financials
In the year ended January 2005 ECL had revenues of £23.5 million, profit before tax of £3.3 million and profit after tax of £2.3 million. Net assets at 31 January 2005 were £6.9 million including net cash of £1.1 million.
Consideration
Consideration paid at completion was £13,047,450 in cash and 2.83 million new RPS shares valued at £5,018,250. On the first anniversary of the transaction, assuming certain operational conditions are met, a further £3,264,600 will be paid in cash and 0.99 million shares, currently valued at £1,753,650, issued to the vendors. On the second anniversary a further £2,460,950 will be paid in cash and 0.87 million shares, currently valued at £1,553,650, issued to vendors. Total consideration, assuming no share price movement, is £27,098,550. The number of shares to be issued has been calculated by reference to the RPS share price when the terms of the transaction were agreed in July 2005, indexed against the performance of the FTSE Support Service Index until the end of trading on 8 September, giving rise to an issue price of 177.6 pence.
RPS Energy
In September 2003 RPS made a significant move into the energy sector with the acquisition of Hydrosearch Associates Ltd (“HAL”) which had, as its core business, the provision of geological advice to the oil and gas sector but which had added environmental advice to its range of services for that sector and had begun to pioneer work in the offshore wind energy market.
RPS developed its energy business around HAL during 2004 by making 3 further acquisitions: Troy-Ikoda Ltd (March); Bowman Bishaw Gorham Pty Ltd (April) and Cambrian Consultants Ltd (July). In addition the onshore wind energy business, already developing in RPS, has been moved into RPS Energy, along with our nuclear safety activities.
This rapid progress positions RPS as a leading participant in the global energy consultancy sector. This has occurred at a time when market circumstances in this sector have become significantly more favourable as a result of the rising oil price and the continuing debate about global warming, both of which have brought back onto the political agenda the possibility of constructing new nuclear power stations in the UK.
This strengthened position of our energy business has created other opportunities. The acquisition of ECL is another strategic step in the development of this business.
Brook Land, RPS Chairman, said:
“Our strategic move into the energy sector has proved to be timely and successful. That success has, in significant part, been due to the quality of the Hydrosearch business, its management and skilled staff. The acquisitions of Troy Ikoda, BBG and Cambrian during 2004 brought into RPS additional teams of highly skilled and motivated people. With these skills and against a background of a rapidly increasing oil price RPS Energy has been able to develop encouragingly. The acquisition now of ECL provides not only a major increase in our size and product range, but also positions us as a clear market leader in this global industry. We anticipate this business will be a significant engine for growth in the coming years.“
15th September 2005
ENQUIRIES
RPS Group Plc
Dr Alan Hearne, Chief Executive
Gary Young, Finance Director
Tel: 01235 863206
College Hill
Matthew Smallwood
Justine Warren
Tel: 020 7457 2020