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Craig Group secures £20m Shell North Sea contract

THE HERALD (SCOTLAND): Craig Group secures £20m Shell North Sea contract

MARK WILLIAMSON May 23 2005

CRAIG Group has won a contract to supply Shell installations in the North Sea that could be worth as much as £20m as the oil and gas services firm continues to benefit from strong activity levels in its backyard.

Aberdeen-headquartered Craig’s International Supplies subsidiary has been appointed to supply all the oil giant’s rigs in the North Sea and some onshore plants, including the St Fergus terminal, with oilfield consumables like drilling accessories for five years.

Worth between £2m and £3m annually, the deal comes with the possibility that it might be extended leaving Craig with a stable source of long-term income for its supplies operation.

This has grown turnover from £5m in 1998 to nearly £18m, around 65% of which comes from exports. The directors hope that winning work from Shell in the North Sea might lead to contracts in other parts of the giant’s international empire, such as West Africa where CIS has bases.

Meantimes the award provides evidence of good conditions for services companies in the North Sea, where majors and independents have been stepping up activity in response to soaring oil prices.

Craig Group grew pre-tax profits 20% to £1.7m last year, amid what managing director Douglas Craig described as a “strong recovery” in its domestic market and further growth in exports.

Highlighting that North Sea rig utilisation rates were running at a record 85% in March, Craig said then that he expected the upturn to continue following a sharp fall in earnings in 2003.

The group, which employs 1350 across nine divisions, saw operating profits rise to £3.2m in the year to April 2004, up from £1.2m. By contrast, smaller oil and gas companies listed on the Stock Exchange could find their share prices coming under pressure after First Calgary failed to find a buyer ready to match directors’ price expectations.

The Canadian oil and gas company’s market valuation topped £1.9bn last year after successes with the drill bit in Algeria but has slipped to below £1bn.

It is reported to be in talks that would see Repsol of Spain take a stake in an Algerian gas find.

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