From Officer to Commander
Robin Watson is the Chief Executive Officer of Wood plc, Scotland's leading engineering business, with a global footprint in 60 countries.
Taken from Panmure Perspectives Issue 4: He speaks to Kenny Kemp about his unusual path to the top via the Merchant Navy – and his time at Heriot-Watt University.
It is a dreich and blowy afternoon in early April when I step into a modern office complex in Justice Mill Lane, off Union Street in Aberdeen. In the spacious executive suite up on the second floor, there
It is a warm welcome from Robin Watson, an experienced executive of slender build in a neat lounge suit, who exudes a sense of friendly calm.
Watson is down-to-earth, fiercely smart and proudly Scottish. An honours graduate from Heriot-Watt University, he is at the helm of Wood plc, Scotland’s leading engineering company. Wood plc may be unknown to many Scots, yet it is one of the nation’s hidden industrial gems. On 6 October 2017, this dynamic company undertook a game-changing deal when it snapped up Anglo-American business Amec Foster Wheeler (AFW) for £2.2 billion. That deal has been ‘transformational’ for the company and its leadership team, led by Watson and chaired by Ian Marchant, the former head of Scottish & Southern Energy (SSE). Now, 18 months on, Wood plc has completed the integration of AFW, giving the company revenues of $11 billion, and earnings of $630 million.
Although Wood has its headquarters in Aberdeen’s Justice Mill Lane, it operates in over 60 countries around the globe, ranging from the Middle East to South America, Australia, Mauritania and Papua New Guinea. The company also has a significant presence in the US where the majority of revenue stems from. It was Sir Ian Wood, a psychologist rather than a trained engineer, who transformed the former fishing trawler repairer into an international engineering support business.
Speaking as he delivered his company’s results in March 2019, Robin Watson said: “Wood delivered good organic growth in 2018. We completed the integration of AFW at pace, increased cost synergy targets by 24% and found new opportunities across our broader range of capabilities and sectors to secure revenue synergies of over $600 million. We have built a unique platform and are in the early stages of what we can achieve. Our performance has strengthened our conviction in Wood’s potential, and we are excited about our prospects. We are confident of achieving further growth in 2019.”
The AFW deal means that Wood Group’s 29,000 people were joined by 35,000 from Amec Foster Wheeler. In March 2019, the average number of employees was almost 60,000, with circa 13,500 in the UK, 19,000 in the US, and over 25,000 in the rest of the world. So how did this Heriot-Watt engineering graduate end up leading this international organisation? He is clear that being a Scottish trained engineer who spent several years at sea in the Merchant Navy as an engineering officer gave him the grounding to succeed.
“Even today, a Scottish-trained engineer still has a great reputation around the world. We have some significant home-grown capability. In oil and gas, I worked on the Berylfield with some young engineers when we were all in our twenties. Many of them have moved on to positions of influence,’’ he says, sitting at a table in his tidy office.
The Beryl field, which is situated over 330 km off Aberdeen, was discovered in 1972 and named after Beryl Solomon, the wife of Mobil Europe’s then president. It was a massive discovery with 28 oil and three gas wells, producing nearly two billion barrels of oil. Production began from Beryl Alpha in 1976 and from Bravo in 1984.
Watson said that two of the top four people in ExxonMobil Liam Mallon (president of ExxonMobil Development Company) and Neil Duffin (president of ExxonMobil Global Projects), worked on Mobil’s Beryl field, and both are Heriot-Watt graduates. Watson himself became the Offshore Installation Manager (OIM) on the Beryl Alpha in his late 20s. “I worked offshore with these guys on the Beryl field. The stuff that we did was so pioneering and I feel people have forgotten that. The influence of the Scottish oil industry and unlocking offshore hydrocarbon reserves cannot be understated,’’ he says.
“Deepwater Gulf of Mexico happened on the back of what we did in the North Sea between the 1970s and the 1990s. If you look at deepwater engineering now, it would never have been envisaged if it wasn’t for offshore. There is something about having the blessing of hydrocarbon reserves to the tune of 40 billion barrels. That was a big asset for Britain. However, one of the other things was unlocking this asset and I think the ingenuity we developed, supplemented by some of the ideas brought in from the United States, very quickly made us world leaders in the industry.’’ He says the complexity of the technology in the North Sea was far superior to the nodding donkeys of the land-based Texas and Louisiana oilfields.
“Before we get too congratulatory, this transition was marked by the terrible Piper Alpha disaster (the production platform exploded and killed 167 people in July 1988), which became a landmark for the North Sea. Lord Cullen’s report was a studious piece of analysis with a set of very structured recommendations which have transformed operations and health and safety regulation. This became the template for good corporate practice across the global oil and gas industry,’’ he points out.
Scots, on the whole, are pretty hard-working and Calvinistic in approach, says Watson. “We’re modest, head-down types but we are also innovative. When I look at everything that Sir Ian Wood achieved, he is an inspirational figure for me and a really good role model for all of us.’’
“Personally, I travelled the world at sea when I was in my teens but to take the business to where it is now, it has been from the great vantage point which Sir Ian created for all of us.’’ He recalls the bleak days after the de-industrialisation instigated by Margaret Thatcher, when engineering in Scotland was in the doldrums. “I pinch myself to think that 35 years later, I’m in a company that does this much engineering, is Scottish, headquartered in Scotland, and is the largest integrated engineering company in the UK, doing pioneering engineering work around the globe. It’s wonderful and in many respects, it is in spite of the challenges and the political rhetoric of that time.’’
When the company moved into shale gas in America, it quickly learned more about this booming sector and broadened the company’s operational footprint in an innovative and emerging environment. “We went on a journey and we’ve grown that business. We are quite thoughtful and we’re not complacent. We don’t assume anything; I think that’s this rigid Scottish upbringing again.’’
His Path To The Top
Robin Watson was not born into any industrial dynasty. Indeed, he has rather humble origins, with hard work as his hallmark. He was born in Campbeltown on the Mull of Kintyre and was the youngest of three children. The family home was a two-bedroom top floor flat in a 1950s block and his dad was a joiner who was able to convert the roof space into a play area.
“It was a fairly modest upbringing. I went to the local Dalintober primary school at four and a half, then to Campbeltown Grammar School, which sounds very grand but it was the only senior school in the town.’’
“My uncle John was a captain on the Western Ferries’ ships Sound of Jura, Sound of Islay and the Highland Seabird and, like many young men living on the coast, I had a massive fascination for ships. “Despite getting enough qualifications at school to go to university, I was determined to join the Merchant Navy.’’ Watson left home at 17 after doing his Highers in 1984. He joined the Edinburgh shipping company Ben Line, then with a fleet of ships that were taking cargo around the world. The head office, now a Travelodge, was in St Mary’s Street and the ships sailed mainly from Southampton, around the European coast and across the Indian Ocean to the Far East. He began an engineering officer cadetship which entailed attending the Glasgow Nautical College for two years, followed by a year at sea, before a final year at the college.
“I loved my time at the nautical college and I loved my time at sea. It was quite formal and we wore our blazer and flannels. The college was well run and had great facilities. We had many interesting projects, like stripping down a ship’s steering gear and then putting it back together again. We designed, fabricated and commissioned a closed-loop water pumping system and a refrigeration system.’’
“Then I did a year at sea. By the time I was 19, I had been around Europe and off to the Far East, through the Suez Canal. It was a really good experience going to countries like Japan, Hong Kong, and Singapore. Seeing the world and learning much about marine engineering in the process.” In the mid-1980s, the Ben Line fleet was a modern fleet of 60,000-tonne, 300-metre twin-screw container ships such as the City of Edinburgh, the Benavon and the Benalder.
“There were fitters on the ships as well. Sometimes there was a bit of work on the lathes to fix a valve or undertake some other machining activity. I’ve always been quite good at organising things. I remember being in the middle of the Indian Ocean, and when ships break down there, you don’t just sit on your hands and wait for help to arrive. There was something very practical; if you had a problem with one of the main cylinders in the engine, you would take two cylinders out to balance it up, so at least you could hobble into port.’’
During his four years in the Merchant Navy he was given a lot of responsibility at an early age and, with superior grades from his Higher National Diploma (HND), Robin gained access to the third year of a four-year honours degree in Offshore Mechanical Engineering at Heriot-Watt University.
“At sea, you kind of grow up quickly. I’ve been self-sufficient since I was 17 and during the summer holidays, I went back to sea to fund myself to go to university. I joined an ore ship in Japan and sailed to Australia and crossed the equator for the first time on that journey. The following summer I went from Southampton to Canada with a couple of trips across the Atlantic.’’
Another key skill that Robin Watson developed at sea was the ability to handle different types of people in different situations. “You were at sea with folk whose average age was 40. They were all mischievous, shipyard types and there was madness all around you. I was brought up to try and engage with people and get along with them. At long stretches at sea, it kills the time better when you have something in common and enjoy working and socialising together.’’
After leaving Heriot-Watt University and with an interesting CV, he landed a job with Mobil North Sea as a graduate engineer. He moved to Aberdeen and began life as a petroleum engineer, rotated around all the different parts of the business, and got his first experience offshore.
“I took ten days off after finishing university and then started work in Aberdeen. The Mobil Graduate scheme was a really good programme which allowed me to learn, especially about engineers working in the office rather than in the field".
He lived in a rented company flat in Holburn Street, Aberdeen. “I was desperate to get offshore and back into the industrial environment. My ambition was to become an offshore platform manager. There was a technical and a managerial ladder, and at that point you didn’t have to commit to either of them,’’ he recalls.
He went out onto drilling rigs and experienced ‘spudding in’: when the rig comes over virgin seabed, the anchors go down, and the drilling begins. With some irony, it was on a drilling rig owned by Ben Line, which was by then moving from container ships into oil industry jack-up, drill-ships, and semi-submersibles.
The Oil Industry Beckons
Robin Watson spent a decade with ExxonMobil from 1990 to 2000. Meanwhile, he undertook a distance-learning MBA at the University of Strathclyde in Glasgow. “I thoroughly enjoyed doing this and it broadened my learning beyond the sphere of oil and gas and helped me with other corporate skills. It was so enriching.’’
During this time, he rubbed shoulders with people from the Forestry Commission, the Scottish Prison Service and other institutions which gave a different level of insight. He finished his degree just in time to get married to Lorraine.
“During that period, I became a platform manager, which had been my ambition. As I worked my way up I thought it would be great to be an OIM (Offshore Installation Manager). I was doing this by the time I was 30 on the Beryl Alpha. It was a big platform (500 000 tones) with 170 people on board, producing 110,000 barrels of oil and 200 million standard cubic ft of gas a day.’’
He came back onshore, started a family with Lorraine and began to consider his next career step. “I really like working with people and taking on new challenges. I like developing a strategy and then delivering against that.’’ When Exxon acquired Mobil in 2001, Watson joined PGS Production Services as an operations manager, which was then acquired by Petrofac and subsequently floated in an IPO on the stock market in 2005. The operations environment was changing as the big oil companies began sub-contracting to the emerging integrated service companies under the term ‘duty holders’.
The proposition was that the service company could manage the entire facility, lock, stock and barrel, which even included tax and oil accountancy, and everything else. There was a range of BRINDEX members who bought assets.’’ There were new exploration and production entrants coming in with a range of deals, which gave Watson the ability to grow the services company from a £10 million to a £500 million business by 2005.
“That was phenomenal growth and a new model. You get a real buzz out of that kind of strategy and action,’’ he says.
After undertaking a number of senior roles including in the investment division of Petrofac, where he looked after global assets, it was a case of ‘what’s next?’ The Wood Group, which has been listed on the stock market since 2002, beckoned. “In 2009, I started speaking to Sir Ian and Allister (Langlands, who was chief executive), who felt there was work to be done to move the company forward. I joined in 2010 and we acquired PSN that same year.’’
When Sir Ian retired, Allister took over as chairman and Bob Keiller (head of PSN and then chairman of Scottish Enterprise, and another Heriot-Watt graduate) became Wood Group chief executive.
“I took over from Bob in a restructured PSN division in 2012 and we grew this pretty rapidly,’’ he said. Robin Watson joined the main board in 2013 and very quickly Sir Ian, Allister Langlands and Bob Keiller moved on to allow the new team to take the business to the next level. It was all change at the helm, with Watson charting his own course, and choosing not to proceed with oil sands in western Canada, looking instead at the opportunities in the shale gas industry in the US.
“I’m fairly clear about things. I was keen to enter shale and this has become the engine of Wood Group growth from 2013 to 2015. PSN grew 25% per annum in that period, and we had established a $1 billion business from scratch – in what was a hugely exciting time for us ’’ he said. Shale gas extraction, which involves the pumping of hundreds of thousands of gallons of high-pressure water into the rock formation, is highly controversial. Watson emphasises that the US and the UK are two different markets. “It’s a tricky one, there is always a balance. The question is: have you got natural resources that can be put to good use for your country, either your GDP, with trading or with primary energy use, and balance that with what it means environmentally and logistically? And it is always essential that we apply the appropriate science in our thinking as to opportunity and applicability,’’ he said.
When Robin Watson became Chief Operating Officer, business life at Wood Group was turbulent. He reset the strategy around transforming the business as the company entered a cyclical downturn when capital expenditure dropped off a cliff, along with the oil price. “This was a significant headwind for us when the price of oil dropped dramatically from $130 to $30 in 2015 and into 2016. We had to reduce our headcount by a third during the worst of it. But we drove this quite quickly to survive. We are an asset light business, which is good because owning drilling rigs and exploration equipment is a drain on capital. It also allowed us to act swiftly to address the new operating environment.”
It was a tremendously harsh time with a staggering $65 billion of bankruptcies among oil field services companies’ assets around the world, and the loss of 500,000 jobs, with over 100,000 of them in the UK alone. Since 2002, Wood Group has completed 60 acquisitions but the AFW deal in 2017 was the largest by far. “We have a good functional team to contemplate an acquisition of this scale, from myself to our Executive leadership, the lawyers, tax experts, accountants and operational leaders; many with experience working on mergers and acquisitions. We do know how to foster a good culture in the business, with the bedrock set by Sir Ian, where there was much activity around acquisitive growth.’’
The company did its detailed analysis on AFW and found that it was a very good strategic fit and would help to accelerate growth. “We determined that Amec Foster Wheeler really accelerated the delivery of our strategy more quickly in one single deal. A class 1 transaction is not without its risks. In acquiring AFW we took on a very large downstream business plus a big E&I (engineering and infrastructure) business, an EPC (engineering, procurement and construction) project capability and a process technology business. We paid a premium of 15% on the share price (around £2.2 billion) but adding it all up, it was well worth it. Much of the Foster Wheeler operational delivery and expertise in refining, petrochemicals and crude oil is world leading,’’ he says.
Meanwhile Amec have a large presence in the smart city infrastructure of the built environment in terms of water treatment systems, architectural engineering and transportation systems, in the US and Canada. There is also a mining projects consultancy and projects business working on gold, lithium, copper and cobalt, all necessary metals for the next generation of battery technology which will be key to the growth of electric vehicles.
“The industrial logic is compelling. It broadens our footprint and reduces our volatility. We think it is a good operational business that needed stronger leadership.’’ Robin Watson says he was very pleased with the integration and how the cultures of Amec Foster Wheeler and Wood plc have come together. Perhaps it’s just the straight-talking Scotsman, who tells it like it is, without hype and with a clear grasp of the existing facts. There is still plenty more for Watson and his team at Wood plc to do. You can’t help basking in a radiant glow from this Scottish business as you step back out into the Aberdeen chill.