Amec raises £90m for oil and gas expansion

Amec, the international engineering and project management group, sprang a surprise £90m share issue yesterday to fund an expansion of its oil and gas division and increase its activities under the Public Private Partnership.

The placing of 30.1 million new shares at 300p, representing a 9.99 per cent capital increase, was twice subscribed. Amec shares closed 7.5p lower at 306p.

The money will be used partly to finance the £20m acquisition of the Houston-based oil and gas engineering services company, Paragon Engineering Services.

Amec is also committing a further £40m in equity to a series of PPP projects it recently won. These include a £200m contract to extend the Docklands Light Railway through to Woolwich Arsenal in south-east London and a hospital contract in Colchester. Amec has also won the £1bn- plus Incheon Bridge project in Korea which will involve an equity investment on its part of £19m.

A further £23m has been earmarked for urban regeneration schemes in the UK, while £15m will be spent on a series of small European transactions.

Sir Peter Mason, Amec's chief executive, said that the Paragon deal in Houston would provide it with a major presence in what was the decision-making centre for many of the world's big oil and gas companies.

Paragon has 500 employees and carries out most of its work from its Houston base. It made pre-tax profits of $4.3m (£2.3m) on sales of $58m in 2003.

Oil and gas now accounts for one-third of Amec's £5bn-a-year turnover as it has progressively moved out of traditional construction activities and housebuilding. In the last four years Amec has spent a net £150m on acquisitions as the group has reshaped itself around three core businesses.

The share placing was carried out by UBS and Dresdner Kleinwort Wasserstein at a 4 per cent discount to Amec's opening share price yesterday of 313.5p. Sir Peter said the company had received a strong level of support from investors.