The weakening mining services industry has led engineering operation Ausenco to buy a Canadian oil sands firm.
The company signed the deal yesterday, under which Ausenco will pay $15.2 million for privately owned Projex Technologies.
That amount is 2.9 times more than Projex’s forecast raw earnings of $5.2 million for 2014. Ausenco’s raw earnings in 2012 were $59.6 million.
Projex’s services include engineering and construction management to Canada’s expanding oil sector, which looks into petroleum deposits in sand.
Ausenco chief executive Zimi Meka explained the ‘global energy market is significantly larger than the global minerals and metals market’.
“Diversification’s a key part of our strategy,” he told the Courier Mail.
The mining boom significantly benefited Ausenco, with around 60 per cent of its revenue generated from minerals and metals in 2012. Energy delivered only 2 per cent.
The company was recently awarded a three year contract to manage projects at Newcrest's Lihir mine.
But as investment flattened this year, Ausenco was affected, with lower margins and share prices slashing in half.
Its stock closed at $1.845 yesterday, up 2.5c.
The deal opens Brisbane-based Ausenco’s doors to North America’s energy market, which according to one expert has huge amounts of reservoirs and proficient practices but is dominated by oil.
Meka said combining with Projex might be a challenge but added Ausenco had effectively done integrations like this before.
Ausenco acquired oil sands specialist Reaction Consulting last year.
Projex’s website said local ownership is a draw card, saying local owners in the office made them ‘nimble and responsive to client needs’ with a hierarchy ‘flatter than your monitor screen’.
But Meka said this would continue at Projex, but it now has global support, as clients desired.
One challenge for the industry is making sands resource production economical.
Oil and gas expert at consultants Deloitte Geoffrey Cann said North America is abundant in huge long-term energy resources such as shale oil and the oil sands.
He said oil sands could last for hundreds of years.
But the sector is overflowing with production.
Cann said Australian companies should take advantage of overseas knowledge in energy projects.
He said North American companies were usually ‘dramatically more efficient’ in comparable extraction methods and management than Australian companies.
Wayne Goss recently resigned from his post as Ausenco chairman earlier this year. George Lloyd took his place.