Hudson’s billion dollar vision – MIS has ambition

However, Kevin Hudson, the man at the helm of MIS as group managing director, is in good spirits – not only is the company hitting new highs in terms of the projects it is taking on and delivering, it is actually in great financial shape too.

“People, certainly in the oil and gas business, have a tendency to talk themselves into submission when times are tough. What I see at the moment is a great portfolio of newbuild rigs being delivered, a company first, and a market brimming with opportunity again,” he says confidently.

In the run up to the financial crisis and accompanying oil price nosedive, Hudson asserts that the company had put itself in an extremely strong position to not only weather the storm, but also to come out fighting when activity picked up.

Hudson joined MIS in early 2009, just as regional activity and upstream investment began to teeter on what many feared was an industry-wide precipice.

“In 2008 and early 2009 the company managed to create quite a broad backlog of work. That meant we actually spent most of last year executing those key projects. Overall, considering what was going on elsewhere in the industry and the economy we had a pretty strong year,” asserts the chief executive.

“We walked into 2009 with U$800 million worth of backlog orders and got busy with those. We posted record profits in 2009, and halved our debt position – so from a financial position it was actually a very good year.”

Hudson says the early signs are there that the industry has turned, or is turning a corner, in terms of upstream project investment. “Towards the end of last year we saw activity picking up. You get a fairly accurate feel for the industry and which direction its heading from the volume of enquiries coming in. People have been placing orders at an increased rate – particularly in this region.”

There is no question that for companies in the project EPC business, both onshore and offshore, margins across the board have been squeezed extremely tight. Hudson says that though material costs come down, they come down for everybody, so a level playing field has forced competition to address what margins are acceptable, without compromising on other core values.

“What firms can compete on is quality, reputation and price. With price in mind, it’s worth noting that the National Oil Companies here have been incredibly smart. They have definitely taken advantage of a down market to place large contracts at a discounted price. It’s been very good business for those Nationals which have maintained some forward momentum.”

Hudson says that upstream project managers actually represent a small community, in terms of clients. “Performance is very important. If you have a reputation for not performing it doesn’t matter how cheap your price is you will simply be written off as unreliable. Performance isn’t just tangible based on finishing on time and on budget, it’s also very much about client feel. It may have been a difficult job, so feeling that he got value for money is vital.”

Order book
In March, Hudson was able to announce a US$55.4 million contract with Abu Dhabi’s National Drilling Company (NDC) for the refurbishment of jack-up drilling rig NDC Al Bzoom. The contract, which is MIS’ highest contract to date in its refurbishment value stream, will cover the Rig Integrity Assurance Programme (RIAP) as its base scope for the modification and refurbishment work on the rig.

The signing ceremony attracted special attention as it was held under the patronage of His Excellency, Mr. Abdalla Nasser Al Suwaidi, chairman of NDC, and Abu Dhabi National Oil Company (ADNOC) deputy CEO and exploration & production director, with the contract being signed by Mr. Abdalla Saeed Al Suwaidi, NDC’s general manager.

The company had extra reason for good cheer when Al Suwaidi confirmed more work would be coming their way. “We enjoy a solid business association with MIS. This is not the first time that NDC contracts MIS for its specialised rig refurbishment works, nor will it be the last time,” said Mr. Abdalla Al Suwaidi at the signing ceremony. “We look forward to a continued strong relationship with MIS.”

Rig NDC Al Bzoom, which is a Baker Marine BMC- 150-IC design with a rated water depth capacity of 110 ft and drilling depth of 18,000 ft., will be used to drill oil wells in Abu Dhabi’s offshore fields upon completion. A month earlier, in February, the MIS-built KS Endeavor, a Friede & Goldman Super M2 design, is MIS’ and the third new build offshore jack up drilling rig from the Sharjah company was delivered, marking something of a milestone for Hudson.

“The experience we gained on Hulls 104 and 105 helped MIS in the final stages of the KS Endeavor’s progress, although we faced a few challenges during the process. We were particularly pleased with this achievement and the delivery of the rig on schedule,” he says.

Broad Base

Whilst the lion’s share of attention which MIS has drawn in 2009 and 2010 has been derived from its offshore, and notably jack-up business lines, Hudson is keen to assert that the company has much more to offer, and its broader project scope has been key to building the backlog of orders it has today.

“We span quite an arc throughout the upstream industry. We’re not solely dependent on jack-up rigs, and that is one of the company’s strengths which has seen us perform solidly. Our client base in international although we are MENA based. We get orders from EPC contractors, which, for example could be Petrofac, but it could equally be Technip which is based in France.”

Outside the jack-up business the company’s engineering strengths have enabled it to enter and execute markets across the Gulf, and EPC projects in the $50 million range are not unusual.

“In 2009 we completed a heavy fuel oil bunkering facility in Qatar. We’ve handled aviation fuel lines in Sharjah and various tank farm projects in the region, and even some desalination project work. Our EPC work spans a wide energy remit, and geographically straddles the whole MENA region,” asserts Hudson.

The company has traditionally been more involved in brownfield EPC work than region’s greenfield projects. “We will take on the full EPC risk, but because its brownfield it tends to be inside an existing facility, and covers conversion or additional work. Within the UAE, to date that has been dominated by the Northern Emirates rather than Abu Dhabi, but that is our next big push strategically.”

In Kuwait MIS has an operation which is focused principally on mud systems for land rigs, an area of the company which Hudson says has grown satisfactorily. “Our Kuwait business is part of a joint venture with the Burgan Company.” Burgan has a relationship spanning almost 40 years with KOC and its parent, Kuwait Petroleum Corporation, and Hudson says it is certainly a useful ally in the Northern Gulf.

New opportunities

The company already has a sour gas detection division, Sunbelt, operating in Erbil, Iraq, but Hudson hopes that the demand for land rigs and land rig services will soon pick up, and the scope of project work there is a tempting proposition.

“Iraq is certainly promising. I think drilling work in Iraq has to start fairly soon, but we just don’t know enough to talk specific timetables just yet. Sunbelt’s business tends to be a front runner with new areas for MIS and then we go in and build on the relationships they make, so you could say we have laid the ground work in Iraq.”

MIS does not yet engineer and furnish complete land rigs from new, but the prospect of a vibrant onshore market has pushed it onto the company’s agenda, reveals the CEO.

“For land rigs, what we have done to date is rehabilitate, refurbish and install new systems on existing rigs, but we are moving up that value chain right now. It’s not just Iraq, we see that Kuwait and Saudi Arabia both have a push on for land rigs, but of course Iraq will definitely will have a major drive, so the demand pipeline for land rigs in this region looks very healthy right now.”

“We have a facility in Saudi Arabia. It’s a joint venture company of which we hold 30% and that’s been up and running for around six years now and is doing very well. It just won the biggest ever pressure vessel order that’s been awarded in the Kingdom.”

New Horizons

Offshore EPC contractors across the world have been waking up to an alternate use of their talents in recent months. As global governments seek to reduce their reliance on carbon-based energy, offshore wind farm licenses have been popping up in littoral waters the world over. The latest round of concessions in Europe has prompted a spate of wind farm installation vessel contracts which are currently up for grabs.

“We are actively tendering for that wind farm installation work right now, and we expect that business stream to be cyclical in nature, largely based on the projected volume of work coming out of the European license rounds.”

Essentially the marine and jacking structures are very similar to traditional drilling rigs, but the installation equipment is very client dependent. “Increasingly we are seeing more complex installation equipment being proposed, but in many ways that is similar to the drilling packages on drilling rigs, because that configuration is totally client dependent too.”

Future scope

Hudson says he is proud of much that much has been achieved since he came on board in 2009. Whilst it is easy to look to the numbers, he stresses that one of the most successful initiatives introduced under his stewardship has actually been to drive through a rethink of HR and talent management.

“One of our values is people. Like ‘safety’ a lot of people say it but not a lot of people mean it. One of the things I am most proud of is building a capable and competent workforce so that we are not constantly going to the open market for our talent,” he says.

One of the tools created to this end has been a partnership with the American University of Sharjah. “With them we developed an executive development course. Our third batch of graduates has just completed the course, and it’s a great way to keep people developing.”

In addition to the development programme, Hudson has brought in a to boost productivity throughout the organisation.

“Every salaried individual within the company works with a scorecard target system which has been extremely interesting. This rewards performance and we actually paid out over $3 million in bonuses based on people hitting personal targets – that’s not for management – that’s for every individual in the organisation,” beams the CEO.

Looking ahead, Hudson says that although timeframes have shifted from when he first arrived, his ultimate goal has not changed. “MIS has the potential to be a billion dollar company by 2013 or 2014. We have built an expertise in newbuild and our reputation in terms of refurbishment work has grown over the course of the last 18 months.”

He says to that end the company is facing a massive opportunity in terms of regional activity expectations.

“It’s about timing. A lot of big jobs have been awarded on very tight budgets. There is still lots more work in the Middle East to come. Perhaps the pot isn’t as big, but I think there is a niche opportunity out there today because other yards will be busy with lower margin work accepted at the low point in the cycle.”

Now that oil has settled around the $80 mark, and OPEC predictions of demand increases are back on the table, MIS may indeed be well placed to step into the fray just as project prices begin their cyclical climb north again.

KS Endeavour – Feb delivery

Maritime Industrial Services delivered the jack-up rig “KS Endeavor” (Hull 107), from its client, KSAM2 Petrodrill Offshore within its scheduled contract delivery date in February 2010.

KSAM 2 Petrodrill Offshore is a joint venture company led by Singapore-based KS Energy Services Ltd., Saudi-based Amwal Al Khaleej and MIS.

The “KS Endeavor”, a Friede & Goldman Super M2 design, is MIS’ third new build offshore jack up drilling rig to be delivered and as such has benefited from the learning curve on the first two SeaWolf rigs. “The experience we gained on Hulls 104 and 105 helped MIS in the final stages of the KS Endeavor’s progress, although we faced a few challenges during the process. Today, we are pleased with this achievement and the delivery of the rig on schedule,” MIS group managing director Kevin Hudson said at the time.