Bringing a stable of international brands under one roof has made Woodhouse International a crucial partner for the region’s oilfield service providers and operators alike. Woodhouse International owner and managing director Tim Percy talks to Oil & Gas Middle East.
Finely tuning stock and yet remaining nimble enough to respond to orders, both on and offshore in a timely fashion, is the name of the game for oilfield service providers. Reputations can soar or crumble based on performance, cost and execution.
As most project mangers and drilling engineers will know, in an age when accountants often have the final word, it’s a fine line between on the one hand, being prepared, and on the other, sitting by a warehouse full of expensive equipment, or capital being tied to orders placed speculatively.
This conundrum is managed, and the inherent risks involved in inventory management mitigated, by companies such as Woodhouse International. Operationally set up in Dubai in 1985, (although its origin was in London), the company’s strict focus was, and remains buying, inventorying and selling oilfield drilling equipment, explains managing director Tim Percy.
“We are the major stockist, distributor, and Middle East representative for various prime manufacturers. We have been able to use Dubai as a springboard to develop sales in neighbouring areas, and through the support of our principals have added an important support component to the Middle East’s drilling capabilities,” says Percy.
Inventory management is a massive issue for Middle Eastern service companies, and striking the balance between having the means to deliver, and maintaining a healthy cash flow is one of the primary challenges, and biggest operational risks, companies big or small face.
“Buying equipment is an expensive business, and service companies aren’t going to buy something unless they can be sure that outlay will be covered by upcoming work. This means that buying drill pipe or fishing tools, for example, is only done once a company a secured a contract,” he says.
“Often enough, when that contract is signed there will be a very short lead time between when you have to commence work, so to go back to a pipe mill in Germany or a vendor in Houston and order afresh takes a long time – and that lag could be the difference between successfully carrying out a contract and missing deadlines.”
When business is up, lead times for drilling equipment, particularly pipe, can be long. Accurately forecasting what the market will need and when is what makes Woodhouse the invaluable partner to regional firms it has become. It is also what makes the symbiotic relationship between the company and its principals so strong.
“The relationships we have with the principals have been almost as if we are their Middle East office in many ways. We are able to furnish them with equipment from stock at the right price,” explains Percy.
The price is an important factor which has separated Woodhouse International from many of its competitors. When a rig is down an operator can be facing daily losses upwards of tens, sometimes hundreds, of thousands of dollars each day. This puts the supplier holding the stock they need to get going again in an extremely strong bargaining position.
“Certainly there have been suppliers which have exploited this situation, but milking an opportunity is not what we have ever been about. That tends to tarnish a relationship, and once you lose that trust, as a supplier you won’t be the first person that operator rings next time,” explains Percy.
“We have always maintained fair prices, and that has built a huge amount of return business for us. We’re here to stay and we rely on the relationships with our principals.”
The company has recently cemented its future, investing in a brand new facility in Dubai’s Jebel Ali Free Zone. The company also operates representative offices in Baghdad, Iraq, and in Tripoli, Libya.
“In August we moved into to our brand new purpose built facility in Jebel Ali. This comprises 2,000 square metres rime warehouse and 1,200 square metres of first class office space. These headquarters are staffed by 40 people, and are managed by expatriate personnel with significant experience in all aspects of drilling equipment sales, purchasing, warehousing and business development.”
Market Watch
When the oil price tumbled in the wake of the financial crisis, many suppliers and operators were saddled with equipment and inventory which could not find work. Drilling activity dropped off across the Middle East, and the operators which did push on were able to demand hugely reduced prices for equipment and services.
For high-end equipment stockists the period could have been calamitous, and indeed many did suffer. However, Percy says the Woodhouse approach during the preceding boom was cautious, and his strategy paid off.
“Certainly there is still a lot of inventory about in the market, but prices are coming back to normality, but slowly. When times are lean there is a surplus of equipment and costs and rates tumble, and of course vice-versa,” he says.
The single most expensive item on a drilling rig is the drillstring. Stockists expecting an ever increasing demand curve were having to place orders facing a lead time of up to one year. Drill pipe was also priced at top-dollar, as raw material and manufacturing costs has soared to an absolute premium.
“When prices were spiralling ordering stock was an enormous risk, sometimes thirteen months or more, and who knows where the market will be that far ahead? We decided, quite fortuitously, that enough was enough, and we weren’t willing to commit that far ahead continuously, so when the crisis hit, we had in fact run down our inventory quite satisfactorily,” says Percy.
Brand House
Securing the right partners to meet the needs of the regional industry is an ongoing, but exciting challenge says Percy.
“Over the years we have had to reinvent ourselves so many times because merger and acquisition activity. Over the years many companies trading under our banner in the Middle East have been absorbed into our competitors, so we have had to keep nimble and ensure we replace brands we no longer represent with suppliers as good or better,” he says.
“Ultimately what stands us in strong stead is the quality of the brands behind us and our reputation in the market, essentially the equipment we keep and maintain. Despite market activity and the movement of some brands from our umbrella, that is something we have managed that very well,” he concludes.
