Red Spider Technology of Aberdeen has received a £5million cash injection from Simmons Parallel Energy and Energy Ventures to “properly fund and internationalise the business”.
MD Steve Nicol said the days of largely self-funding growth out of cash flow were over; it was time to take the Aberdeen company to the next level, and the money, coupled with the expertise that will come with, is expected to achieve exactly that.
While the deal means surrendering a sizeable slice of the business to the private-equity duo, Nicol told Energy that accelerating Red Spider’s growth and international spread would more than make up for the dilution of ownership and was the responsible thing to do for everyone in the business.
It means new jobs – initially perhaps another five to 10 being taken on this year while preparations are made for a growth spurt starting in 2011.
The company currently employs 50 people and turned over £5.7million in 2008. This year, the target is £6.3million.
Nicol: “We’re trying to have a year of very little growth to finish the technology developments that we’re working on … an extension of our e-RED (Electronic Remote Equalising Device) open-and-close technology, which has been very successful since its introduction to the market.
“We need a few months to finish the products that go with and properly commercialise, then internationalise them.
“We see this year as a time for building the infrastructure that will allow growth to happen from 2011. If we don’t put down roots in Houston, in Australia, in Kuala Lumpur and strengthen the Middle East and Norway, then when we put the foot down on the accelerator, nothing will happen. That’s why we’re investing this way … now. I think we have the technologies. Now we have the money to get us there … the future is very exciting.”
Nicol said Red Spider’s technology portfolio needed tightening – shifting towards a more focused offering rather than “many different things for many companies”.
Basically, for the foreseeable future, the heart of the business will be eRED, which is a downhole computer-controlled valve that can be opened and closed by remote control without the need for any intervention.
Nicol added: “The UK side of the business is progressing nicely; Norway is a bit static; the Middle East part of the business needs some changes so we can get the best out of that region, and we need to develop Houston into a real base. We have a phone line there, but we need to get people on the ground in order to build credibility and orders.”
Frank Summers said the reason why Simmons was attracted to Red Spider was the quality of the management team, coupled with the company’s track record, technical expertise and products.
He indicated that the P/E duo had taken a majority position in Red Spider, though did not disclose their percentage holdings.
“The business will be run equally between the existing owners (management) and the new investors. Mike Salter will continue as chairman,” said Summers.
Greg Herrera, of Energy Ventures, said: “This is a very interesting space to invest in … a space where Energy Ventures has historically done very well. What Red Spider seems to have done is identify a niche technology which we think is capable of exceptional growth.
“We think, with the investment we’re putting in, together with a tightening of the strategy over the next couple of years, that this business should be positioned for very significant growth and catapulted out of the well-intervention market into becoming one of the firm players in the completions and well-construction markets. Anywhere where people are applying high dayrate rigs, this technology can provide considerably more flexibility, considerably less risk and less cost. I think this will be very attractive globally. That’s what sold us … the considerable value proposition of the technologies.”
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