“We’re three years into the Acteon phase of Seatronics; three pretty exciting and very different years,” says David Currie.
“We’re doing well at most of our locations with the exception of the US, which was slow to start this year (even before Deepwater Horizon) because of a decline in shallow water oil and gas activity.
“But then Deepwater Horizon came along, companies put a stop to a lot of things … a very abrupt stop.
“I think a part of that was that a number of vessels were seconded into the Macondo operation and so a lot of other work and projects were put on hold and have not yet recovered.”
Currie, who is group MD at Seatronics, used to joke about driving down Highway 90, which is the main route between Interstate 10 highway and down past all the service bases in Louisiana.
“They used to have these big, big billboards saying ‘we’re hiring’. It was like that through 2006-7-8. But with the Macondo affair, just change the H to an F and that would be the billboards this year.
“That’s exactly the way it is now. They’ve been firing, laying off a lot of people … a lot of it as result of the drilling moratorium (which has only recently been relaxed).
“Rigs were stood down, crews too, and the hire and fire nature of the business in the US has seen people being laid off and unemployment escalate in that area.”
However, according to Currie, the rest of the business for Seatronics is going satisfactorily.
“We’ve picked up quite a lot of work in West Africa and that’s going to be a bonus this winter,” he says.
Like everyone else in the oil and gas supply chain, Currie plans for stability but that isn’t the normal state as the business stage is constantly being rearranged.
For example, the four or five years prior to 2009-10 had seen the development of a year-round market, but then it suddenly reverted to a more traditional pattern for Seatronics when Currie and his team saw a big dip in the rentals market.
“I don’t think we’re going to see the same dip for 2010 into 2011 because of the West Africa work.
“For the first eight months of the year, we were pretty much on budget; which I think is an achievement in itself as it’s been a very difficult year.
“2010 is expected to come in at about £28million for the year. We’ve worked very hard to try to achieve a reasonable margin. However, this year’s background has been one of falling prices and price competition.
“Go back just a year or two and, since then, there’s been a big change in the subsea electronics rental part of the market. For a start, we’ve seen three of the bigger players being bought over by private equity/venture capital concerns. Our numbers one and two competitors are Ashtead and DPS.”
DPS is now owned by Triton, which is in turn owned by SCF Finance, which has recently bought a number of subsea companies in Aberdeen, including Nautronix, Visual Soft and Sub-Atlantic.
Seatronics has faced and overcome significant pricing competition with the above and others trying to grab market share and, on occasion, Currie has been forced to price match.
One result is that, while Seatronics has broadly level-pegged on 2009 in terms of revenues, utilisation of its stable of equipment has increased. However, Currie says that, besides the bread-and-butter commodity type rentals where everything comes down to price, the firm has a sizeable portfolio of specialist services where margins can be protected.
“We don’t just want to be a box shifter,” says Currie. “We make real input to our clients. For example, we’re one of the few rental companies with calibration bases around the world … Aberdeen, Houston and Singapore … and that gives us an advantage.”
Almost 30 years have flown by since Currie arrived in Aberdeen in 1982.
He had three interviews on his very first day in the city. Surprisingly, one was in the office he occupies today. He took the job, becoming an offshore engineer with Oceonics.
“I sold my soul for a new car. It wasn’t even a great car; a 1.7 Morris Ital. I worked mainly offshore and overseas including the Middle and Far East.
“After four years I joined Instrument Rentals; had a short spell for a year, then I freelanced for a year; then went back to Instrument Rentals, worked for two years and then we did a management buyout with Neil Smith, who was MD at the time.
“When we started off we were invested in by 3i in return for a 30% interest in the business; then we had two silent partners who also had stakes. In 1997-98 we bought out all the partners, kept the business for another year and a half and then sold to the Craig Group in 1999 for just short of £4million.
“The whole idea of going into the Craig Group was to try and diversify the IR (instrument rental) business overseas.
“The plan was, with Craig backing, we would buy businesses overseas. We tried for a company in Singapore and the Middle East, but that didn’t come off.
“We went and looked at another company called Seatronics, which had offices in Aberdeen, Abu Dhabi and Houston. Craig bought Seatronics and combined them with our business. We then bought the one-man band Aquatron in Singapore.
“Over the next four or five years to about 2006 we grew the business, moved into bigger premises in all locations and the lucky thing for Craig after the initial injection of cash is that they could almost step away from it because it became self-funding.”
In 2007 Craig sold the business to Acteon, the main reason being a difference of opinion over where future growth was going to come from in subsea electronics, plus Craig was under pressure because of a number of new ships on order in Spain.
It was ships or subsea electronics, so Currie went to find suitable partners to work with and Acteon came into the frame.
He kept a stake in the company (Smith had departed some years earlier) through both sales, selling half his holding to Craig and later selling half the balance to Acteon, giving him 25% ownership of the business as stands today.
“Acteon paid £76million for the business. At the time it was a good deal for both parties. Craig got an excellent return on their initial investment and they were happy with the money they got.
“I believe Acteon got a sensible, fair price for the business as they got growth on top of that for the next year and a half. They completed the deal in July 2007.
“We delivered all the numbers we said we would at the end of September 2007, we delivered what we said we would for 2008 and it was at the end of that year that we started to see things going a little bit backwards.”
That was because the markets served by Seatronics were hit by the credit crunch and associated oil price yo-yo.
“It is important to understand that we are not a primary contractor; we’re not even a sub-contractor; we’re a sub-sub contractor and a lot of what we do is as a top-up business,” says Currie.
“Customers of ours had spent a lot of money and built up asset pools over the 2006-08 period and are sitting with shelves full of equipment. Where we still win is with the specialist equipment … high value items that they require the use of but are not going to invest a lot of money in.
“They would rather come to rental companies like ourselves for equipment like multi-beam sonars, inertial navigations systems and new generations of technologies that operators may want them to use.
“It is important to realise that non oil and gas accounts for 30% of the Seatronics business … mostly commercial fishing-related; the rest is to do with renewables, ports and harbours and civils. This mix provides valuable protection from oil-related over-exposure.”
Looking ahead for the next two years, caution is the watchword for Currie.
“We’re talking about single figure growth – 6-8%. Until we see real pick-up on the subsea side of the oil and gas then it’s going to be modest. However, we’re still investing in new technologies, for example a new pipe tracker system that is smaller, more user-friendly and is able to track to greater depths than current systems.
“Last year we decided to further diversify our business. We’ve set up cable-moulding facilities in Singapore and the US. We’ve since taken up a distribution agreement with Cooper Industries who manufacture the industry-standard Burton subsea (power) connector. We’re now the distributor in the Gulf of Mexico and Southeast Asia for these.
“On the back of that we’re introducing cable moulding. Prior to that, you would go out and find connectors, then locate someone to mould them on to your cabling. We’re now supplying some of the cables, plus we’re doing the moulding.
“We see the ROV market expanding and with it a requirement for new instrumentation. So, for example, we’ve signed up representative agreements with Bowtech in Aberdeen (cameras and lights for ROVs).
“We’re also working on opening up bases in India and Brazil. These will be more than just a sales office, as they will also service equipment. We’re also looking at stocking equipment … at least in India.
“We have 110 or so people on staff of which around 60 are in Aberdeen. Typically we have around 10 people in each of our bases in Louisiana, Texas, Abu Dhabi and Singapore.”
While Currie is clearly successful, that optimism is tempered with caution. Nothing’s a given.
“We’re just not sure how the market’s going to play out, especially because of big mergers such as Acergy with Subsea 7. Will the subsea sector tend to move overseas … out of Aberdeen? Might we have to consider moving our HQ?”
But then Currie has ridden through 30 years of change and he is clearly in control of his game.