Locke says the game plan isn’t a secret; returning to the market after three to five years, perhaps longer, is quite likely, but only after growing the business substantially.
“You can’t just buy a business and keep it as it is for two or three years and bring back the same company to the marketplace. We want to radically turbocharge this business. We would like to bring a company back to market that’s twice the size. That’s the logical way for an exit to take place.
“We’re looking in that three-to-five-years horizon and I’d rather talk about it that way. We’re certainly looking to double the size of the business again.
“Market cap was just under £900million ($2billion) when we agreed the First Reserve deal, so we’d be looking to bring back to market a company worth £2-2.5billion ($4-5billion).
“That will be achieved through a combination of organic growth and investment in units, assets and equipment for our existing business. We’ve made a significant investment over the last two to three years; decisions were taken quite some time ago and we expect to continue to build and grow, particularly the land rig fleet.”
That said, Locke sees substantial growth across all main Abbot business streams – including offshore platform-based drilling, ownership and management of mobile offshore drilling units (jack-ups and tender units), land rig construction and engineering. Of these, offshore rig ownership/management is, in effect, the newest, having been kicked off with the Songa deal of early-2006 which brought three jack-ups under Abbot ownership.
But Locke is not about to hit the marketplace with his war chest and buy more jack-ups.
“I think we have enough capital invested in offshore units at the moment … but since we’ve made the acquisition of Songa, we now operate a total of seven tender barges for two different entities … one North American financial group owns three barges; we have a 10% stake in each. The other group … Norwegian-backed … owns four and, again, we have 10%.
“So we have management of seven units on top of the three that we have … extending the management side of the business.
“We’ve just done a deal with a Nigerian group where we will have three more (new) jack-ups to manage. One is delivered and two are in-build. We don’t have an ownership interest in these.”
All told, Locke hopes that, by 2010, Abbot will have a division that has 15 or 20 units, including the three wholly owned jack-ups. It represents a very substantial shift in balance at Abbot.
As for land rig construction (Bentec), Locke sees output of new units gradually increasing, with further significant sales to the Russian market based on in-Russia manufacturing at Tyumen.
“Capacity at Bentec, in Germany, is eight to 10 units – if they’re small rigs, maybe up to 12 – plus various equipment. What we’re doing is investing in a facility in Russia, which will be up and running next year (first full year will be 2010) … building specifically for the Russian market.
“We have a very full – over-full – order book in Germany. Capacity in Tyumen will be a bit larger, probably 12 medium-to-large rigs for the Russian marketplace a year.”
Locke reckons the traditional platform business run through KCA Deutag has been “terrific” and that there is “another clear wave of growth opportunity” ahead. He is equally bullish about KCA Deutag’s land drilling business.
Summing up, he says: “Clearly, we’ve got to perform. But you have to do that whatever. I don’t think there’s a risk that we’ll get swallowed up by somebody else because I think the return potential is better if we carry on doing what we’re doing.
“I think it’s very exciting and the management group should end up owning much more of this business than they did in the past.”
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