A little over a year ago, a battle to gain control of one of Aberdeen’s premier companies was in full swing, with a consortium of private-equity investors slugging it out against Halliburton.
P/E won the day, Expro was de-listed from the London Stock Exchange and Candover, with Goldman Sachs, took control. This was just before oil prices shot through the roof only to plummet to the basement a few months later and much of the world became gripped by the icy fingers of recession.
It is said that management at Expro, then led by CEO Graeme Coutts, were heard to heave an audible sign of relief: they had escaped the demolition derby of the London Stock Exchange as energy and energy-related stock plummeted – an episode that has done huge damage to AIM-listed oil minnows especially.
In May this year, there was a boardroom shuffle, with Coutts moving to the top chair while chief operating officer Gavin Prise was handed the CEO brief.
Prise told Energy that, 18 months ago, Expro was in great shape but had, even then, mapped out how to cope with a downturn should there be one. This was to prove valuable after Candover/Goldman Sachs took ownership.
“I think we have come through the takeover well and are more strongly positioned than ever before,” Prise told Energy.
“The investors were totally supportive of the management team and their strategy. However, it was only a matter of a month or two later that the warning signs were there in terms of the global economy. It was probably around August or September that the question came to Expro as to how the company would see its way through.”
Bear in mind, the characteristics of Expro that attracted the investors in the first place was the group’s technological strength and geographic footprint, plus it had a defence strategy that was to be truly tested as the recession bit and the oil industry drew back into its shell.
“As we moved towards the end of 2008, we were obliged to closely examine our budgeting process, and it was probably more detailed than at any time in the past.”
According to Prise, analysis demonstrated that the fundamentals of upstream oil&gas really hadn’t changed all that much from a year prior, even if the investment brakes had been slammed on by many companies.
Candover/Goldman Sachs quizzed the Expro top team about what had changed regarding client intentions.
“So we looked at them in the context of IOCs, NOCs and independents. The IOCs were talking about spending roughly as much as in the current year, with some even looking at increasing spend,” said Prise.
“The NOCs were a bit of a mixed bag … some up and some down … onshore generally up and onshore generally down.
“The major NOCs that invest offshore, such as Statoil and Petrobras, were talking about growth, whereas some land-based NOCs in the Middle East were talking about cutting back; not just in terms of costs, but also reducing production in line with quota cuts.
“But independents were all over the place. Some went into liquidation, some were in a reasonably strong position and others had to implement big capex cuts in order to see their way through.”
Prise said the various impacts were added up and the net result pointed to “slight decline in revenue, but not a major decline … in the order of 5-10%”.
He told Energy that, while that meant it was important to pare costs, it was even more vital not to damage Expro’s ability to bounce back rapidly as the oil&gas industry began its recovery – a recovery that appears to now be under way.
“The review was really about three things. First and foremost, it was about keeping the shape of the company … Expro has a great shape in terms of geographic exposure, product portfolio and organisation. We didn’t want to do anything that would damage that.
“The second thing was to ensure that costs were aligned to the market as we saw it.
“So there was cost trimming, but it wasn’t a slash and burn by any means. It was basically fine-tuning to the different markets.”
Prise said the position for North America land had particularly changed for the medium to long term and that Expro had been obliged to carry out a substantive reorganisation in that particular part of its portfolio – painful but necessary.
He said that the third key aspect of the review was about the need to carry on investing in high-value technologies as these were a key differentiator for Expro, both today and into the future.
“So, with those three things in mind in terms of keeping the shape, being sensible about costs and sustaining key technology developments, as we set clear for the year, the question was, how would that turn out,” said Prise.
“Here we are, mid-2009, and things have turned out pretty much as we had planned.
“We’ve been careful with our costs, the revenues are much in line with what we expected and our funding in terms of major technology development projects has gone ahead and continues.
“We’re in a position where we know where we are in the market and can look forward with confidence to growth in the future. We can especially look forward to the increase in deepwater developments two to three years from now.
“We’re at the start of a new phase of growth for Expro and have put in place a new and slightly broadened management team to take the company through its next phase of growth.
“We’re currently working on our new five-year strategy; this planning period will last for the next two or three months, and everyone in the company is looking forward with great confidence.
“The position we were in as we went into new ownership was a great one, and that has carried us through this difficult period without major trauma.
“But that doesn’t mean that anything going forward is guaranteed. But we’re looking forward with great confidence.
“The strategy that has enabled Expro to succeed in the past is probably very similar to the strategy that will see us succeeding in the future.”
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