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Interview

Bjørnar Iversen, Chief Executive Officer, Songa Offshore, Norway

After the challenges Songa Offshore had over the last years, the company has started to implement important steps to streamline the group, to restore liquidity and has strengthened both board and management. These are all measures that will yield long-term benefits to Songa Offshore, allowing us to focus on the most critical projects and processes and deliver prime services to our customers,” says Bjørnar Iversen, Chief Executive Officer of Songa.


As a Norway focused company, how do you see the ability to remain competitive in Norway’s high-cost operational environment?

Well, for one, we are not planning on shifting our focus away from the Norwegian Continental Shelf. The North Atlantic region is our main focus area, with a special focus on the Norwegian Continental Shelf having seven out of nine units based within that geography. That is where we will continue to invest—supporting the strategies of Statoil and the rest of the operators that are focusing here.

How fundamental is your relationship with Statoil today?

Songa Offshore needs to deliver what we have promised and have on the books. The company currently owns and operates five semi-submersible midwater rigs. Three rigs—Songa Delta, Songa Trym and Songa Dee—are operating in the North Sea on contracts with Statoil. Moreover we have two units in Southeast Asia, the Songa Mercur and the Songa Venus

Most important is that our rigs deliver stable, safe and efficient operations. Subsequently we take delivery of the four Category D rigs and mobilize these rigs towards the Norwegian Continental Shelf.

In addition, we will recruit quality people for our Norwegian operations. On average, we have approximately 150 people per rig operation, meaning that we will have to add an additional 700 new workers to an already existing 700 people work force in Norway. Hence we are growing 100 percent over the next 24 to 30 months. We aim to recruit these people in line with our ambition to become the preferred midwater drilling contractor. At Songa Offshore we provide our employees the opportunity to develop themselves. Recently we started a training program for talent straight from University. Having prime assets and the longest contracts in the industry provides predictability, opportunities and stability for our people.

After a challenging 2012 for Songa Offshore, you have been appointed CEO. What was the mission you were given and what made you the right person for the job?

First and foremost I will contribute to building a new Songa Offshore.

I have been working in the offshore drilling industry for the last 17 years covering all aspects that are interesting for Songa Offshore. I see substantial potential in the company. The objective is to become the leading midwater rig operator based on our harsh environment and experience with Statoil as our prime customer. With a future seven rigs operating in the North Atlantic region contracted by Statoil, we are in a position to achieve that goal.

My prior position was President and CEO of Odfjell Galvao Ltd, a newly established joint venture in Brazil, and before that I had been Executive Vice President in Odfjell Drilling Technology were I gained working experience with Statoil for the last fifteen years—in which seven of them I responsible for the strategic cooperation with Statoil.

Songa Offshore is currently in the process of adding four new builds to our current pool of rigs. The building process is currently progressing according to plan with Daewoo Shipbuilding & Marine Engineering Co Ltd. (DSME). DSME is a yard that I have experience working with for the last 10 years and has full responsibility for the rig design.

Øystein Michelson, EVP of Development & Production at Statoil, said that the company was pushing for a different ownership model of drilling rigs on the NCS and targeting more “fit-for-purpose” rigs to reduce the cost of drilling. To what extent is this affecting your commercial strategy in Norway?

In fact, the four category D rigs that we are building are a lot of what he is referring to. Currently, Statoil has eight rigs under construction, through suppliers. Out of these eight, there are four jackup rigs and four semisubmersible rigs. The latter four are Songa Offshore’s and thus a substantial part of Statoil’s rig strategy. We are bringing new assets with higher efficiency and fit-for-purpose.

Additionally, four identical units provide an efficiency gain in operations, training and redundancy.

In January 2013, Songa Offshore sold the Songa Eclipse to Seadrill. Is this a confirmation that Songa will not further expand in the ultra-deepwater market?

For a relatively small sized company, today we do not consider it wise to focus on both midwater and deepwater operations. Working in a deepwater environment, which I did the last two years in Brazil, is a completely different ball game. That being said, the Songa Eclipse did not fit in the strategy of a midwater player. The sale of Songa Eclipse has decreased operational complexity and given us the chance to focus our people, operational improvements and synergies. As I mentioned before, when adding the four newbuilds to our current pool of rigs, the potential for such synergies will further increase.

Moreover, the sale of Songa Eclipse strengthened Songa Offshore’s liquidity and thus exited the ultra-deepwater segment.

In light of the company’s objective to become the leading midwater rig operator in harsh environments, what is your perspective on risk management and training?

That is on the top of my agenda. Risk management for Songa Offshore is an area where I am implementing a new risk standard. Historically, Songa Offshore has taken quite some beating based on poor risk management. To handle risk is a key issue in what we do.

We shall learn from past mistakes and improve our project management skills. We are currently in the process of implementing better risk management systems in all parts of the organisation in order to make better decisions and operations.

Songa Offshore’s international division is an important contributor to future profits and cash generation. Could you elaborate on your further geographic expansion strategy?

Our future focus area will include the Barents Sea and Arctic area—Norway, Canada, Greenland and Russia. These will be Songa Offshore’s main focus areas.

Songa Offshore’s international division consists of Songa Venus and Songa Mercur, both located in South East Asia (SEA). In the future, we shall take on management opportunities in the SEA but we will not continue to invest in that area in the short to medium term. Again, we are using our capital in the North Atlantic region to create a focussed company where we have our key competences. We will build on these competences and standards if we are able to take on management contracts.

Drilling has two main value chains: technical availability and the drilling process. Historically, this has been in one entity but now I am splitting and strengthening the organisation into “Drilling Operations” and the “Technical and Project Division”. The separate divisions will each have a separate management as well. For each division I am recruiting talent and senior personnel to become a stronger midwater, harsh environment and Arctic player.

In addition, a third division is under development. The company currently has seven units in one geographical area—four identical and three other rigs for the same customer. This provides us the opportunity to optimize use of equipment. Therefore, we are establishing a “rental division” moving all the loose and flexible drilling equipment into one company in order to optimize our equipment portfolio. Thus, we will have our drilling operations in the North Atlantic and the two rigs operating out of South East Asia. In the latter region we will not focus on capital investment but rather on management growth. Our technical and project division will focus on technical availability, including Special Periodic Survey’s (SPS) and project work. Lastly, the rental division will optimize tools and equipment that we have consisting of approximately between 100 and 200 MUSD floating around.

How are you looking at moving Songa Offshore’s operations toward the icy waters of the Arctic?

In fact, one of the newbuild rigs is a winterized Arctic unit. This unit is contracted by Statoil for an eight-year contract and will be moved around in the Barents Sea.

There is major potential on the Arctic—we will definitely keep an eye on the market and participate together with our prime partner Statoil.

Looking ahead, what would you like to have achieved within the coming years?

Personally, I have the ambition to deliver our rigs within time and budget, showing the efficiency that our units can bring to the drilling market.

Mobile drilling-wise, there are currently three big players on the NCS: Seadrill, Transocean and Songa Offshore. I would like our company to be perceived as the best focussed drilling contractor in the region. Our company has a unique opportunity; Songa Offshore’s narrow focus on midwater operations in the North Atlantic is a differentiator. Furthermore, we are building four identical drilling units that Statoil has developed together with the industry. This will materialize into operational excellence and substantial synergies’ on equipment, personnel and logistics, which will give us a competitive advantage compared to the others that have a mixed bag of equipment.

After the challenges Songa Offshore had over the last years, the company has started to implement important steps to streamline the Group, to restore liquidity and has strengthened both Board and Management. These are all measures that will yield long-term benefits to Songa Offshore, allowing us to focus on the most critical projects and processes and deliver prime services to our customers.

 

To read more interviews and articles on Norway, and to download the latest free report on the country, click here.

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