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Interview

Diego Fernando Jerez – Vice President, Huinoil, Argentina

portrait-picture-diego-fernando-jerez

The Vice-President of Huinoil, one of Argentina’s leading oilfield service providers, highlights how constant re-evaluation of the company’s direction and diversifying into new service areas has grown Huinoil to become a reference within the industry.

Diego, following in your father’s footsteps, you joined the company in 1997 and have worked your way up over the past 18 years. How have you seen the company evolve during that time?

“Huinoil is an Argentinean family company, with the main goal of providing excellent services to our customers.”

In the past, Argentina had multiple crises and our company has not only endured and proven its resilience, it has also always used these crises to successfully adapt and thus respond to the changing needs of the industry induced by these crises. One of the major reason we were able to transform these crises to opportunities was that we kept our financial management to utmost security; we always only had minimal debt and kept an attractive backlog of projects in the pipeline. As all other companies succeeding in crises, we were able to seize the opportunities other companies left unfulfilled and thus were able to gain significant market share.

How have you navigated through the different crises to stay afloat?

We have excelled in understanding our customers’ needs and have always made those our utmost priority! Our customers genuinely appreciated that we were able to support them throughout the given crises, which ultimately established long lasting relationships, still existing after the crises with newly negotiated deals.

How would you define Huinoil today?

Huinoil is an Argentinean family company, with the main goal of providing excellent services to our customers. Argentina is a challenging market for SME’s such as ours, as competition is typically high and the usually more sizable customers of ours are not used to SME’s being able to provide the scope and quality of services we do. We understood, however, that by maintaining our family values, the flexibility and swift decision making process only a family run business can have, we would be able to diversify to become a service company with a fully-fledged service offering; this, ultimately, ensured that we were always prepared to overcome arising challenges, whether it be the unions or some economic crises.

Huinoil offers an extensive portfolio of services including installations, maintenance and operation of equipment, transportation of liquid cargo and much more. Which of your services are currently highest in demand?

In today’s hydrocarbon industry of Argentina, our well-services—specifically integral maintenance and production enhancement—are most in demand. This demand also allows us to extend the service offering by deploying trained personnel to our clients, engage in electrical maintenance and prevention of equipment failure. Although this is the main demand we currently supply, it is not everything we are able to do and should demand in Argentina’s hydrocarbon industry change we are prepared to seamlessly change direction according to the demand.

In most of our interviews, we have heard how companies have been forced to reduce costs in order to stay afloat. How have you managed the situation?

The landslide in commodity prices has had its impact on us because almost all of our clients have requested us to reduce prices significantly. As service provider to the oil and gas industry, this usually entails redundancies of staff. Currently we employ some 820 people and value all of them as loyal members of our company allowing us to excel the way we do. Therefore, we sought opportunities to reduce costs without having to lay off employees. We went into a productive dialogue with the unions and found solutions together, these included rotating personal as well as early retirement agreements for instance. This has allowed us to make necessary adjustments to keep servicing our customers. We have unyielding relationships with our employees and although we had to find solutions to remain competitive and lower prices, we always had the welfare of our employees in mind. Thus, we were able to find a solution, maintaining the welfare of our employees, serve our clients to accustomed quality of our services to a cheaper price and generated a turnover of approximately USD 61 million.

In some areas you have chosen to enter a strategic partnership in order to add services to your portfolio. To what extend do you see your own capabilities sufficient and where do you need partners to come in?

Geostock, for example, is an international company specialized on underground storage solutions and packing solutions for old reservoirs.. As we have a genuine spotless track record in Argentina, it is not uncommon that some of the large companies chose us to have them represented in Argentina. We analyze these offers internally and depending if their portfolio’s complements ours—as it does in the case of Geostock—we take the decision to become partners or not.

These strategic partners are globally recognized companies, what is the added value you can provide to these companies?

First and foremost is our longstanding history together; we have been partnering with some of these partners for over 20 years which established an unyielding relationship of trust. Both, the owners of our partners and our owners are personally acquainted and communication is excellent. Moreover, we have an excellent footprint in the Argentinean market with an established customer base, excellent reputation and established offices across Argentina; we are a comparatively a great option to enter the Argentinean market because our partner is not in need of initial investment or building up his client base for instance.

Starting out as transportation company, Huinoil has over its history continuously added new services to its portfolio either through partnerships or organic growth as a method of targeting a broader market. Which services are you currently eyeing at adding to your portfolio?

Our strategy is to reevaluate the companies’ direction and positioning every five years; this ensures that we are in the pole position in all of the services we offer at the moment. This also allows us to participate in almost all tenders existing in Argentina as our growth is depended on the quantity of contracts we achieve. In this five year evaluations, we also asses the market needs and demands, thus identifying areas of improvement or new needs which we can cater. Three years ago, for instance, we saw the performance of A&B equipment in Argentina is need of improvement, thus we set up a new entity –FixPump SA—specialized on this area thus serving the needs of customers and increasing their performance. Another continuous and reoccurring measure of adapting and adding new services is investing in our employees. We always seek that our employees are educated to the newest standard and know-how to perform to utmost quality standards. Moreover, we identify the Vaca Muerta shale basin as future growth spot for the country and our operations. We do not expect a boom to occur in the short term future, however, commencing 2018 we believe many opportunities will be unfolding in this area. We are confident that YPF will be at the forefront of Vaca Muerta’s development and will use SME’s to service and exploit their wells so that they can focus on their larger core projects. We are preparing ourselves to this development by positing ourselves as the ‘go-to’ company proving low cost services to all of these companies trying to exploit the region; we will increase our internal efficiency and productivity which means we will be able to offer significant cost advantages to the clients. For now, however, we are geographically focused on Tierra del Fuego, Santa Cruz and Mendoza.

Do you have to adapt your capabilities if you want to go from conventional resources to unconventional resources?

Most of our services do not need adaption to the specifics of unconventional resources. Nonetheless, we are planning to introduce some services which we believe will be sought after, one of which is post drilling water treatment for instance. The post drilling services at large, will likely become an area with significant unmet demand; we will be hiring people and re-train some of our existing staff in order meet this upcoming demand. Although Vaca Muerta will offer the opportunity to grow significantly as company, we are committed to our current business philosophy and code of ethics.

Argentina is in a phase of economic change under the political direction of President Macri, and many commentators predict a truly new Argentina. How do you prepare for this new Argentina?

Maintaining our low cost base while striving for new processes or technology which will further reduce costs, either within our operations or the operations of our clients. This dimension will be complemented by the quality standard we are renowned for and which we will never compromise on; this combination will support the efforts of YPF and the other multinational oil companies to extract hydrocarbons to a more competitive price. Given that Argentina is one of the countries with the highest costs of extraction in the world we are confident that these type of services will be the future in Argentina; the equation is simple: we are already one of the countries with the most resources in the world, while also being one of the most expensive one to operate in! While some see this to be challenging, we identify the opportunity within the crux of these characteristics.

You have mentioned working in projects in Peru and other countries in LATAM. Are you looking to expand and grow abroad?

We are always seeking new opportunities to tap into and we are already involved in some international projects in Peru or Bolivia for instance; we were also requested to participate in some tenders in Mexico when the oil reservoirs were tendered. Nonetheless, we currently do not have a strategy in place which foresees active internationalization within the region. Typically, the process begins with a foreign company requesting us to service them on a project in another Latin American country. Our lean structure allows us to absorb the challenges within another country and deliver the usual high quality results which often gives us a competitive advantage over larger companies, hence why we had these international projects.

What role do you think SMEs will have in the development of Argentina’s Oil and Gas industry?

SME’s are the backbone of any given countries economy, just as it is of Argentina’s economy. We are vital for bringing new technology and solutions while keeping a low cost profile. Nonetheless, given our history, the quintessence of our company and our family oriented business philosophy we consider ourselves to be part of the SME sector.

When we come back in three to four years, what is the story of development you will tell us?

We will certainly be able to report of more complex projects which we have successfully developed for our clients. We will have an even larger sales track record, be even more competitive and have a pipeline full of upcoming projects. It has been quite challenging for us to stay afloat while maintaining our employment level and remaining competitive, however, we have done all of these to excellence. We have more than ‘just’ survived harsh times and we will use this to our advantage. Argentina is slowly gaining momentum, winning back the trust of the world and we are already seeing the first cautious investments. Moreover, we see how local companies such as YPF are significantly driving Argentina’s development forward and we believe that the combination of both will bring unmatched opportunities for companies such as Huinoil. When you come back in four years, we hope to have doubled or tripled the number of our employees.

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