Ian Dunderdale, Senior Vice President, Business Development, Hydra Energy, Singapore
Senior Vice President Ian Dunderdale discusses Hydra Energy’s operational footprint in Australia and elaborates how the private equity backed E&P player, will leverage its unique competitive and technological advantages to grow an asset portfolio, which seeks to take advantage of proven hydrocarbon reserves in Southeast Asia.
Southeast Asia is a vast, fragmented region. What strategy do you adopt to successfully penetrate different markets?
As a relatively new E&P entity, Hydra Energy may not have a strong name in this region but our people do. Our company is organized and managed by professionals who have had a longstanding career in the Oil and Gas industry, most of whom have around 30 years’ experience. In a way, private equity investors are not necessarily backing a business, but a group of people who they believe can deliver a level of return on the capital they invest. As such, we push our business development campaign by principally leveraging the prowess, track record and experience of our employees. With time, the company’s name will increasingly permeate through the region.
Nonetheless, a number of experienced senior executives have formalized their own start-ups and raised capital, yet have not been successful. What separates Hydra Energy from these entities?
It is important to have a unique and niche approach. Kris Energy for instance have a strong exploration team; whereas our focus leans towards development. We look for discovered resources, and endeavor to develop that base through sophisticated technology and engineering. If one assesses our portfolio of assets, there is not much in the way of exploration acreage; but, there is heavy investment into facilities engineering and the development of our mobile production unit.
If we tried to be a company offering all thing to all people, we would fail. All markets are competitive but for a company to be a success, it has to have differentiators. As emphasized, ours is developing smaller fields. As we have grown, and made commitments to the production facilities we are going to build, we have companies knocking on our door as we have something to offer.
Approaching 30 years working in the O&G industry, you have obtained different roles across the world. Considering the E&P sector is fraught with risk, and can be an uncompromising environment for new entities, what attracted you to Hydra Energy in 2011?
Prior to joining Hydra Energy, I was attracted by the opportunity of working for private equity backed companies, as being part of the management team allows you to have skin in the game. In 2008, I entered this field through APEC, before joining Hydra Energy in early 2011.
At Hydra Energy, though there is an element of risk in the business, as a shareholder in the company and as part of the management, one has influence over the risks the company takes. Moreover, as the management team is investing their own money, alongside our private equity backers, it implements a more balanced approach to the risks we take on, as ultimately the capital used is ours and not somebody else’s.
Hydra Energy is backed by private equity capital, through Barclays Natural Resource Investments. How much influence does BNRI have over the company’s decisions?
We have a standard board structure: BNRI have two directors on our board, one of whom is a very experienced O&G professional. Decisions are made by a relevant majority, which consists of the management team of investors and institutional investors, which is Barclays. Ultimately, big decisions are made as one, as both parties have channeled investment together.
Since 2010, Hydra Energy’s operational footprint in Southeast Asia, particularly Australia, has increased markedly. What have been some of the company’s key E&P milestones over the last three years?
Hydra Energy’s initial business blueprint was driven firstly by geography. Our original geographical range was vast, covering Asia. Today this has been tightened up, encompassing Australia and South East Asia. Crucially, we have maintained a common, niche investment focus, comprising of: shallow water – water depth of up to 100 meters – openings in mature basins where resources have been discovered, with an emphasis towards oil opportunities, although we do have a stakes in gas. Our foremost intention has been to enter small fields in mature basins which are below the radar of larger players, and develop them.
A further ambition of the company has always been to forge and maintain a foothold in more than one country. In 2012, we established our founding portfolio in the North West Shelf of Australia and we continue to seek attractive and appropriate opportunities in South East Asia that align with our business model.
What technical approach has Hydra Energy adopted to facilitate its E&P business strategy, whilst mitigating the considerable cost risks associated with such ventures?
Hydra Energy’s core technical competency of developing small fields, is the foundation we build around, as that is our comparative strength over other companies. Our technological capabilities and technical infrastructure work best in shallow, jack-up water depth.
We seek to minimize the risk of our development processes through having dry trees, so that the wells are on the platform and are not on the sea bed – eschewing the need to bring in a rig for intervention purposes, should something go wrong. Assessing fields where we can do multilateral drilling is another key strategic approach for us, as it minimizes our well costs. Furthermore, we are currently in the process of building the capability to move our facility’s from one field to another, enabling us to distribute our capital costs across fields, rather than loading it onto one. In addition, our mobile production unit not only has the capacity to process oil water separation, it will also have a light weight drilling capability, catalyzing our ability to drill wells up to 500 – 4000 metres, without having rely on a partner to drill the wells for us. Going forwards, this will give us the flexibility to produce and move around different fields.
On acquisition of assets, we look to acquire high equity which supplements the ambition to push our development ideas forward, without having to debate strategies with other equity partners. Currently, we operate six blocks and own 100 percent of four of them and have 50% or more in the other two. To facilitate a streamlined, efficient partner relationship, we work with the same partner, Kufpec, in these two fields.
Hydra Energy expects to produce its first oil to be 2016. Will you continue to acquire assets, despite no production stream over the next couple of years?
We will continue to acquire assets through our equity capital, until we achieve production. We would be unlikely to engage in any substantive exploration activity with equity capital; rather, we would probably finance exploration activity through the cash flow received from production.
What is the long term goal of Hydra Energy?
On analyzing our activity in Australia, we have acquired participating interests in ten petroleum titles: six of which we operate, the other four Apache operate and we have a further eight oil discoveries, we would be hoping in Australia and in South East Asia, is that we generate a portfolio affect. For instance, of half a dozen oil discoveries, some will perform better than the estimates on acquisition. The upside or downside in our business is that a field is either bigger or smaller than initially anticipated.
Our upside scenarios would be similar to what the Gulf of Thailand’s Jasmine Field has been for Pearl Energy. In a development company like Hydra Energy, the upside does not stem from finding a new, elephant discovery; rather, it is comes from recovering more from what you have got.
Looking ahead, we are pushing towards building our portfolio, whilst additionally, striving towards establishing a second portfolio in Southeast Asia. Indeed, Australia and South East Asia will remain the cornerstone growth engines of the company. Once we produce first oil from 2016, and have established our own cash flow, we can start to think about further growth. In particular, the gas market is buoyant in this region, and is an area we would like to further expand into.
What is the strategic role of Hydra Energy having a presence in Singapore?
There are a number of companies based in Singapore that can help us build the infrastructure we need for growth. For example, we can get extremely high quality jack-up hull’s built in Singapore but there is a cost differential compared to having it produced in China. Moreover, Singapore’s competitive edge is the high tech equipment it can produce, for instance: the oil processing equipment produced is to an exceptional standard. Indeed, we use Singapore based engineering companies to produce our processing designs.
Furthermore, from a business development perspective, Singapore is undoubtedly the place to be. The necessary business network flows through here, and the financial infrastructure is mature and healthy, bolstering the development of the industry in the region.
If we came back in three years’ time, what would you have liked Hydra Energy to have achieved in that time frame?
By 2016 we should have produced our own oil – that is the fundamental milestone for us. In addition, we would want our Asian portfolio to be running close behind our Australian business. There are a significant number of opportunities for the development of small discoveries in South East Asia. For example, the industry needs to realize the considerable efforts Malaysia is making to open up their market. We will hopefully see more countries in the region, recognizing that opening their borders to foreign direct investment is a step towards progress and growth.