Sam Modica, General Manager, Songa Offshore, Singapore
“It is important to open up and get to know the core players in the market. You have to be pro-active and seek to foster local and regional relationships,” explains Sam Modica, General Manager of Songa Offshore, Singapore, about building a regional profile for the company.
With a lot of change over the last couple of years, what has been your principle mandate and responsibility from Singapore?
Songa Offshore started with its head office in Houston in 2005, where they purchased three rigs, two of which were Songa Venus and Mercur. They were successful in gaining contracts in the Asia Pacific arena. The Venus and Mercur were mobilized to Singapore, where they went to the yards and were upgraded. The Venus was in Australia from 2006 to 2011, before heading to Malaysia. Conversely the Mercur has had a rather nomadic life. It has been to Australia, Sakhalin, Malaysia, China, and Cuba, and has finally come back to Vietnam. In essence, because we had two from three rigs operating in the region, this office had a major presence from 2006 to 2008. In 2008, there was a strategic decision to move our headquarters from Singapore to Cyprus. The bulk of the company’s activity and tasks—approximately 90 percent—swiftly gravitated to Cyprus. Singapore’s strategic role, therefore, was scaled back and revolved around marketing and bareboat chartering, with some finance and maintenance support.
Prior to becoming general manager in 2011, I was the global financial director, which which included overseeing the implementation of new business models. For instance, we were actively looking for continuous work for the rigs, dealing with clients, contracts and assessing the establishment of various company structures. In Norway, MODU contracts tend to be long term focused, whereas in Asia it is much more difficult to obtain long lead contracts. We devote a lot of time trying to cement continuous work because when the market cools, contracts suddenly become volatile and short in length. This trend is compounded by the immense competition out here. Consequently, a concentrated and focused amount of marketing is needed in this part of the world. Without having a presence in the region, we could not have maintained these rigs. Singapore has facilitated these contracts because it is a networking and offshore hub.
Singapore also contributed to the construction of the 6th generation, semi-submersible rig Songa Eclipse, which was previously owned by Larson Oil & Gas. At that stage we additionally had a construction arm with another 40 people based in Jurong. At that point, there was a lot of speculation surrounding the company boosting its presence in Asia; but, ultimately the company’s decision was to focus on the North Sea Continental Shelf and remain headquartered in Cyprus.
The Songa Eclipse was sold to lift us out of a financial predicament and strengthen the company’s financial house. Since then, the construction arm of Singapore has been closed down.
What is Songa Offshore’s long-term ambition for the Venus and Mercur rigs?
There has been a complete change in Songa’s executive management and ownership, and subsequently this has led to a change in strategic focus. There are conversations about selling Venus and Mercur with management agreements, meaning that we would sell the assets but continue to manage them. We have a few interested parties in this proposal, but to date, nothing has been set in stone. Consequently, until the situation changes, we need to continue to market and broker these rigs so that the company has a further revenue stream. Our focus has been on Southeast Asia, particularly the buoyant offshore markets of Vietnam, Malaysia, Indonesia and the Philippines. Indeed, for the last couple of years my prime responsibility has been to keep these contracts ticking and negotiate the best possible terms for Songa Offshore. No matter what is being done at the top end, we have a responsibility to keep these rigs working. Ultimately, despite their age, both rigs have had persistent upgrades and have proven to be good, steady and efficient earners.
Southeast Asia is perceived as a diverse collection of micro markets. As General Manager and responsible for business development in Asia Pacific, how do you build the regional profile of the company?
It is important to open up and get to know the core players in the market. You have to be pro-active and seek to foster local and regional relationships. Regionally, we have worked successfully for a number of well-established oil and gas companies: PETRONAS, ENI, Idemitsu, Mubadala, Santos and many more. There is a swathe of activity taking place in the region and it is critical to keep our intelligence levels high to know who could benefit from the services we provide. We are restricted to water depth of about 1500 ft. We are not focusing on the top end of the market, which targets deep offshore potential. We are focused on the mid-water market and that is where a sizeable amount of regional activity is taking place.
The new Category D semi-submersible units are being built in South Korea. With increasing regional competition, what does Singapore need to do to not lose ground against its regional competitors?
Clearly, Singapore’s rig manufacturing industry is facing intense competition from South Korean and Chinese yards. Nonetheless, Chinese rig manufacturing is still a relatively fledgling industry and there remain issues of the quality of the assets. The lion-city’s prime competition is Korea. There is a growing perception that they are producing a better product and they are supported in the sense that 90 percent of their work force is Korean. The cost differential between Korea and Singapore is negligible.
Though Singapore’s rig manufacturing industry is not at its peak, it is still a formidable service they provide. Only recently Jurong Shipyards won a major contract with Transocean and Keppel is actually building a drill ship on specification. I do not think it would require much for the rig-manufacturing pendulum to swing back in their favor. I do not see why Songa Offshore’s future rigs cannot be built in Singapore. You are guaranteed quality services and on time delivery here; but you are also expected to receive such a level of service in Korea and that is why Korea was chosen to construct our new 6th generation semi-submersibles.
Personally, I believe that our company should have a presence in Asia given the forecasted offshore investment and surging demand needs of the region. If a company wants to be truly international, then it cannot afford to distance itself from Asia’s growth trajectory.
What new enterprise are you supporting in the UK?
I have been assisting in the development and establishment of a Technical and Projects service branch in Aberdeen. I have been involved in this because I am the finance lead for the creation of the whole enterprise in the UK. I was asked to help set up the office because of my experience in setting up businesses and branches in various markets, both developed and emerging, and have been able to orchestrate this from Singapore.
It has been good to get an insight into the UK oil and gas arena. I have found the whole initiative interesting. The model is based on providing the rigs services in terms of their maintenance, subsea and engineering upgrades, which will all be controlled by this new division of the company. Previously, we have had to outsource this service at a substantial cost. Bringing these services in-house in Aberdeen is particularly pertinent because drilling activity in the North Sea Continental Shelf is the company’s overwhelming priority. The Technical and Project division has been purposely designed to take care of our older rigs and new delivery CAT D rigs—due to come online in 2014 and 2015. This division looks poised to be a further growth engine of the company.
If we were to fast forward three years, how do you hope the company would have evolved?
I am eight years at Songa Offshore tomorrow and have witnessed its transformation. In three years’ time I hope to see the company in a healthier financial position, with stable operations in North Sea Continental Shelf. Hopefully our four new Category D semi-submersible units will be flourishing. As for our older rigs, due to the stringent regulatory requirements of Norway, it will be interesting to see whether they are pushed out to the rest of the world. These rigs are five-star quality assets and as discussed, I view Asia as a tremendous growth market and it would be shrewd to have some sort of rigging presence out here.
As a publicly listed entity, why should potential investors invest in Songa Offshore?
First and foremost we have a very solid and enduring relationship with Statoil. They are effectively guaranteeing us work for 32 years and to have such a reputable, stable and growing client on our books gives the company a very robust foundation. As a consequence of our logbook, I do not fear credit as a possible risk, as we know of their ability to pay. Furthermore, the fact the major shareholders and new executive board is determined to rebuild the company back to where it should be is encouraging, as we need drive and energy from the top.