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Interview

with Chris Oliver, Director, Red Spider Technology

23.10.2008 / Energyboardroom

What was the vision behind Red Spider’s creation in 2003?

Our vision was to step into space in the market for an innovative downhole tool supplier. Some really smart technology companies that had existed in Aberdeen before Red Spider but had subsequently disappeared through acquisitions and mergers in a service company feeding frenzy between 1995 and 2000. I got together with my three fellow founders, Andy Skinner, Mike Reid and Irvine Brown, who had worked in some of these companies such as Petroline, PES and WellEquip, but who via acquisition found themselves working for a major service company and found that life wasn’t as exciting as it had been. I’d helped a company of small companies evolve and had been lucky to work for a small and exciting part of Schlumberger which was the result of one of their acquisitions.
When a big company acquires a smaller one, despite all the best intentions, inevitably the spirit becomes diluted or lost to some degree. The founders were initially driven by the desire to recreate the excitement of building a business and for the engineers this particularly meant working on niche innovative products rather than supporting an existing catalogue of old tools.
Red Spider saw an opportunity to bring new products to market to help meet the challenges faced by North Sea operators for the “next 40 years” of a maturing region. The UK analogy was like when you drop a mirror and it shatters into many pieces. You’re able to pick up the big pieces easily by hand, but all the small bits are left which are much harder to find and handle. In a similar way, the easy oil has been recovered, and although there is still lots left in the reservoirs, new technology is needed to access it.
The founders saw in Red Spider the chance too to form a company that others would respect and look up to for its technology and culture. It would be strongly branded to reflect the quality of its engineering, it would have a high profile in a crowded market and it would look and feel as good as the technology it created. There are many good engineering companies that simply don’t communicate what they’re about unless you get to work intimately with them. For Red Spider, it was a case of choosing a big hat and growing to fit it. The Red Spider brand, look, and feel are about getting a small company known in a busy industry and getting the attention of customers big and small.
The North Sea was the natural place for Re Spider to start because it is a region that needs new ideas and new technology. The beauty of being in Aberdeen is that customers are all around us. The company was keen to internationalize early though, because whether the North Sea has 40 years left or more is uncertain, so its unwise to sit on your laurels enjoying local trade, but important to test the technology and move out to international markets, diversifying and ensuring a longer-term future for the business. That was the initial vision behind Red Spider.

Five years into the business, what have been some of the most significant milestones and achievements since Red Spider’s inception?

In product terms, Red Spider has migrated from initially providing mainly well intervention technology and services to developing a range of completion products and services. This allows us to participate in new field developments as well as existing ones and play a part in solving the current technical challenges faced by the industry downhole. This shift is analogous with a mechanic who fixes cars, now Red Spider fixes the car and also designs and provides new parts. That was a natural progression for us. We had to build up a track record for the company in intervention work first where the risk for clients in dealing with a new supplier in this area is relatively low. After proven success in workovers etc clients then start to see how our ingenuity can be applied to the completions arena too.
Milestone products have included our water injection valve, our remote opening devices (hRED and eRED) for use during workovers, our rugged protection systems for through tubing drilling applications and our ZODIAC completion products
The water injection valve was our first product and typifies the Red Spider approach to design, where we go back to basics and pretend that the problem has never been solved before. We knew that clients were having problems with existing products on the market, particularly where debris was present in the well and they needed something more reliable to reduce the frequency of unplanned workovers. This resulted in a Red Spider product that looks much different and performs much better than all the others. It has since become the standard water injection valve in the North Sea, being sold already to 10 operators here, and others in the Middle East and Africa. It is a simple product and shows that Red Spider is a company that thinks differently. It has been the mainstay of our UK business in our first few years of operation. Following on from this success, Red Spider was invited by a Norwegian client to tackle a problem for its through-tubing drilling team, who were looking to drill sidetrack wells to access hydrocarbons adjacent to existing wells. Existing and known techniques were risky because they often resulted in damage to the safety valve in the ‘mother’ wells, and so in 2004, Red Spider developed a really robust protection system for subsea wells to overcome this. Since then, it has become the protection system of choice, because of its 100% track record of success and its ruggedness and reliability which appeals to drillers.

The oil and gas industry tends to have a conservative reputation. How did Red Spider initially earn trust as a new entity?

The company’s first client was willing to try Red Spider because their existing water injection valves were being replaced every three to six months, which was very costly. They knew what they had didn’t work, and had nothing to lose by trying our solution. As a new kid on the block, it’s important to find new technology champions to back your ideas. However, even they don’t always have sufficient influence over their colleagues in the producing assets, so it doesn’t always result in work. Therefore, direct contact is needed with well service and completion engineers to hear what’s eating their lunch, and if Red Spider can fix their problems, they’ll give us a try. It’s about understanding what drives a value proposition too: does a client need to maintain production, stop leaks, or are there ‘personnel on board’ issues? Red Spider’s experience is that the UK is a market that does not easily accept new technology. The task is even harder for a new supplier without a track record or the credibility or reputation of a well-known name such a Schlumberger or a Baker.
However to reduce client concerns initially we perform stringent testing on all our products and are our own harshest critics. For example, we carried out more testing on our water injection valve than had ever been done on any existing water injection valve, and at our cost before launch. In doing so we could show how it performed, how it handled debris, water flow, pressure drop etc., and state with confidence that it would deliver superior results in the field.

You mentioned an early desire to diversify and expand internationally; what has been the trajectory of that strategy at Red Spider?

It’s an important strategy, because we don’t want to be limited to one market, with sole exposure to the varying economic and tax factors in any given locale. Also, while the UK needs new technology, we knew that the culture among clients was not so pioneering. We also knew from past experience that Norway was more of an early adopter market. We therefore made early trips to Norway to compare their interest in Red Spider to the UK’s, which in 2003 was a very quiet intervention market. We’d shaken all the trees in the UK by that time, but were unsure whether there were any coconuts in them. The question was whether to shake them again, or go have a look at some other trees. Norway was an easy choice for us, because the business language is English and the culture is honest and open. Red Spider went to Norway on the back of British Trade Office, were introduced to some of the key technology players in Statoil and Hydro and others and this resulted in the development of our TTRD protection systems.
The Norwegians were also receptive to our hRED (remote equalization device) for wellwork, because they understood what the device could do for them. In the UK, there were constant questions: what if this happens, what if that happens? In Norway, it was more like: can it do this, can it do that? Very refreshing!
However, the company is not satisfied with just the North Sea, and is looking abroad to other markets. It is now seeing success in the Middle East and South America, with interest too from farther afield.
Red Spider is poised for this expansion, with a new Chairman and equity financing from the Bank of Scotland to guide the way.

What is your projection for target growth markets?

This year, Red Spider’s turnover will be Ј4-5 million, representing strong year on year growth, and looking in four or five years to be at the Ј25-30 million turnover level. However, the company is not trying to take over the entire world. The Middle East is seen as a good market. Qatar is quite a sophisticated market for Red Spider with a good range of MNCs who need technology and are prepared to pay for it, countries like Oman have the need, but are less prepared to pay. Saudi Arabia, on the other hand, can be attractive if the right product is found to fit their strategy for standard completions. Red Spider has been in the Middle East now for 18 months, and that’s where the focus lies for initial growth.
Other than continued organic growth in Norway and the UK, Red Spider is also looking to the Americas, which has not received focus to date due to the high commitment in time and money required to establish a presence in a new region. However, now that Red Spider has established regional managers in the UK, Norway, and the Middle East for the last few years, we’re getting at the stage to put people in Houston or South America. The company can also be pulled into geographies by clients who want to have access to our products which they’ve used elsewhere. There’s a danger though of neglecting already-performing markets with just for the sake of trying something new and so letting clients down, and we need to ward ourselves against that. Red Spider will go to places that it can support properly and which have the desire for technology and need for a niche player.

It seems ambitious in growing to 5 million over five years, then quintupling that figure over the next five. You mentioned the design approach of starting from scratch, but how has the design been in terms of molding an internal culture at Red Spider?

Culture is hugely important to Red Spider, and acts as a lighthouse to attract the right sort of people to the company. We recruit for “Spiderishness”, in other words, people who fit the culture. This doesn’t mean clones; we’re looking for enthusiastic people, no matter the field, because at the end of the day that’s more important to us than qualifications and experience on paper. People who take pride in their work and like to do things well encapsulate the essence of Spiderishness.
Management operates along a very flat structure. Instead of a CEO, there is a leadership team of three, split between commercial and strategy, finance and planning, and resources, like a three-headed CEO. For the rest of the organization, this team is a gateway, where any one of the three can support a decision or spin it around the other two for consideration or a different perspective. This means that the company doesn’t rely on one person who’s supposed to know everything.
Red Spider has created a product centre in Aberdeen, while building a strong regional structure where regional managers determine what they require. We’re not like a bakery that puts out one kind of pie every day to its shops, but, rather, the regional managers who run the shops and tell us what kind of pies they want. They are actually the driving power behind their decisions. We encourage them not to ask “What do you want us to do?”, but we prefer to ask “What do you need?”
Our regional managers are entrepreneurs in their own right, they ask for what they want and what their clients need and it is the product centre’s task to find a way to give it to them.
In terms of new hires, Red Spider has found that by recruiting for enthusiasm and attitude, it has created a team of people looking to be challenged and capable of many tasks. As a result we have seen technicians move into sales roles, engineers moving into business development etc, which results in very rounded individuals.
If I had to put the culture down to one aspect, I would say it’s continuous improvement. We’re trying to be great, and that’s the only way to achieve greatness.
It might appear that growth from Ј5 million to Ј25 million is ambitious, but as a new technology company everything Red Spider sells has so far been developed in-house. So the hardest part has been growing from zero to Ј5 million, while key products have still been under development. Every year we see additions to our product range and existing products going from early adopter to more general acceptance by clients. This fuels higher growth in sales and revenues.

Other than the anticipated sales expansion, what else could we expect to see different at Red Spider over the next five years?

Red Spider is developing a reputation for smart Remote Operating Tools, which combine clever electronics with our mechanical and hydraulic expertise. We have current tools, such as the eRED, and are developing a suite of completion and intervention products to complement it. There’s a big value for clients in Remote Operating Tools, which reduce the need for wireline support and setup costs, while giving flexibility downhole. We also have exciting offerings coming through for gas lift and drilling applications.
Certainly, the company will be much bigger in the Middle East in future, which could account for half of our business in five years’ time, while the UK might double in size. Red Spider will continue to be a learning organization, to bring people in through a graduate/trainee program and develop all through what we call the Red Academy, which represents an investment in future leaders and technical experts to enable spiders to become the best they can.
10 years down the road, Red Spider will be able to demonstrate tangible global success. It is a work in progress today, as we move into new markets, with new products and new client. We’re taking a longer-term view on product development now though so that we focus on growth in the right areas.

In moving forward with all these different opportunities, what is your final message to OGFJ readers?

Red Spider is a company that clients can really use to create an advantage for their organizations. We’re not trying to serve every customer, but rather those that need technology solutions for their business. We like to work as trusted advisers to our clients, so that they feel they can come to us with the crazy questions or specific problems that often result in great solutions. We’re proud of our current client base and enjoy finding solving problems together. We’re at a size and a stage in our growth now where we can still adapt ourselves to particular clients needs and be their technology partner as we grow together. Some customers have already seen that and if others want that type of relationship with Red Spider Technology, they should contact us while we still have capacity for them!

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