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Interview

with Erik H. Saestad, VP & Country Manager Norway, Oceaneering AS

01.03.2013 / Energyboardroom

When we met with Alan Gray of Oceaneering UK, he described the company as being in constant evolution. Would you start by describing how your activity in Norway has been evolving?

Norway has been a clear example of this evolution and Oceaneering has invested a lot in order to expand our capabilities. In 2011 we funded organic growth and acquisition opportunities at a record setting pace. Our capital expenditures were almost two-and-a-half times the average we invested during the previous five years and our investment in acquisitions was three times what we spent in total during the 2006 – 2010 period. We have steadily broadened our portfolio over the last ten years, but 2011 was fundamental, especially on the Norwegian side. First Oceaneering acquired NCA Group, which gave the company a foothold in the dredging and decommissioning market. The NCA Group acquisition also brought with it a set of international operations, with sales offices and an operational office in Houston as well as activities in West Africa. Second, we acquired Mechanica AS, which increased our ROV-tooling capabilities and in-house CNC machining. And third, we acquired previous AGR Field Operations, now Oceaneering Asset Integrity, which significantly increased our global capabilities in the asset integrity market and also provided us subsea inspection tooling to offer in other geographic markets.

How challenging is it from a managerial perspective to continuously incorporate these divisions within the portfolio and when bringing on board these acquired companies, how much do they preserve their original nature and how much do they take on the Oceaneering structure?

The process of evaluating and getting to know the acquired company normally takes some time; indeed, the whole management team spent a considerable portion of last year dealing with these issues. Every acquisition target can come from a different angle and the timing of closing an acquisition is not always predictable. There is a lot of work to do in assessing exactly how the target company will fit within the current portfolio and it is extremely important to understand how to leverage what we bought in order to harvest synergies and optimize the return on the investment. The main work of acquisition actually begins when you start the process of integrating companies within the portfolio. An integration process often has a major impact on the organization as a whole, so it is challenging and important to do the job right.

When Oceaneering acquire a business, we are not necessarily trying to take on something new ourselves but bring in the expertise from another company to consolidate what they are good at and link it with existing business units to maintain synergies and expand the scope of what we already do. For example, in the decommissioning market we needed the expertise of the NCA Group to complement our services to approach this market. Otherwise we would have had to subcontract this part of the business. The same is true for the field operations activities. How the companies preserve their original nature, depends on the company we acquire as it varies a lot from case to case. It is essential to have a broad engagement with management fully involved in the integration process and assessing how to do it. Culture can vary a lot from company to company and when you add different countries into the mix as well it becomes even more important for management to spend time with the staff. Safety is our number one priority and first of all we need to make sure we transfer our established safety culture to our acquisitions and the new people those acquisitions bring. We have experienced from the Norway side that this has been successful and valuable.

With a fairly diverse portfolio, how challenging is it to create one understanding of what Oceaneering contributes to the market?

The portfolio is diverse yes, but there are a lot of links between the different divisions in terms of robotics, operational experience and applications of various methods. The expansion of the company’s portfolio is a key aspect of our competitive advantage as a global supplier. Our wide range of services is communicated regardless of what division or service line the client is involved with. We want our clients to see us as one company offering a complete package of solutions. For many of our clients we are predominantly known for our ROV business. Oceaneering is the world’s largest manufacturer of ROVs, owning and operating the biggest fleet of work class ROVs. However the combination of services alongside our ROV business is one of the key differentiators we have in relation to other ROV providers. It is important that the market is aware of the whole package.

Today the company is divided into 5 divisions and we often operate for the same clients across a range of services within;
ROV: Remotely Operated Vehicles run by technicians from a control container typically aboard a rig or a vessel. Their tasks include drill support, subsea hardware installation and construction, pipeline inspections and surveys and subsea production facility operation and maintenance.

Products: Engineering services that design and manufacture a variety of built-to-order specialty oilfield products. These encompass production of control umbilical, tooling, installation and workover control systems (IWOCS) and subsea hardware. Most of our products are sold, but we also have a rental department as a service line.

Projects: We perform subsea oilfield hardware installation, inspection, maintenance and repair services both topside and subsea. We service deepwater projects with dynamically positioned vessels that have our ROVs onboard. We operate and maintain offshore and onshore oil and gas production facilities. We provide subsea engineering services and operate logistics supply bases.

Asset Integrity: We provide asset integrity management, corrosion management, inspection, Non Destructive Testing (NDT) and composite repair services principally to the oil and gas-, power generation and petrochemical industries. These services are performed on facilities onshore and offshore, both topside and subsea.

Advanced Technologies: We provide engineering services and related manufacturing principally to the U.S. Department of Defense, NASA and its contractors and the commercial theme park industry. The U.S. Navy is our largest non-oilfield client for whom we perform work primarily on surface ships and submarines.

How is Norway viewed within the global strategy of the company?

Norway is one of the largest business areas outside the US. Seen in a global perspective, Norway is an important place to look for new technologies, due to the high focus on technology and willingness to invest in related projects. Despite the growth of other regions, Europe remains one of the world’s largest offshore producers and the Norwegian oil and gas cluster has been in the forefront with respect to developing and applying technology within areas Oceaneering operates in. The overall outlook for the global business is clearly one significant long-term opportunity with substantial growth and the Norwegian Continental Shelf is in its nature a frontier petroleum region, with a continuous need for new technology. So indeed this is an important market for Oceaneering.

Because of the commitment to high-end technology in the Norwegian market, Oceaneering can guarantee a more stable business. For instance in the ROV business, we are not in the “No cure – No pay” business as we simply do not believe this is sustainable over time. As a company we would rather wait to obtain a long-term commitment at acceptable rates, or as a minimum have a commitment that justifies what we put forward in terms of investment and resource allocation. This allows us the foresight to engage in long-term investments and train people to get them up to speed in the areas that we operate in. In this way we will ensure that we are prepared for all eventualities whether the customer or Oceaneering encounters operational challenges.

There is a lot of consolidation in the Norwegian subsea sector and several companies extend their portfolios. How do you see the competitive landscape developing and how will you position Oceaneering relative to these companies?

Oceaneering is a global service provider and we structure ourselves to meet our clients’ expectations. There will always be a space for the smaller entrepreneurial technology companies in Norway, but larger international service companies frequently buy these companies and in this way consolidate the technology market. We are also seeing an ever-greater demand from the operators to broaden the scope of contracts, which is pushing the larger service providers to meet these needs. In the case of Oceaneering we never talk about becoming the largest company in the market. Our aim is always to be the best in what we do. If this leads to growth, it is important to grow in a controlled manner, making sure we utilize our existing competency in order not to compromise on our existing service, quality and reputation.

How do you see the next couple of years shaping up for Oceaneering?

One of our goals is to be a technology company and due to our ambitious targets for growth we prioritize investing in new technology and training. With professional expertise and top trained personnel, we will continue to be best in class at what we do and build on the expertise we have. Trust is a key, internally between all departments and externally with customers, partners and suppliers. We are never better than the weakest link and we will continue to set high goals in order to help maintaining our position in the market.

Over the recent years, we have worked on establishing the company’s core values and we aim to be even more innovative and creative going forward. Actually, in Norway the employees have selected humour as one of the core values. We all strongly believe humour creates a positive work environment that fosters creativity and innovation. This demonstrates the health and wellbeing of any organization and when we as a firm exert little bureaucracy and trust in people’s decisions we enable our employees to grow in their roles. I am proud to be part of an innovative company where we hold each other accountable for living the core values. Maintaining and developing the core values within the organization is both important for the success of our projects and for retaining and attracting people to work for our organization.

This year Oceaneering marks 40 years’ operating in Norway and our plan is to still be around for the next 40 years to come. We are preparing for future growth and are now establishing another facility at Forus where we will consolidate our five offices in Stavanger We are optimistic about the future and we anticipate that demand for our product and services will continue to rise and believe our business prospects for the next several years are promising. Our strategy right now is to continue to deliver to our clients’ expectations and in addition, bring Norway up to the same breadth of portfolio as the company enjoys globally. This is an exciting time for Oceaneering. I will use this opportunity to recognize and thank our employees! Their commitment to safely provide high-quality solutions to our clients needs is the foundation of our continued success. We are looking forward to the contribution they will make to our future operations and growth. We are looking ahead together – in a young industry with a great future!

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