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Interview

with Tore Sørheim, Managing Director, i-tec

31.10.2012 / Energyboardroom

Looking at your movement from Baker Hughes to i-TEC, what was your main motivation for changing, and what are your objectives and expectations over the next year?

I had sixteen fantastic years with Baker Hughes, so my transition was not connected in any way to my old employer. I was familiar with i-TEC as a competitor and through common customers, knowing that as well as being a company run by smart people with great ideas, their primary feature were their extraordinary ability to create tangible tools, technologies and applications from those ideas. The choice to take on this exciting position was obvious. I would like to continue i-TEC’s progress and customer reputation, as well as develop the technical portfolio of the company to achieve the goals and visions that we have. In addition to our current range of products, we have many tools on the drawing board that we will bring into real life to complete our portfolio.

There is always a risk in transferring from a giant company, offering stability to a much younger company; however, given the current market situation, my experience and my knowledge of the market, the risk was relatively low.

What experiences from BH have you brought to your management style here?

BH has a very broad portfolio of technical tools, features and applications. Getting to know the market and well construction process from A-Z is a great experience from BH. i-TEC has smart people and great ideas, and the focus on the i-TEC niches is a significant contribution to the success. BH taught me a lot about the entire process and I will bring that to i-TEC to ensure that our niches also are understood as part of the complete well construction process. BH also taught me about HSE focus, quality focus and structure. Structure can be overwhelming in larger companies. Having a sense of structural ideas and how you use it is something that can benefit smaller companies. I will take my experiences from what I have seen practiced in BH and make it work better here.

i-TEC has only been around for six years, and it already has offices across the U.S. and Canada. How did the company expand so quickly compared to other companies that are still developing?

Coming from a larger company I know that developing ideas and tools takes a lot of time because bigger companies have processes and gatekeepers that slow down the process. One of the first products that i-TEC made, the i-Valve took, from the initial concept as a request from the customer to a tested tool on the ground qualified according to the customer’s specifications, 67 days. The enthusiasm that I mentioned in terms of engineering has been the approach and culture of the entire organization. When i-TEC’s employees can create and market such tools, they can characterize its unique properties directly to the customer.

The reason for the worldwide status of i-TEC products can be attributed to the company’s efforts and money being put into right products directed to the customers and markets that needed these products. There is an element of guts involved in all of this. When companies like Statoil, ConocoPhillips, BP, Exxon or Shell are looking for suppliers they mainly relate to businesses such as Baker Hughes, Schlumberger and Halliburton, all who have broad portfolios with great people but heavy time-consuming processes and systems. The engineers in those operating companies really want to be engineers but when you have to plan two years ahead, you might not always have the opportunities of an engineer to challenge your own innovative desires because your work is based on something decided two years ago. When engineers get the opportunity to really be themselves and create solutions with a much shorter timeline from idea to an actual tool, their enthusiasm increases. That is one of the main things that made i-TEC a popular partner for cooperation and innovation with operating companies.

Mr. Kyllingstad said that in Norway, there is a distinct lack of entrepreneurship compared to innovation. To what extent do you agree with this statement?

He has a point. There are plenty of great ideas with market potential but it is not always promoted, marketed and sold to its full potential. Nevertheless, one of the main features and historical selling points of i-TEC is to take an innovative idea and really endorse it well. On a general basis I would agree with Mr Kyllingstad, but again I think that i-TEC have had success based on our own entrepreneurship.

We have many unique products; furthermore, we have an entire drawer of ideas that is still full. The plan is to open that drawer a little and prioritize those really amazing products that we know we can market in Norway and showcase to the world. We have some truly unique tools that have great potential for the future.

Developing i-TEC’s U.S. operations is capital intensive; it costs a lot of money to invest in infrastructure, organization and inventory. Given the growth that we have had in the States, we prioritize how to spend our R&D funds. We are hiring additional employees in our engineering department because we want to invest more and get those really amazing ideas to the marketplace. When it comes to funds and percentages, it is a matter of generating that business case in which our shareholders will happily invest.

With a rapid response time from idea to product, many of the smaller companies have a problem trying to get their technology into the market because many of the big companies with the exception of Statoil are very unwilling to test first time products. In that sense, you must a have a real advantage over competitors with your turnaround time?

Our ideas mainly come from operating companies, although not necessarily Statoil. The i-Frac had its first installation in a well in Norway for another operator. We develop, manufacture and qualify tools according to customer specifications, and they are a very integrated part of our development and testing process, so they really know what they are getting. That is important to get by and get the opportunity for a first installation.

What would you say is the biggest technology potential in terms of contributing to the NCS? Is there something in particular that you see about i-TEC’s products that set it apart from its competitors?

Absolutely. Our i-Frac system, which was designed for Norway and is used now in the States, is a frac valve. Using this system in comparison to conventional methods saves massive amounts of time. For Norway, the frac market is primarily focused on the carbonates in the south, while most of the reservoirs on the NCS are sand-based, where fracking is less of an issue when it comes to wells. That is why I make the link to Denmark and the UK, as they have the same types of reservoirs that we have in the southern North Sea. Our i-Frac as a technology has more options and opportunities that are appropriate for that application than others. Additionally, the i-Frac is a development of our first tool, the i-Valve, which also has many applications in sand reservoirs. Taking that i-Valve into sandstone reservoirs and applications for the product there, is one of our main focus points aimed to broaden the market for our Norway operations.

In terms of internationalization, you have a couple of offices in the United States and Canada as well. Do you think this technology can be marketed on the same cost-basis to other markets around the world?

Our current operations in the States have potential in Russia, the Middle East, and West Africa. While we have focused on the Norwegian Continental Shelf (NCS), we have similar opportunities in the southern North Sea in the UK and Danish sectors.

i-TEC was founded in Norway several years ago predominantly with Norwegian applications in mind. However I would say that the greatest potential in terms of revenue and growth lies on U.S. soil, where we have taken many of our components and harvested the applications and opportunities there. Our i-Frac valve is being used frequently in the U.S. and will be used even more worldwide in the years to come. Similarly, in regards to the entire company, our main goal for the future is consistent growth across the Atlantic. At the same time, we are also prioritizing the development of i-TEC’s portfolio of lower completion tools fit for the Norwegian and North Sea market. Our two main focuses are: to harvest American opportunities, and to further develop our portfolio to meet our goals.

The increase in human labour costs is an issue for many Norwegian companies, who are outsourcing their work to nearby countries. How do you deal with that here?

We are split evenly between Norway and North America, with roughly 28 employees in each location. That is not connected to labour cost; it is just a result of where our work actually is and where we have our tasks. We manage our personnel cost here and we do not plan to move offices abroad solely for the purpose of cheaper labour. We intend to stay in Norway as long as we have work here.

While small companies can create innovative products more quickly, in the global market there are challenges in terms of bigger competitors making similar products. What are your main challenges in terms of competing with those companies?

I would say that the main challenge is to find those products that our competitors do not have. This is what we did with the i-Frac and what we will do with some of our other tools as well. We want to make unique products that are fit for specific applications. We cannot make another tool that Schlumberger or Halliburton already sells and expect to gain market share by reputation or price. So finding those unique niches in which we can excel will be our main driver. Those are the prioritized tools in that drawer from which we will select.

One of my plans is to maintain what i-TEC has been doing in terms of innovation. There is a culture of innovation and a real desire to turn those smart ideas into a useful product, and we have the right people in i-TEC to achieve this. My challenge is to nurture and maintain this mindset and as we grow, we can sustain this focus and enthusiasm rather than becoming another company that spits out tools that we have designed in the past.

Where can we expect i-TEC to be in five years’ time?

It is difficult to say; after being here for a short while I would say that we will adhere to our vision of being a reservoir completion provider. We have no ambition to fight with BH and Halliburton in terms of having a really broad range of tools. We will be the best in the world in our assortment of lower completions. In five years i-TEC will have its portfolio of the complete tool suite done and we will be the preferred partner and supplier to the operating companies for those systems.

i-TEC is really great at what we do and we have really ambitious plans to maintain our greatness, but inside our niche.

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