RNS No 8026p
INTERNATIONAL TOOL & SUPPLY
2nd October 1998
PART 2
INFORMATION ON OFFSHORE TOOL & ENERGY CORPORATION ("OTE")
Introduction
On Admission, Offshore Tool Energy Corporation will be a provider of a range
of equipment and services for oil and gas, marine and industrial applications
worldwide. It will specialise in the construction and repair of offshore
cranes, the manufacture of equipment and component parts for the offshore oil
and gas, dredging, marine and mining industries, the manufacture of engineered
systems for enhanced oil recovery projects and the marketing and servicing of
a range of oil and gas production and environmental products.
OTE, which will be headquartered in Mobile, Alabama, USA, will serve major and
independent oil and gas production companies, engineering firms, shipyards,
drilling contractors and dredging and mining companies, many of which are
located in the Gulf of Mexico region.
OTE will operate four manufacturing and four service facilities positioned
along the US Gulf Coast from Houston, Texas to Mobile, Alabama. In addition,
OTE will operate six service and repair centres located in Nigeria, Singapore,
Malaysia, Scotland and the US.
Background
OTE has been formed in order to combine the businesses of two separate groups,
the Aero Business Units and the ITS Companies. These two groups have operated
in different segments of the marine equipment and oil services industries.
The Aero Business Units
The Aero Business Units comprise American Aero Cranes business unit ("American
Aero Cranes"), Titan Industries business unit ("Titan"), Mobile Pulley &
Machine Works ("MPMW") and Mobile Pulley Marine Services ("MPMS"). The Aero
Business Units were acquired or established by McGowin I. Patrick Jr., Clifton
C. Inge Jr., Byron A. Adams Jr., and W. Steven McKenzie ("the Aero Owners")
from 1993 to 1997.
The Directors of OTE who comprise McGowin I. Patrick Jr., Clifton C. Inge Jr.,
Byron Adams, Jr., the Hon Robert Rayne and Bernard J. Duroc-Danner ("the OTE
Directors") believe that American Aero Cranes and Titan, the Crane Division,
form one of the largest US manufacturers of offshore cranes, having designed
and commissioned numerous cranes operating in many countries worldwide, and
that the Crane Division forms one of the largest providers of on-site
maintenance services and parts for cranes in the oil and gas industry. In
1996, the Crane Division entered the crane rental market and currently rents
six offshore cranes to offshore oil and gas operators.
MPMW and MPMS, the Marine Equipment Division, manufactures component parts
used in the offshore and marine industries such as gears, winches, ball
joints, pumps, valves and fittings. The Marine Equipment Division also has the
ability to machine castings and assemble components. This allows the division
to offer a comprehensive manufacture and assembly service to clients.
McGowin I. Patrick, Jr. and Clifton C. Inge, Jr. were responsible for creating
the group. Through IPC Industries, Inc. ("IPC"), Mr Patrick and Mr Inge
acquired MPMW in 1993. Later that year, they established MPMS. Byron A. Adams,
Jr. and W. Steven McKenzie were introduced into the management team when the
group acquired American Aero Cranes and Titan in 1997.
The ITS Companies
The ITS Companies comprise ITS Investments Inc. which operates the Engineered
Systems Division and ITS Holdings Limited which operates the Drilling Services
Division. The ITS Companies are currently subsidiaries of ITS. ITS
Investments Inc. also operates the Drilling Services Division's operations in
the US. The ITS Companies are currently subsidiaries of ITS.
The Engineered Systems Division manufactures and markets enhanced oil recovery
("EOR") equipment, oil and gas production equipment, oil field and industrial
water treatment equipment and provides custom fabrication services. The
division incorporates approximately thirty years' experience in the skid
mounted steam generating equipment industry.
The Drilling Services Division is a rental, sales and services business
trading within the oil and gas industry. It provides environmental management
systems through its products and services: Aberlan clean up and mud recovery
equipment; Scavenger waste compaction equipment; DSD oil based mud drill
cuttings and crude sludge disposal systems; waste Incineration services; SECO
mud mixing and shearing systems; and STS filter screens.
The Merger
A description of the transactions which have already taken place and which
will take place before and on Admission in order to effect the merger of Aero
and the ITS Companies ("Merger") is contained in the Admission Document.
Group operations
The business of OTE is to be run through its four business units: the Crane
Division, the Marine Equipment Division, the Engineered Systems Division and
the Drilling Services Division.
CRANE DIVISION
The Crane Division engineers, manufactures, rebuilds and provides replacement
parts for cranes for marine applications. These applications include offshore
platforms, offshore mobile drilling rigs, floating dry-docks, dockside and
shipboard services. The Crane Division also offers crane repair, overhaul and
refurbishment services worldwide through service centres located in the US
Gulf Coast Region, Malaysia and Nigeria.
American Aero Cranes and Titan, the two business units which together comprise
the Crane Division, produce different brands of cranes. American Aero Cranes
is based in Mobile, Alabama. Titan is based in Covington, Louisiana.
Products
Both of the business units in the Crane Division manufacture pedestal-mounted
hydraulic and mechanical cranes for use offshore. The Crane Division offers
customers a wide range of options and capabilities with its four series of
cranes: the Baymaster, the Gulfmaster, the Oceanmaster, and Titan.
Design
Crane design is generated through an in-house engineering staff. The staff
utilises computer design methods to meet client requirements. The computer
operated designs are tested by independent engineering companies.
Manufacture
For each series of cranes, the Crane Division purchases certain components
(for example, engines, winches, and bearings) and fabricates the crane to
customer specifications. The structural crane components are predominantly
fabricated in house, which assures strict quality control as well as
interchangeability of components on the Crane Division's manufactured cranes.
Blasting and painting are also performed predominantly in house. All of the
cranes are manufactured in accordance with American Petroleum Institute
("API") specifications. The components of each crane are built of
high-strength, low alloy steel for both durability and ease of repair.
Marketing
The Crane Division's sales personnel monitor offshore platform construction
activity in order to identify the needs and requirements of companies
undertaking these activities. Many of the Crane Division's sales are made to
engineering and construction companies such as J.Ray McDermott Engineering,
LLC or Brown Root Far East Engineering PLC as opposed to end users.
Servicing and parts
The Crane Division provides crane service and inspection from its five service
centres located in Nigeria, Malaysia, Houston, Texas (USA), Houma, Louisiana
(USA) and Covington, Louisiana (USA).
Each service centre is staffed with experienced professionals and stocked with
spare parts, tools and equipment. The division's technicians are available 24
hours a day, 365 days a year. The division also offers management services for
preventative maintenance, complete with computerised reports, scheduling and
repairs. Crane parts typically stocked by service centres include high-use,
commonly replaced items.
The Crane Division does not enter into long term repair contracts. The
division puts in place master service agreements with many of its customers.
These agreements specify a start date but no end date. The agreements may be
terminated by either party by giving 30 days written notice. The agreements
specify hourly labour rate for service work. No quotations are given for parts
or materials.
Rental
The Crane Division markets a rental fleet of six cranes. The OTE Directors
believe that there is a shortage of API-standard cranes in the market for
rental cranes and the division is in the process of constructing two new
API-standard cranes to offer for rent.
Rental Operations
Four cranes are available for rental in the Gulf of Mexico and two are
available in Malaysia. All of the rental cranes are designed for use on a
variety of platforms with substructures and beams that allow rapid assembly
and dismantling. The OTE Directors believe that by renting cranes, the Crane
Division's customers are able to avoid capital investment and maintenance
costs. Providing rental services increases the utilisation of the Crane
Division's existing manufacturing and service infrastructure, and increases
the Crane Division's market presence. The Crane Division is able to identify
potential rental opportunities through its activities in selling and servicing
cranes.
Facilities of Crane Division
The Crane Division's primary crane manufacturing facility is located on 11
acres near Mobile, Alabama with approximately 40,000 square feet of
manufacturing space under roof. The Crane Division also owns a crane
manufacturing and service facility in Covington, Louisiana consisting of
approximately 20 acres of land and 35,000 square feet under roof.
The division also has a facility in Houston, Texas, which is used for service
and limited manufacturing. This latter facility consists of one manufacturing
building with 12,000 square feet under roof and 5,000 square feet of open air
facilities on approximately eight acres of land. Also, the division owns a
9,500 square foot facility in Houma, Louisiana for crane repair services and
recently improved an additional two acres of land to assist the expansion of
this service centre. The Crane Division also operates service and repair
centres in Nigeria and Malaysia.
Customers
The Crane Division's customers in its offshore crane operations are major and
independent oil and gas exploration and production companies, drilling
contractors, and other marine construction companies. The five most
significant customers of the Crane Division's during fiscal year 1997 were
Chevron Co., USA, Shell Offshore, Inc., Halliburton Inc., Noble Drilling
Corporation and Handal Engineering Inc. Customers that account for a
significant portion of revenue in one fiscal year may represent an
insignificant portion of revenue in subsequent fiscal years.
Some of the division's major customers in the offshore crane service market
include Chevron Co., USA, Shell Offshore, Inc., Texaco Co., Halliburton, Inc.,
and Exxon, USA.
In fiscal year 1997, approximately half of the Crane Division's manufactured
cranes were sold in the US. The large majority of the Crane Division's
products are sold to companies in the oil and gas industry.
Market
The OTE Directors believe that the construction business for offshore cranes
is highly competitive. In recent years this market has been characterised by
over-capacity, which has resulted in substantial pressure on pricing and
operating margins.
The Crane Division competes with several crane manufacturing businesses
worldwide. The division focuses its crane business exclusively on the offshore
and marine markets. Most of the Crane Division's largest competitors are
located in the Gulf of Mexico region. The crane service and repair business is
highly fragmented and most of the Crane Division's competitors that provide
similar services are also located in the Gulf of Mexico region. The OTE
Directors believe that crane manufacturers and service companies compete on
the basis of quality, price, service availability of spare parts and
reliability.
Employees
The Crane Division employs approximately 235 full time staff. None of the
employees are represented by collective bargaining agreements.
MARINE EQUIPMENT DIVISION
The Marine Equipment Division manufactures component and replacement parts
used in the offshore oil and gas, dredging, marine and mining industries such
as gears, winches, ball joints, pumps, valves and fittings. The division has
the ability to offer a comprehensive service in engineering, machining and
assembling component parts.
The Marine Equipment Division owns and operates a foundry in Mobile, Alabama
which produces large castings and also has smaller fabrication and machining
facilities on Pinto Island in Mobile, Alabama. The Marine Equipment Division
also provides a fabrication and machining facility at two vessel drydocks in
Mobile, Alabama.
Following the acquisition of MPMW, which owns and operates the foundry, by
McGowin I. Patrick, Jr. and Clifton C. Inge, Jr. through IPC in 1993,
Mr.Patrick and Mr.Inge founded MPMS, which operates from the smaller facility
on Pinto Island, in Mobile, Alabama, to fabricate smaller items and
sub-assemble machinery, many of which are supplied to MPMW.
Products
The Marine Equipment Division's foundry operation designs and manufactures
original equipment and replacement component parts, including customized
pumps, cutter-heads and ball joint products for the dredging and mining
industries. Most of the pumps designed and manufactured by the division are
custom made according to the specific requirements of each order.
The division manufactures components for the oil and gas industry including
gas compressors and cable drums.
The Marine Equipment Division also performs welding, fabrication and repair
services on equipment used in the offshore oil and gas and the dredging
markets.
Design
The Marine Equipment Division has its own engineering and design staff. The
division's engineers meet directly with customers to develop product
specifications. The engineers create unique designs utilising, wherever
possible, characteristics taken from earlier designs of similar products
supplied to the customer. The engineering department maintains an extensive
library of original designs and files.
Many of the division's jobs involve some custom design for a customer's
specifications. The designs are then translated into a wooden pattern by
experienced craftsmen. There are over 7,000 patterns in storage at the
division's facility that can be used to manufacture new parts for the
replacement market. A pattern may cost up to $50,000, and the OTE Directors
estimate the entire inventory of patterns to have a replacement value of
approximately $20 million. The Marine Equipment Division possesses the only
existing patterns of the parts which it designs and customers are therefore
likely to come back to the division to replace customized equipment.
Facilities
The Marine Equipment Division's largest facility is located on a 25-acre site
in Mobile, Alabama, with approximately 280,000 square feet under roof. The
manufacturing buildings include a foundry and machine shop of approximately
100,000 square feet each, which produce large steel and iron castings. The
Marine Equipment Division also operates a 30,000 square foot fabrication and
machining facility with water access of 24 feet which is located on Pinto
Island in Mobile, Alabama.
The Marine Equipment Division also owns two drydock facilities used to service
dredging and waterfront customers along the Alabama River at Pinto Island,
Mobile, Alabama.
Customers
The Marine Equipment Division's largest customers in the dredging industry
vary from year to year, depending upon which companies are awarded US Army
Corps of Engineers dredging contracts. Its major customers in recent years
have included Great Lakes Dredge and Dock Company, Weeks Marine, T.L. James
Company, and the Suez Canal Authority. Because of its possession of unique
custom made parts and patterns, the Marine Equipment Division derives a
significant portion of its revenues from maintaining repeat business from
existing customers. The Marine Equipment Division's dredging equipment is
currently being used to deepen the ports of New York, Los Angeles and Oakland.
In the mining industry, the Marine Equipment Division's main customers are
IMC/Agrico and PCS Phosphate, which is based in Aurora, North Carolina, and
Syncrude, a Canadian company which mines from the tar sands regions in that
country.
In the oil and gas industry, the Marine Equipment Division's main customers
are Friede Goldman International, Continental Emsco, Inc., and Cooper Energy
Services.
A substantial part of the Marine Equipment Division's sales are made to the
dredging and mining industries. The balance is made to the oil and gas and
other industries.
Materials and supplies
The Marine Equipment Division has developed relationships with a number of
suppliers of raw materials and finished goods which are used in the
manufacture of its products. None of the purchased parts have only one
supplier but several have a limited number of suppliers. MPMS is a major
supplier of parts to MPMW.
Sales and marketing
The Marine Equipment Division employs six sales representatives. The sales
staff often consult with the Marine Equipment Division's engineering and
design staff in meeting customer needs. The Marine Equipment Division also
contracts with sales and service agents based in Egypt, Holland, Australia,
Japan, Mexico and Venezuela.
Market
The OTE Directors believe that the Marine Equipment Division competes with
companies which manufacture heavy equipment for the mining industry. However,
the Marine Equipment Division derives the majority of revenues from the
manufacture of parts for the dredging industry and is currently a significant
force in the manufacture of dredging products in the US
Employees
As of June 1998, the Marine Equipment Division had approximately 245 full time
employees. Approximately 140 employees are represented by one of three
collective bargaining agreements which are effective for a period of four
years, expiring in March 2002.
ENGINEERED SYSTEMS DIVISION
The Engineered Systems Division, based in Katy, Texas, manufactures and
markets EOR equipment, oil and gas production equipment, oil field and
industrial water treatment equipment and provides custom fabrication services.
Products and services
The Engineered Systems Division designs, manufactures and installs injection
equipment and ancillary products which are used in EOR projects to inject
steam, gas, water or dilutents into subsurface oil and gas formations for the
retrieval of low gravity crude oil. The division incorporates around thirty
years experience in the skid mounted steam generating equipment industry.
The Engineered Systems Division manufactures a range of oil and gas production
equipment including the following items: multiphase production separators
which separate water, gas and oil flowing from a well; wellhead test
separators; free water knockout equipment which conducts the first stage of
water removal from oil; gas dehydration packages; and indirect fired heaters
which heat oil or gas to facilitate its transportation through pipelines.
The division also manufactures pipeline gathering and transmission equipment
for the oil and gas industry including pressure regulating components and
metering skids.
Through its subdivision, Water Technologies, the Engineered Systems Division
manufactures, installs, retrofits and services industrial water treatment
systems. Products include deaereators and demineralizers, systems for ion
exchange, waste neutralisation, waste water treatment, boiler feed water and
purified water for industrial processes. The division's service technicians
provide training to customers and advice to operators on optimising
performance of the water treatment equipment.
The Engineered Systems Division has added custom fabrication services to its
manufacturing activities. Using its facilities, the division fabricates
vessels and other equipment for customers, which the OTE Directors believe
that this activity increases the utilisation of the division's facilities.
The Engineered Systems Division is certified to International Standards
Organisation 9001 and is certified by the American Society of Mechanical
Engineers.
Material and supplies
The Engineered Systems Division has developed relationships with a number of
suppliers and manufacturers of components for its products. Purchased
components do not have only one supplier but some have a limited number of
suppliers. Pumps, burners, controls and pressure switches are manufactured for
each separate project by third party manufacturers. While there are a number
of sources for components, including pumps, the Engineered Systems Division
has developed and maintains strong relationships with a number of its
suppliers, resulting in regular supplies of components.
Components utilised in the fabrication of water treatment equipment are
available from a number of sources.
Product development
Promising results have been achieved in the area of injecting dilutent into
oil and gas formations for the purpose of enhancing the lifting
characteristics of low gravity crude oil. Dilutents, such as naphtha, are
injected into the near well bore area for the purpose of reducing the
viscosity of the low gravity crude oil. The resulting mixture is more easily
transported to the surface. This process has been tested in Venezuela and has
met with success.
Marketing
The Engineered Systems Division is represented in the Middle East, China,
Brazil, Romania, Turkey, the United States and Trinidad and Tobago.
The marketing and process design functions are organised into three separate
units: EOR projects; oil and gas production equipment including pipelines; and
industrial equipment including custom fabrication.
Market
EOR projects in Brazil, China, Russia, Canada and Venezuela contribute the
majority of the Engineered Systems Division's sales. Purchasers have included
several national oil companies. Given the current low price of crude oil and
resulting limitations on capital expenditure, the OTE Directors believe that
the proportion of sales contributed by EOR equipment will fall in 1998.
Custom fabrication is a relatively new area for the division. This service has
experienced demand since its introduction in the refining, petrochemical and
oilfield industries. The OTE Directors believe that the refining and
petrochemical industries are not as sensitive to crude oil prices as EOR
projects.
Major and independent oil and gas companies and domestic US engineering firms
make up the majority of customers for the water treatment equipment.
Approximately 70 per cent. of sales of water treatment equipment are made
outside the US.
Facilities
The manufacturing facility for the division is located on 8.6 acres in Waller
County, Texas, on a site approximately 40 miles west of Houston, Texas. The
facility consists of 5 separate buildings containing approximately 60,000
square feet of covered manufacturing space and 10,000 square feet of office
space. Crane capacities range up to 45 tons. All fabricating, painting,
in-house repair and retrofitting is performed at the facility.
Employees
Currently, there are approximately 86 full time employees at the facility.
Included in the staff are engineers with degrees and one registered
professional engineer. None of the employees are represented by collective
bargaining agreements. OTE has an education assistance programme for its
employees.
DRILLING SERVICES DIVISION
The Drilling Services Division provides products which assist in the
prevention of pollution and environmental damage through its Aberlan,
Scavenger, DSD, SECO and STS product lines and its Incineration service.
Headquartered in Aberdeen, Scotland, the Drilling Services Division was set up
in April 1995, as part of a major reorganisation of ITS. The Drilling Services
Division initially consisted of the three existing operations based in the UK,
Singapore and Houston. The Nigerian operation was added in October 1995. The
division's business has grown significantly since 1995 as a result of the
introduction of existing products into new geographical markets and the
development of new products.
The products are offered on either a sales or rental basis. The Drilling
Services Division provides a package of equipment and support services which
is supported by its offices in Aberdeen in Scotland, Houston in the USA,
Singapore and Port Harcourt in Nigeria.
Products and services
Aberlan is a significant force in the market for equipment which recovers
spilled drilling and other fluids on drilling rigs and production facilities.
The Aberlan equipment range includes the following products: the LRU Liquid
Recovery Unit, a portable vacuum system for the recovery of spilled fluids on
offshore rigs and land locations; the Sludge Gulper and Rig Vac for the
recovery of fluids and sludges with high solids contents such as those found
in mud pits and rig drainage systems; the VPW and GRACO which are high
pressure wash systems for cleaning in offshore and shipyard locations such as
drill floors and pit rooms; and the Expo Clean Zone One certified hot water
high pressure water system.
Scavenger trash compactors are mobile waste compaction systems, designed to
use minimal deck space. They are used primarily to reduce the volume of waste
generated on offshore drilling and production facilities. The Scavenger has
been developed into three separate models, each with optional attachments and
each designed for different applications. The largest Scavenger has a 30 cubic
foot compaction bin; the mini Scavenger has a 10 cubic foot bin; and the
Recycler has a 4 x 10 foot bin.
The SECO mud mixing and shearing system is a low pressure, high volume
shearing system which reduces the time required to prepare drilling fluids.
This system is effective in remote drilling locations when the costs of
transporting chemicals and drilling fluids is high. Some of the SECO range of
shearing systems are designed to be mobile and are used both offshore and
onshore to enhance the mixing and shearing capabilities of existing mud
systems.
Using the Scavenger product line, the Drilling Services Division has developed
an integrated waste compaction to incineration service which disposes of waste
generated from both offshore and land based drilling operations. Bags used in
the division's Scavenger trash compactors are collected from customers and
taken to incineration sites. This Incineration system provides the customer
with a safe and efficient means for the disposal of domestic waste. The
disposal process is certified to conform to environmental standards. The
incineration sites are subjected to environmental impact studies and are
certified by relevant environmental agencies. The incinerators are
manufactured to British Standard 3316.
The STS is a filtering screen for use on the Shale Shakers of drilling rigs.
The screens act as a sieve for removing large cuttings from the well. The
screens are mounted over a support cradle which is fitted into a Shale Shaker
basket. The screen, when torn beyond repair through solids abrasion, is
discarded and replaced by a new one.
Product development and patents
The Drilling Services Division maintains a development programme for new and
existing products and services. In the past year the Drilling Services
Division has developed and introduced two new products, an oil based mud drill
cuttings and crude sludge disposal system and a self tensioning screen.
The oil based mud drill cuttings and crude sludge disposal system, DSD, which
processes and disposes of oily waste materials in an environmentally safe
manner, is an expansion of the Drilling Services Division's incineration
business. It is designed to process up to 3 tons of waste materials per hour.
Contracts are currently in place in Nigeria and the first DSD unit was
commissioned in July 1998.
Patents are either in place or application for patent has been made for the
following products: LRU Liquid Recovery Unit, SECO Homogeniser, STS and the
DSD system. The DSD Patent is owned by DSD Ventures Limited, in which ITS
Holdings Limited has a 50per cent. shareholding.
Employees
The Drilling Services Division employs a total of 50 employees in its four
offices.
Facilities
The Drilling Services Division operates from four facilities. ITS Drilling
Services Ltd which is located in Aberdeen, Scotland is responsible for
supplying the Drilling Services Division's products in the European market.
The Aberdeen facility consists of approximately 3,600 square feet of warehouse
space where the servicing of the rental equipment is carried out. It also
produces and assembles some of the Drilling Services' products, specifically
the Aberlan equipment and STS Screens. The office area of 2,410 square feet
houses the administration and accountancy operations of ITS Drilling Services
Ltd, and the divisional management based in Aberdeen. There are 17 employees
in total.
The division's facility in Singapore supports all the Drilling Services
Division's products in the Far East region. With 567 square metres of
warehouse, workshop and office space all design, assembly and servicing is
conducted at this site. This location employs seven individuals including
management, accounting, sales and service personnel.
The facilities in Port Harcourt, Nigeria, are the base for all sales, rentals
and services of the Drilling Services Division in that country. The
incineration and servicing facilities are located at Onne. The Onne facility
consists of 15,000 square metres and there is a second incineration facility
currently under development at Port Harcourt at the Aker base. The Nigerian
operation employs two expatriate and 20 local employees including management,
book-keeping, sales and service and administration.
ITS Drilling Services Inc., USA, is based in Houston, Texas and provides
support for products in the Americas, including the US, Venezuela and
Colombia. There are three employees responsible for management, sales and
administration.
Customers and markets
In Europe, the Far East and the USA, no single customer accounts for more than
20 per cent. of the division's turnover.
In the Nigerian market a very significant percentage of the Drilling Services
Division's annual turnover has been derived from sales and services to Mobil
Offshore. As the Nigerian operation has become more established its dependence
on Mobil has decreased.
Competition
At present, the OTE Directors believe that there are several competitors to
the Scavenger products range in Texas and the Louisiana Gulf Coast regions,
and one primary competitor in the UK. The OTE Directors are not aware of any
locally based competitors to Scavenger in the Far East and Nigeria.
The OTE Directors further believe that there is one main competitor to the
Aberlan products range in the UK and that the SECO products range has two main
competitors in the Far East.
At present, the OTE Directors are not aware of any competitor that provides
the complete waste compaction and incineration services in Nigeria. The DSD
has certain competitors which provide alternative processes to remove oil from
cuttings. The OTE Directors are only aware of two competitors who operate in
England and Venezuela. The OTE Directors believe that STS has one main
competitor in the UK.
OTE DIRECTORS
Details of the OTE Directors are set out below:
Robert A. Rayne, Non-executive chairman
Robert Rayne, aged 49, has been a director of London Merchant Securities Plc,
the parent company of Westpool Investment Trust Plc, since 1983. He is also
chairman of Golden Rose Communications plc, and among his other directorships
are First Leisure Corporation PLC and EVI Weatherford Inc.
McGowin I. Patrick, Jr., Director, President and chief operating officer
McGowin I. Patrick, Jr., aged 34, graduated from Washington and Lee University
with a B.S. in Accounting and Business Administration in 1986 and began his
career in corporate finance with Suntrust Banks Inc., a large US Bank Holding
Company. During his time at Suntrust Corporate Finance, he advised clients on
mergers and acquisitions and raised debt and equity financing for leveraged
buyouts. In 1991, Mr. Patrick co-founded IP Capital Corporation, a small
merchant bank and real estate investment company. He has been president and
chief operating officer of the Aero Business Units and will fulfil this role
for Offshore Tool Energy Corporation. He has been responsible for the
organisation of the Aero Business Units.
Mr. Patrick will be responsible for OTE's finances at board level and OTE's
vice president of accounting and administration will report directly to him.
Clifton C. Inge Jr., Director and Chief Executive Officer
Clifton C. Inge, Jr., aged 34, graduated from the University of Virginia in
1986 and has worked for Chubb Insurance in New York City and Willis Corroon
Corporation in San Francisco. He then proceeded to earn his master of
marketing degree from the University of Alabama in 1991 and shortly thereafter
co-founded IP Capital Corporation with McGowin I. Patrick, Jr.
He was one of the principals that acquired MPMW and established MPMS in 1993
and has been responsible with Mr.Patrick for the organisation of the Aero
Business Units. He has been chief executive officer for the Aero Business
Units and will fulfil this role for Offshore Tool Energy Corporation.
Byron A. Adams, Jr., Director and executive vice president of business
development
Byron A. Adams, Jr., aged 39, received a bachelor degree from the University
of Southwestern Louisiana and subsequently an MBA from Tulane University in
New Orleans. He has many years of experience in sales and marketing of oil
field services and equipment, having held various management positions with
Oil Gas Rental Services, Inc., a privately held company providing rental
equipment and services to major and independent oil and gas companies.
Mr. Adams is a principal of Aero and will continue his role in business
development for Offshore Tool Energy Corporation. He is a member of the
Society of Petroleum Engineers and has been active within other oil and gas
industry groups.
Bernard J. Duroc-Danner, Non-executive Director
Bernard J. Duroc-Danner, aged 45, is Chairman, President and Chief Executive
Officer of EVI Weatherford, one of the largest oilfield service and equipment
companies in the industry. EVI Weatherford combines a line of completion
systems, artificial lift and drilling products with rental, fishing, downhole
remediation and tubular running services integrated in a worldwide
infrastructure of over 400locations. Previously Mr Duroc-Danner was President
and Chief Executive Officer of EVI, Inc. where he was responsible for OTE's
1987 start up in the oilfield service and equipment business. In prior years
Mr Duroc-Danner worked for Arthur D. Little Inc. and Mobil. He holds a Ph.D in
economics from Wharton (University of Pennsylvania). Mr Duroc-Danner is also a
director of Parker Drilling Company.
Corporate governance
The OTE Board has established two committees of the OTE Board to comprise of a
majority of non-executive directors as the Compensation Committee and the
Audit Committee.
OTE has adopted the Model Code for AIM Companies. OTE Directors and relevant
employees have been briefed on their responsibilities under the Model Code and
procedures have been introduced for its implementation.
OTE intends to appoint two further non-executive OTE Directors in the near
future, one of whom will have relevant experience of, inter alia, the
obligations of companies admitted to trading on AIM.
Current trading and prospects
The Crane Division and the Marine Equipment Division have experienced an
increase in demand for their offshore and marine products and services over
the last year which the OTE Directors believe is due primarily to the overall
increase in offshore production activity worldwide and ageing offshore
infrastructure.
The Engineered Systems Division has experienced stable demand for its enhanced
oil recovery equipment over the last year. The Drilling Services Division has
continued to experience strong demand for its existing products in the last
year and has added two new products to its range.
The price of crude oil is currently near a ten year low. The OTE Directors
expect demand for most products and services for the oil and gas industry to
weaken in the near to medium term as oil companies reduce capital expenditure
in the low oil price environment. In particular, the OTE Directors expect
weaker demand for the enhanced oil recovery equipment of the Engineered
Systems Division. In this trading environment, the pattern of business in the
Engineered Systems Division is expected to be variable, with peaks and troughs
in short term demand based on tendering success. In addition, the Engineered
Systems Division's Water Technologies subdivision is currently
underperforming. The OTE Directors and the senior management of the Engineered
Services Division will therefore continue to monitor the situation and adjust
operation and costs accordingly within that division.
The OTE Directors expect that demand in Asia for the products of the Drilling
Services Division will fall as a result of the economic difficulties in that
area, but that sales will grow in Europe and Africa. The OTE Directors expect
that demand for offshore cranes and component parts will be stable as
customers focus on long-term reserve replacement plans which target offshore
areas.
In the longer term, industry sources predict a rise in oil prices from current
levels. The OTE Directors expect this to cause increased spending among major
and independent oil and gas companies which will increase demand for products
and services for the oil and gas industry. The OTE Directors expect that
several trends will work to increase offshore exploration and production
activity over the next few years which will raise demand for products for the
offshore oil and gas industry. These trends include (i) advances in offshore
drilling and production technology which have reduced the cost of developing
oil and gas fields, (ii) increasing deep water exploration and production
activity, (iii) the opening to foreign investment of certain offshore areas
including offshore Brazil and West Africa and (iv) the ageing infrastructure
of offshore drilling rigs and offshore supply vessels.
The OTE Directors believe that OTE will be well positioned to develop its
business within its chosen markets.
Reasons for Admission
The OTE Directors believe that the future development of OTE will be enhanced
by its admission to AIM. Admission will raise the profile of OTE in the oil
and gas industry, with its customers, both existing and prospective, and with
potential investors. It will provide access to capital and provide liquidity
to the common shares in OTE.
OTE is considering seeking inclusion on the Nasdaq Stock Market when such a
listing would be advantageous or appropriate for OTE in the judgement of the
OTE Board. There can be no assurance as to when, if ever, such inclusion on
the Nasdaq Stock Market will occur.
Strategy
OTE's strategy is to identify markets where it can increase market share and
improve the service and/or depth of products offered to provide its customers
with a low cost package. OTE's long-range corporate objective for each
business unit is to promote growth, both internal and through acquisitions,
and to pursue process improvements which could enhance margins and returns on
invested capital while providing customers with a higher quality service.
Crane Division
The strategy of the Crane Division is to grow its higher margin parts and
service business in the US and elsewhere. The new crane construction business
will search for more cost effective methods to manufacture its products. The
division is presently designing a new series of cranes to compete more
effectively in the drilling end of the crane market.
Marine Equipment Division
The strategy of the Marine Equipment Division is to continue to design and
offer new equipment and services and to utilize this division's reputation in
the marine industry. To accomplish this the division has recently begun a cost
improvement programme to enable it to compete more effectively. The division
has also added more value-added services to its existing dredging customers
and new marine/towing companies by acquiring two dry-docks in Mobile, Alabama.
This enables the division to provide dredger tugboats and barge repair and
refurbishment services.
Engineered Systems Division
The strategy of the Engineered Systems Division is to maintain its position in
the EOR product and service market by building, supplying and operating steam
generators on long term contracts. The division aims to enhance the marketing
and sales of its other equipment through alliances with engineering companies
and to extend its services by offering to build and operate these systems. The
division aims to expand its sales and marketing activities.
Drilling Services Division
The strategy of the Drilling Services Division is to grow its business through
marketing the new product lines, namely DSD and STS, which have become part of
the product range during the last year, through extending the division's
product range into new geographical locations and through examining possible
acquisitions to extend its existing product range.
The City Code
The City Code on Takeovers and Mergers applies to takeover offers for listed
and unlisted public companies considered by the Panel on Takeovers and Mergers
to be resident in the United Kingdom, the Channel Islands or the Isle of Man.
The Panel normally considers a company to be resident only if it is
incorporated in the United Kingdom, the Channel Islands, the Isle of Man or
the Irish Republic and has its head office and place of central management in
one of those jurisdictions. OTE is a Delaware company and its head office and
place of central management will be at Mobile, Alabama, USA. The City Code on
Takeovers and Mergers will therefore not apply to takeover offers for OTE.
Further information in this regard is set out in the AIM Admission Document.
Dividend policy
Bearing in mind the need to further OTE's development activities, the OTE
Directors intend to conserve OTE's cash to fund these activities, and
accordingly do not anticipate that common dividends will be paid during the
early years immediately following Admission.
Stock incentive plan
OTE has put in place a stock incentive plan, a summary of which is contained
in the Admission Document. No options will be granted prior to Admission.
Risk factors
The business of OTE is subject to a number of risk factors and the principal
risk factors perceived by the OTE Directors to be relevant are set out in the
AIM Admission Document.
For further information
Greg O'Brien, Finance Director of ITS 00 1 281 371 3333
Andrew Edwards, Director - Corporate Finance 0171 623 9333
Henderson Crosthwaite Corporate Finance
END
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Ithaca Energy (LSE:ITH)
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