SmallCapNews | Got a grip: interview with Graham Stevens, Finance Director of Plexus Holdings

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Got a grip: interview with Graham Stevens, Finance Director of Plexus Holdings

24 April 2009

When Graham Stevens helped to bring Plexus Holdings plc to AIM in December 2005 it was a move designed to smooth the way to the negotiating tables of some of the biggest oil and gas companies in the world.

Just over three years on, finance director Stevens and founder-CEO Ben van Bilderbeek are making impressive headway in convincing those prospective clients to rethink the way they drill for oil.

Plexus is behind a new engineering technique that simplifies and, it argues, improves the critical “wellhead” part of a drilling rig. Wellhead equipment is what drilling companies use to channel and hold in place the lengths of steel casing that are plunged into the sea bed.

Traditional wellheads often involve rather complicated “slip and seal” systems that use seals and lock-rings to hold the piping in place. Plexus’s idea – known as POS Grip – literally squeezes and grips the steel tubing, sealing the system and holding it in place using friction.

It sounds simple, but in recent months alone the system has won the company a £1.7m deal with ConocoPhillips as well as major contract extensions with Shell in Brunei and Egypt. Indeed, its client list now reads like a who’s who of the oil and gas industry.

It’s not bad for a company that started from scratch back in 1995 and in Stevens’ words has “rowed its own boat” ever since.

“After Ben came up with the invention in 1997 it took two or three years and a lot of investment to prove that it would work and to get the formula right,” he explains.

“Having invented it, proved it works, gone out and commissioned the building of some equipment, we then got to the point of getting it into the field and working. We see all of that as a way of setting out our stall. Taking on POS Grip is quite a leap of faith for these companies, and when we win these high profile contracts we are winning them for a good reason.”

And with every new contract win, Stevens says Plexus is reaffirming its message to the industry that it is here to stay. Indeed, he says the company’s ultimate aim is to turn its “stall proving” exercise into some form of joint licensing agreement or joint venture tie-up with a larger company which could take its superior method of engineering and deploy it much more quickly and effectively.

“We view ourselves as the wellhead of necessity rather than the wellhead of choice,” he says. “The reason we are not the wellhead of choice is mainly because we are not big enough to service everyone around the world - our major competitors are multi-billion dollar companies. What we’d like to do is become a new industry standard and we think we’re making good progress on that front.

“People tend to come calling when they have got a project which is a bit more challenging and fortunately for us that is becoming more and more common because the low hanging fruit in terms of oil and gas is disappearing.

“Ultimately that means companies are having to dig deeper and that leads to higher pressures and higher temperatures. Controlling those conditions is difficult; the basic slip and seal wellhead will just never do it, but we believe our equipment is ideal for those conditions.”

The extent to which big oil and gas players are prepared to go when it comes to high pressure, high temperature drilling was reflected in one of Plexus’ North Sea contracts with British Gas.

“When we were chosen by British Gas to do their 20,000psi work in the North Sea for the first time, they were so proactive that they paid us to get the system accredited to 20,000psi from 15,000psi – simply because they wanted it,” Stevens explains.

“What that also shows is that everything about our equipment is scalable. If you make everything bigger, stronger and heavier it will do more – it will handle more pressure and carry more weight.”

Building a reputation

When Plexus came to AIM in 2005, the company raised £11.0m and had a market cap of £47.3m. In tough markets the value has fallen back to around £20m, but Stevens is clear that the public quotation eased the decision-making process for many of its prospective customers and enhanced the company’s profile on an international level.

It now focuses on renting out its POS Grip wellheads on exploration projects (where companies may only need them for a relatively short time) and in some cases selling the systems for longer-term production jobs.

Looking ahead, Stevens says he is keen to boost the company’s presence in key oil producing regions even further after and recently setting up a small sales operation in Malaysia.

He says the company is now concentrating on building its reputation, increasing its customer base and ramping up industry awareness of what it is doing. He reckons the prospect of some form of licensing or joint venture deal could eventually lead to it having a much larger presence in the industry.

“Our markets are predominantly with the bigger players who are making sounds about continuing to invest in exploration through the cycle,” he says. “The reality is that all oil service companies have been working to capacity over the last five years. But now that the big multi-nationals are having to compete with each other a bit more I think that might encourage one or two to start thinking about how they can spice up their tool box.

“What we need to do is bridge being superior with being able to execute all around the world. In reality we can’t execute all around the world, so we need that missing piece.”

Ben Hobson, SmallCapNews.co.uk