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LONDON (Alliance News) - The chairman of Plexus Holdings PLC will use his annual general meeting speech later Thursday to highlight the company's advantages over other oil service companies as the sector continues to be hit by lower levels of activity and spending cuts caused by the falls in oil prices.
The oil services sector, which provides equipment and services to oil and gas companies to get new projects off the ground and to maintain existing projects, has seen its environment begin to deteriorate in 2015 as the fall in oil prices since the middle of 2014 began to bite, causing activity levels to drop - with this slowly trickling through to the sector.
However, Plexus has a major differentiator to its peers through its unique and proprietary technology, namely its POS-GRIP wellhead system and its newly launched Python subsea wellhead.
"We enter the current cycle as the owners and developers of a superior, safer, and more cost effective method of engineering which sets us apart from our competitors, and we will exit this cycle with the same unique set of advantages at a time when such features are more important than ever before," Chairman Jerome Thrall will state.
Plexus is of the view that its technology can save oil and gas companies money - a huge selling point in the current climate - whilst offering superior performance and safety which will allow its technology to continue to thrive even once the cyclical oil cycle returns to better days.
Although safety and regulation are already tight in the oil and gas industry, Plexus believes its superior systems will benefit in the future because standards will be eagerly watched by regulators going forward following the Volkswagen emissions scandal and recent climate change reports - placing further pressure on companies to use the best equipment possible.
Thrall said the company is only "seriously beginning" to address the larger subsea market and the volume surface production wellhead markets with its POS-GRIP system.
On top of that, Plexus has started to establish commercial relationships outside of its North Sea home-ground where it currently generates most of its business, providing the company with geographical expansion options.
The slowdown in activity in the UK North Sea is due to falling prices as the area is considered one of the most expensive areas in the world to operate due to its mature fields. As oil and gas companies make tough decisions on dropping projects because they are uneconomical, Plexus offers systems that allow oil to be extracted at only USD20 to USD30 per barrel - making fields economical even at current oil prices, with oil trading at over USD40 a barrel on Thursday.
The North Sea will remain an important area for the business, with Plexus launching new products like the Python subsea wellhead which has been rated as a new best in class and safest standard for subsea wellheads - once again demonstrating the company's superior technology.
That rating was awarded at the SPE Offshore Europe Conference and Exhibition 2015 in September.
"Python has evolved from a Joint Industry Project started over four years ago and supported by a range of major international oil companies including BG, eni, Maersk, and Total to becoming a fully-fledged subsea product where we will be looking to run a prototype in the second half of 2016 calendar year," said Thrall.
"Python offers a unique range of features including instant casing hanger lockdown and metal-to-metal high integrity sealing whilst eliminating the need for many complex components that all of our competitors' designs require including lock rings, lockdown sleeves and wear bushings," he added.
Significantly, the subsea Python system can be installed using fewer trips, with independent surveys suggesting oil and gas companies can save between USD1.0 to USD2.0 million depending on the water depth by using the system over alternatives.
In 2015, Plexus has struck numerous deals, including one with Total for the Python system to drill the highest pressure well ever to be drilled in the North Sea offshore Norway, alongside other deals for Python and other systems with giants like Centrica PLC and Maersk.
"The most important commercial relationship that we were pleased to cement since the period end was the signing of our first major licensing agreement with Yantai Jereh Oilfield Services Group Co. Ltd in China to facilitate the rental, sale, and manufacture of our wellhead equipment to China, Brazil, Indian and Middle Eastern markets," said Thrall.
Although its global expansion has started, it will take time for the company to establish itself in those new markets but Plexus is already experiencing sales leads and interest, said Thrall.
"Looking further into the future there are some interesting and powerful market and industry dynamics evolving which are increasingly driven by the global drive to reduce CO2 emissions as part of the ongoing climate change dialogue and debate as highlighted by this month's 2015 Paris Climate Conference," said Thrall.
"The reason why this is so relevant for our company is that Plexus' technology is uniquely suited to providing safer and more cost effective wellhead solutions for gas drilling which is why our equipment was selected by Total for the highest pressure well ever drilled in the North Sea, at a time when gas is being seen as a "clean" hydrocarbon in comparison to coal and oil. This could in the longer term be a very positive driver for our business," he added.
Plexus shares were trading up 0.6% to 175.0 pence per share on Thursday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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