Mike Simpson : Interview with energyboardroom.com
29 May 2017
Mike Simpson, CEO of Cansco Well Control, discusses the company's growing global presence as well as their work to develop new services for their clients to meet the current and future needs of the industry. He also comments on the current trends within the industry as well as his ambitions for the future of the company.
As an introduction for our international readers, could you provide us with a brief overview of your operations, as well as one or two of your key agenda priorities?
"It has become very clear to us that today's contract management model for well services must change if the industry is to remain serious about meeting its well control integrity performance standards at the well site."
Our business is focused on the Well Control Equipment (WCE) space at the well-site, more specifically we provide rental WCE solutions to Well Contractors for use during their respective well construction and maintenance activities. WCE is safety critical equipment and our clear priority is always on the integrity of equipment we provide our Customers. In terms of current agenda priorities we are prudently managing our way through the industry's continuing cash crisis, however we are also taking advantage of this down cycle to expand our skills capability, enhance our technical competence, digitalize our business and operational systems, and build a new technical platform for our service delivery in preparation for the emerging need we see in the industry. It has become very clear to us that today's contract management model for well services must change if the industry is to remain serious about meeting its well control integrity performance standards at the well site.
In terms of the portfolio of products and services that you offer, which are driving the most growth for the company currently, and what trends do you see in the future?
Cansco's business is equipment centric and our rental solutions continue to be in steady demand. In recent times our Well Contractor customers are having an increasing struggle with maintaining WCE compliance at their well sites and they have been reaching out to us for help in the form of more comprehensive equipment rental, management and competency services. Concurrently their Well Operator customers have been trying to establish the capability to provide the right level of WCE compliance assurance oversight at the well site. These needs have influenced the expansion in the range of our WCE support services, and we expect steady growth in these areas.
Being involved on both the Well Operator and Well Contractor sides of the WCE compliance assurance issue we have been able to identify how current contract management of well services need to change for the benefit of the industry. For example we believe that to facilitate efficient well delivery for the Well Operator the Drilling Contractors must focus on their primary performance metrics of moving and drilling, and the supporting well site capabilities and competencies such as WCE solutions be provided by industry specialists. Proper well control integrity performance has to be affordable. Some current contract management models put well control integrity performance at risk, forming a significant barrier to building adequate levels of competency at a time when the industry is suffering from a loss of experienced personnel.
We are building credibility around our ability to deliver WCE services that support the well control integrity performance delivery at the well site. We are defining the value of these services, value that our customers will easily recognize. We are absolutely convinced of the need for change in contract management of well services and we are working closely with Well Operators, Well Contractors and equipment manufacturers to make it happen. We know how resistant to change our industry can be; however, we are in this for the long haul.
Looking more broadly at the industry, do you feel that there is a strong level of collaboration across all of the different players?
True to its traditional form the industry talks collaboration during every down cycle, however I don't believe the industry actually achieves as much as it could in realizing the potential of many collaborative intentions. We strongly believe in the need for effective collaboration across all dimensions of the industry as we see this as an essential catalyst for the important changes the industry needs to make. In our world the main players are the Well Operators, the Well Contractors, the WCE services specialist and the equipment manufacturers. We are facilitating discussions with these players to develop a white paper on what we think the industry needs, and together, we are producing the case for change. Unless all parties remain collectively engaged in trying to develop and modify the thinking in the industry with regards to how services are contracted, the changes that we think are needed in the industry are never going to happen.
Who are some of the main clients for Cansco and the moment, and what are some of the key qualities you look for when developing these relationships?
We are providing our services to large and small Well Operators and Well Contractors, both on the national and international business fronts. The depth of relationship varies with the particular Customer need however we particularly seek out Customers that share a passion for performance excellence and are prepared to challenge the status quo in their quest for improvement. We know we can play a very constructive role in the advancement of well control performance and we are enthusiastic about working with like-minded industry players, including our key equipment suppliers. In our service delivery, we must be able to stand behind what we offer, and our relationships with our key equipment suppliers are critical to this.
Given the global scope of Cansco's operations, what was the strategy behind having the company's hub here in the UAE?
The primary reason behind basing our operations here in the UAE was logistics. Our equipment works all over the world, and from Dubai it can be freighted by land, sea or air with ease to any oil and gas province in the world. Apart from offering a great logistics hub UAE also has attractive business framework that is supportive of getting things done.
What specific geographies are keeping you busiest at the moment?
The Middle East is currently where we are most active at this time, and within this region we are seeing activity levels in Oman increasing faster than in other GCC countries. The nature of the oilfields in Oman means it requires a high level of well activity to maintain production output. Accordingly in support of their incremental increases in production in recent times Well Operators in Oman have ramped up their activity levels, and as a result we have seen a significant increase in demand for our services there. I fully expect other countries in the GCC to become increasingly active through this year and next. Meantime we remain prudent in our expansion planning, we see the industry going through a significant transition at this time, particularly in this region, and we would like to see a bit more certainty in what the post transition business landscape looks like before we take our next big step.
What was the driver behind the decision to set up your new facility just last year in Oman?
We had been supporting well operations in Oman from our UAE facilities for many years, and we always maintained a high level of awareness of business needs there. Prior to the current down cycle we had anticipated an increase in demand for our equipment solutions in Oman, in addition WCE compliance assurance needs were increasing and there was a lack of a specialist service provider in the country. This together with a very capable and friendly Omani workforce made it an easy decision to open a new purpose built WCE facilities there. We are currently busier than ever in Oman, with a lot more potential to fulfill.
How do you hope to address these challenges moving forward?
We will use our new technical platform to demonstrate our full range of quality assured WCE and related services and the value they bring when contracted in a non-traditional way. To break with tradition there must be a credible alternative ready to deliver and we will work to demonstrate the industry now has this choice. Well Operators have to be convinced that to preserve the required level of well control integrity performance at their well sites means they will have to contract WCE services separate from the Well Contractors primary services (move and drill in the case of Drilling Contractors).
Given the significant cost pressures that we are seeing in the industry, how do you work to highlight the value-added benefits of your products to your clients?
As WCE compliance is included in Well Contractors scope of work the current round of pricing pressure on these contract-managed well services has directly impacted well control integrity performance at the well site. Accordingly Well Contractors have sought alternative WCE solutions to mitigate contract pricing pain. Non-compliant WCE solutions may reduce costs in the short term but they increase operational risk whenever they are used. Fully compliant WCE solutions such as that provided by Cansco carry the cost of full compliance. Managing the true cost of compliance is therefore a daily dilemma for some Well Contractors.
To show any benefit there has to be an appropriate measuring and comparative standard. However despite being 2017 the industry persists in running a virtually closed book on well control integrity performance at the well site. Few incident data bases exist in the industry and most record only top level release events. Failures in any preventative barriers do not tend to find their way into industry databases. As a result the industry doesn't really know how good or bad its well control integrity performance is. And if you don't know how bad things are to begin with its difficult to show the true value of any benefit.
Every truckload of rental WCE returning to Cansco from our Customers helps to give us a better understanding of the problem, and yes as an industry we have a problem. Based on the number of failures we have observed in equipment due to abnormal operational practices competency at the well site around WCE use is a major issue.
In short, we will be helping the industry better define its well control integrity performance problems and then help fix them.
Looking to the coming 3-5 years, what is your vision for Cansco, where do you hope to lead the company?
Within the next 5 years I expect Cansco to have established a number of new WCE facilities in the Middle East and in at least one other region of the world on the back of our clear leadership position in well control integrity services. I expect to see our first competitors evolve in the WCE services space as the business environment progressively changes allowing the true value of our services to be better realized and recognized in the industry. This down cycle has and will continue to force change, and the resulting change transition will continue for some time to come. At the well site we expect to see greater enforcement of rules and regulations surrounding WCE compliance in the industry, and that is where we will be busiest, providing the assurance of compliant equipment and capable people.
On a more personal note, what motives you each morning to get up and come into the office?
This particular down cycle is creating real opportunity for the type of progressive change that I feel is much needed in the industry. I get up every morning, looking to take another step towards a place where the industry contracts its WCE in a different way, that's my motivation.