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SBO AV on a victory drill

1. December 2010

From the global slump in the oilfield industry in 2009 SBO AV has come out all fired up in 2010. Be it the 100% acquisition of Dubai-based DSI or the rising sales and profit figures over the year 2010 , this Austrian world market leader in its sector of high-precision oil exploration components is here to make an impact. The Austrian Trade gives its readers a sneak peek into SBO AV’s progress in the year 2010

For Schoeller-Bleckmann Oilfield Equipment AG (SBO AV), an Austrian company specialising in high-precision components for the global oilfield service industry the year 2010 is ending on a positive note. After the industry slump in 2009, this listed company on the ATX market of the Vienna Stock Exchange has improved all the relevant financial figures compared to the first nine months of the previous year against the background of a friendly business environment. Compared to the same period in 2009, the aggregate sales in the first three quarters of 2010 rose by 14.0 % to MEUR 215.2. Bookings in the first nine months of 2010 has also noticeably increased by 249% to MEUR 260.2 following MEUR 74.5 in 2009.
Due to the sustained positive development of the market environment in the oilfield service industry SBO has posted constantly rising sales and profit figures over the year. The third quarter of 2010 ended as the best quarter since the slump of the industry in 2009,” comments Gerald Grohmann, CEO, Schoeller-Bleckmann Oilfield Equipment AG (SBO AV)
A comparison of the second quarter of 2010 with the third quarter of 2010 provides more evidence of the obvious upturn: Sales improved by 18.4 % from MEUR 74.0 to MEUR 87.6, earnings before interest and tax (EBIT) by 72.6 % from MEUR 9.3 to MEUR 16.1. The quarterly profit before tax almost doubled from MEUR 7.9 to MEUR 14.4. Bookings also improved by 14.2 % from MEUR 82.3 to MEUR 94.0.
"At the end of the day, the incident in the Gulf of Mexico, the Macondo oil spill, had no major effect on SBO. As expected, the decline in drilling activities there resulted in compensatory exploration drilling in other regions and onshore, particularly in the USA", explains Gerald Grohmann.
The considerably improved order situation also required personnel upsizing by 138 to now 1,194 employees since the beginning of 2010. In part, SBO could re-hire skilled workers who had to be dismissed during the industry's crisis in 2009.
SBO's equity capital went from MEUR 229.8 at year-end 2009 to MEUR 252.1 as of 30 September 2010. Net debt was reduced to MEUR 10.5 (following MEUR 46.5 at the end of 2009).
As for the icing on the cake was the acquisition of Drilling Systems International Ltd. (DSI). Headquartered in Dubai, DSI is a leading global provider of specialised equipment for downhole circulation technology for oil and gas wells. By renting its tools, DSI generates annual revenues of approximately MUSD 30. DSI's customers include international oil
companies and oilfield service providers. Purchase agreements were signed on 13
September 2010 and the transaction is expected to be completed on 1 October
2010. The parties have agreed not to disclose the purchase price.

"With DSI, we acquire the market leader of an attractive niche in the oilfield service industry. We believe that due to its proven technology DSI offers excellent growth potential and is an ideal addition to our product portfolio. We expect to see significant synergies arising between DSI and BICO, our drilling motor subsidiary, notably for our distribution networks," comments Grohmann

The seller is the founder and sole owner of the company and SBO is acquiring all associated patents and intellectual property rights. The former owner will continue to provide technical consulting services to SBO.

DSI delivers specialised downhole circulation tools which steer the flow direction of drilling muds in the drill string. The company's flagship product is the PBL tool which forms part of the drill string. The main purpose of the PBL tool is to avoid mud losses during the drilling process. Such losses may occur when drilling muds escape into the rock formations. The tool helps to protect costly drill string steering systems (MWD and LWD equipment) from damage and to solve expensive lost-circulation problems. The PBL is also used in deepwater operations to clean the wellhead profile prior to running casing and jetting/washing the subsea blowout preventers (BOPs). SBO's CEO Gerald Grohmann also believes : "Using such a tool could become increasingly important, notably after the incident in the Gulf of Mexico (Macondo Well)".

The PBL tool delivers value to customers through considerable time and cost savings, as the system is highly reliable and easy to operate. DSI's technology makes the company the uncontested global market leader in this niche. The business model structure is similar to that of SBO's subsidiary BICO, which also rents drilling motors to its customers.

In short, with the acquisition of DSI (Dubai), the launch of the new production site in Vietnam and the distribution centre in Brazil, SBO has started to operate three new sites and in turn extended its global presence within approximately two years. Additionally, SBO's subsidiary Knust has also started to establish a new production site in Singapore. This new location is to cover the growing market for SBO- Knust products in the Far East .

( with inputs from a german newspaper Der Standard, Reuters and Bloomberg)