Chris Christie, 7th September 2009
Earlier this year, Altra Energy moved out of its Aberdeen west-end townhouse location to smart premises at the city’s just-completed Union Plaza development.
As much as anything, the move symbolised a fresh start and drew a line under an unhappy past couple of years as boardroom battles led to its prior parent, Vienco, imploding. Indeed, Altra’s now managing director Danny McGowan has lived through a lot of change since he joined newly formed Vienco in 2004. This included taking over the role of general manager at Altra in 2006 following the departure of its then MD.
It became clear from speaking with McGowan that Altra has been passed around quite a bit during its existence, including being owed variously by Smedvig and Abbot Group. By the early-2000s, it had lost focus and was struggling. However, it was plucked for a “good price” out of Abbot by Vienco’s founder, Richard Selwa.
According to McGowan, the majority of the work then carried out was “body shop-driven rather than good, solid study work”.
However, gradually, Altra was steered towards developing more meaningful relationships with a small number of key clients, though in McGowan’s view, its style was somewhat cramped by the fact that Vienco also aspired to become an oil company in its own right.
“It came down to people and relationships, and the key was to develop those re lationships with two or three clients. In all honesty, what got us to where we are today is three clients – BP, Maersk FPSO and Repsol. There was also intermittent engagement with others … a varied spread.
“We experienced steady growth during that time. When I took over, we were five people; we grew to about 12 and kept it at that.
Maybe we could have accelerated that growth but, by that time, the management team of Altra – then Fraser McLeod, Emma Kilner and myself – decided that we were going to try and take it out of Vienco.
“So we took guidance from an old friend of mine, Keith Mair (formerly of 3i). He put us in touch with David Laing of law firm Ledingham Chalmers and the three of us put something together to take to Stephen Turner and the Vienco board.
“That didn’t fly. What we could raise as cash just wasn’t enough. Vienco obviously had a target in terms of what had been committed to shareholders in value. I think they thought that I’d just go away – which I did, but to take stock.”
McGowan particularly sought counsel from Mike Hill, of HitecVision Private Equity (a Norwegian outfit that opened in Aberdeen in 2006), plus he struck up a dialogue with Senergy founder James McCallum. The idea was to take Altra into Senergy, but all McCallum apparently wanted was the people, and not to part with money.
“My view was, in that case, I could set up on my own. I felt there was a lot of value in the three contracts that we had, plus we’d secured one from Talisman. Although these were call-off contracts with no tangible value, the flow of work was good.”
Worried about family commitments, McGowan said he again sought Hill’s counsel. He was asked how much money he needed – £1-2million – and was told that such a small sum was below the radar screen of most potential investors.
“But we chatted it through and we saw that possibly Altra could be the glue to a bigger group. So they went ahead and purchased Altra, we then bought Poseidon Group and, since then, we’ve taken over Bennex, plus Ross Offshore.
“That way, we’ve mapped from drilling management right the way through to subsea products, of which Altra provides the conceptual, process and structural components; Poseidon provides subsea engineering; Ross does drilling management, while Bennex is a more product and ROV-type business.
“One of the things that attracted me to the route I took was that experience taught me that I’m an engineer, have always been an engineer. I’ve never been a businessman and so, if I’m going to run a business and I’m going to try and develop it, God, do I need help.
“People like Mike and the Norwegian board that we have provide that comfort blanket that I need. Although I’m confident in the engineering and technical decisions that I’m taking, with some of the business decisions, it’s good to be able to bounce them off such people and perhaps even take their direction.”
That includes making tough acquisition decisions, such as running the ruler over Aberdeen company Xpediate.
Not that Hitec is an easy master. McGowan admits that, like any money-based organisation, it is challenging to work for – a bit like big oil companies, where the real money is generated by minute attention to detail and leaving nothing to chance.
“All the money is in the detail; little things that I never thought about when I got involved in the business – such as brand protection,” admits McGowan.
“As we start to develop the brand, it’s almost like a no-claims bonus. The more you build it and the stronger it gets, the greater the requirement to protect it, and therefore you keep looking at how you’re seen in the market, where you’re seen and what you do to impact that going forward.
“Guidance, support and sometimes the big stick of venture capital has given me the ability to go out and do what I’m good at, which is winning the work and bringing it through and building the relationships. Hitec has given us strategic support, including provision of a part-time CFO … a chap called Derek Smith, ex of Target Drilling.
“I guess we have a reasonably strong management team that’s beginning to direct the business in the right way. For too long it relied solely on me for technical and business development and, if you like, running the business was just a side issue.
“That was fine with $140 oil because revenue flowed in and was comfortable. However, as overheads grow and with tighter revenues, by taking the steps that we have, we’ve been able to smarten up what we do … operate the business more efficiently … and pass those benefits on to the clients as well.
“We’re now more competitive, even though we’ve taken on a bigger overhead (the new offices).”
McGowan doesn’t have a direct stake in Altra itself. However, he does have a group holding via the so-called topco, in this case STG of Norway.
He thinks that, over the next few years, the individual group brands will be done away with in favour of a common image. This is what Senergy, for example, has done – and has been very successful, too.
“But, first of all, we’ve needed to re-establish Altra, because we had to. We’re not there yet, but I think we’re on the right path. There is, however, a mishmash of perceptions of what the company does because of the different owners that it has experienced.”
To clarify, the key areas of Altra’s business comprise conceptual development, technical integrity and operations support. And the four services offered under these disciplines are process, safety, structural and maintenance reliability.
Geographically, most of Altra’s business lies within Europe and North Africa. However, for example, it has supported Repsol YPF in Argentina for the past two-and-a-half years, in this case working closely with Senergy.
As the business evolves, so it is broadening. This includes decommissioning, which at one time McGowan would not have entertained.
“We’ve done a lot of work on BP Miller; we’re out in Norway doing Valhall, and we’re in the Brents (Shell).
He says, too, that Altra is starting to develop a useful business stream in Norway, with the intention of establishing a permanent presence in Norway during Q4 2009. Currently, the company is operating in that market out of sister firm Poseidon’s offices.
“We’re moving into the London market as well … most likely opening an office during Q1 2010.
“For me, London is very receptive to new ideas … open to conversation. I’ve always felt that, in Aberdeen, sometimes people are a bit up their own importance and have no time to see anyone.
“Not so in London; senior people (operations directors/VPs) at oil companies are prepared to take an hour out of their day to meet with you, explain their business, offer good contacts … that mostly wouldn’t happen in Aberdeen.
“I think Aberdeen’s so driven, so focused on just making money. We offer something slightly different in that we blend the whole aspect of technical integrity together. I don’t think any of our competitors have a blend of skills that matches ours, yet not many people in Aberdeen are interested in listening.
“The attitude is, ‘We don’t want change. We did it this way last year, so let’s just carry on the way we are’.
“That I find frustrating; whereas in the Norwegian, London and even Houston markets there is a feeling of ‘you’re bringing something new to the table’.
“In Houston, they’ve been especially helpful, including offering ways in which we can adapt our offerings to, say, shallow-water Gulf of Mexico and ultra-deepwater.
“London will be the main springboard for North and West Africa. We already do work in PNG and Indonesia. Whether we base that out of Australia or Jakarta or KL, strategically that’s not there yet.
“We may well do a JV in Jakarta just to get through the work that we’ve got; and probably Malaysia where Vetco and FMC have just opened. There may be more sense in doing that than going to Perth WA. I’ve been there and it’s not quite me. If we open in Australia, it will more likely be Sydney, Melbourne or Brisbane and then satellite into Perth.”