Houston springboard for North East companies

North East firms are winning more work in a booming market in the North America Oil & Gas sector

George Rafferty, chief executive of NOF Energy left, and Paul Charlton, chairman of NOF Energy, right
NOF Energy-Houston

Houston is now home to more than 5,000 energy-related companies and is the headquarters for most of America's largest natural gas transmission companies, 600 exploration and production companies and more than 170 pipeline operators.

Durham-based business development and support organisation NOF Energy, which has more than 470 members, with clusters in North East England and North East Scotland, has recently launched a Houston network to assist businesses in the thriving market.

Deputy Chief Executive Joanne Leng, MBE said: “There are many NOF Energy members working in the area from the UK as well as those based in the US.

“Houston is recognised as a global hub because of the high number of projects that are engineered and procured there and the proximity to the Gulf. The supply chain links stemming from that are extensive and represent extraordinary opportunities for our members.

“We want to help them network and engage more with each other and tap into our business development support.”

One of those taking advantage of those opportunities is CMP Products, based at Cramlington, Northumberland. It has operated a Houston office since June 1999 and has recorded growth every year. It employs 14 people, but will be stepping that up to 20 by the end of the year as contracts keep coming in.

Jamie Hughes, CMP’s Regional Manager – Americas, said: “Our work is largely project specification in the domestic Americas and international projects.

“We work in the upstream and downstream markets and pretty much everything in-between. Our business has grown above expectations each year because we have continually invested in our people, product development and services. We have just tripled the size our office and warehouse space so business is strong and doesn’t look like slowing down any time soon.”

But Jamie also warned that there may not be quick wins for other North East firms. He said: “Don’t expect to fly in and fly out with an order. Be prepared to invest time and resource in the market and you will reap the rewards.”

NOF Energy set up its Houston network to help tackle this sort of challenge and replicate the services and expertise it has applied in the UK. Members meet on a regular basis and will share market knowledge, contacts and experiences of doing business locally, with NOF Energy facilitating the introductions and arranging the networking meetings and events.

CMP has worked on several major products, but has had particular success with Sakhalin Energy, which is developing the Piltun-Astokhskoye oil field and the Lunskoye gas field off the north-eastern coast of Sakhalin island.

“Their development in Russia has provided the most volume,” said Jamie. “We secured project specification in 2001 and supplied to all Sakhalin related projects since then.

“Houston has certainly worked for us, and my advice would be ‘If you want to be successful globally, invest in the Houston market’. But Government policy will play a significant part in the direction of the market, so established firms and newcomers need to keep a close eye on that.”

Industry experts in America say it is a good time for firms weighing up their options and looking for a stake around the Gulf.

The Houston Business Journal has just highlighted a massive surge in mergers and acquisitions in Texas as companies ride the wave out of the Lehman banking era and look to grow – or decide this is a good time to get out while the price for their companies is strong.

But that M&A wave leaves plenty behind for our firms to fight over. Many CEOs exiting the big leagues will still be keen to keep their newly-bulging wallets open as they fish around for the next projects. And those merging or buying will be looking at every contract on their books to see if a few more dollars can be squeezed out or if a newcomer can offer a better deal.

The energy sector accounted for seven of the state’s 10 largest mergers and acquisitions in the first half of this year, according to data from research firm Mergermarket. And of the 27 Texas deals valued at more than $1 billion during that period, nearly half involved energy companies.

Two of the big factors driving this boom are the huge focus on shale gas and access to finance.

Just as here in the North East, shale gas still faces a strong environmental lobby in America, but the sector is far more established and the market is growing at a startling rate.

That means infrastructure and equipment demands in Texas are higher than ever and there is open warfare on the contracts battleground across the state.

The overall market can be split into shale, shallow and deep – each of which have very different requirements. The valves that will be needed on a shallow-water project or on the surface for shale gas extraction will obviously be a different spec to those needed to withstand the pressure a thousand metres under water.

So the opportunities are there in abundance, but the competitive market means reputations can be built almost overnight – and then cast aside just as quickly in the wake of one failed joint or delayed finish.

The market all this activity creates needs money to be available for companies wanting to move fast. The feeling among investors and borrowers is that the Lehman years have been well and truly laid to rest and that strong companies with good business plans can look forward to available credit and low interest rates.

As the Houston Business Journal report points out, even the firms that were at the sharp end of the recession had the business nous to stockpile cash as the markets were shaking and now have the option of moving on deals without needing to underpin their plans with loans.

Don Fenwick, Sales Director at Hydraulic and Offshore Supplies based in Sunderland, is keeping a close eye on the Houston headlines and said: “We’ve been in business for almost 30 years and are constantly exploring new opportunities with companies operating throughout the world.

“A combination of the Houston network and NOF Energy’s support coupled with our own skills and experience gives us everything we need to make inroads into this new market.”

Engineering firm OSBIT Power, based at Riding Mill in Northumberland, is yet another North East firm targeting Houston.

Managing Director Tony Trapp said: “We are taking on new work all the time and are always looking for areas to expand into. The huge amount of groundwork NOF Energy has done in Houston has paved the way for us to fully assess the potential there.

“We now have a head start and can press on with building a strategy to match the requirements of our potential customers and spread the word about what OSBIT and other North East firms are capable of.”


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