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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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Intechnology | LSE:ITO | London | Ordinary Share | GB0001388932 | ORD 1P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 24.00 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
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0 | 0 | N/A | 0 |
RNS No 8027q INTERNATIONAL TOOL & SUPPLY PLC 2nd October 1998 The announcement of Scheme of Reconstruction Part 2 released today, was issued incorrectly under the Company name of Internet Technology PLC The announcement should have been released under the correct Company name of International Tool & Supply PLC The full text shown below remains unchanged. PART 2 INFORMATION ON OFFSHORE TOOL & ENERGY CORPORATION ("OTE") Introduction On Admission, Offshore Tool Energy Corporation will be a provider of a range of equipment and services for oil and gas, marine and industrial applications worldwide. It will specialise in the construction and repair of offshore cranes, the manufacture of equipment and component parts for the offshore oil and gas, dredging, marine and mining industries, the manufacture of engineered systems for enhanced oil recovery projects and the marketing and servicing of a range of oil and gas production and environmental products. OTE, which will be headquartered in Mobile, Alabama, USA, will serve major and independent oil and gas production companies, engineering firms, shipyards, drilling contractors and dredging and mining companies, many of which are located in the Gulf of Mexico region. OTE will operate four manufacturing and four service facilities positioned along the US Gulf Coast from Houston, Texas to Mobile, Alabama. In addition, OTE will operate six service and repair centres located in Nigeria, Singapore, Malaysia, Scotland and the US. Background OTE has been formed in order to combine the businesses of two separate groups, the Aero Business Units and the ITS Companies. These two groups have operated in different segments of the marine equipment and oil services industries. The Aero Business Units The Aero Business Units comprise American Aero Cranes business unit ("American Aero Cranes"), Titan Industries business unit ("Titan"), Mobile Pulley & Machine Works ("MPMW") and Mobile Pulley Marine Services ("MPMS"). The Aero Business Units were acquired or established by McGowin I. Patrick Jr., Clifton C. Inge Jr., Byron A. Adams Jr., and W. Steven McKenzie ("the Aero Owners") from 1993 to 1997. The Directors of OTE who comprise McGowin I. Patrick Jr., Clifton C. Inge Jr., Byron Adams, Jr., the Hon Robert Rayne and Bernard J. Duroc-Danner ("the OTE Directors") believe that American Aero Cranes and Titan, the Crane Division, form one of the largest US manufacturers of offshore cranes, having designed and commissioned numerous cranes operating in many countries worldwide, and that the Crane Division forms one of the largest providers of on-site maintenance services and parts for cranes in the oil and gas industry. In 1996, the Crane Division entered the crane rental market and currently rents six offshore cranes to offshore oil and gas operators. MPMW and MPMS, the Marine Equipment Division, manufactures component parts used in the offshore and marine industries such as gears, winches, ball joints, pumps, valves and fittings. The Marine Equipment Division also has the ability to machine castings and assemble components. This allows the division to offer a comprehensive manufacture and assembly service to clients. McGowin I. Patrick, Jr. and Clifton C. Inge, Jr. were responsible for creating the group. Through IPC Industries, Inc. ("IPC"), Mr Patrick and Mr Inge acquired MPMW in 1993. Later that year, they established MPMS. Byron A. Adams, Jr. and W. Steven McKenzie were introduced into the management team when the group acquired American Aero Cranes and Titan in 1997. The ITS Companies The ITS Companies comprise ITS Investments Inc. which operates the Engineered Systems Division and ITS Holdings Limited which operates the Drilling Services Division. The ITS Companies are currently subsidiaries of ITS. ITS Investments Inc. also operates the Drilling Services Division's operations in the US. The ITS Companies are currently subsidiaries of ITS. The Engineered Systems Division manufactures and markets enhanced oil recovery ("EOR") equipment, oil and gas production equipment, oil field and industrial water treatment equipment and provides custom fabrication services. The division incorporates approximately thirty years' experience in the skid mounted steam generating equipment industry. The Drilling Services Division is a rental, sales and services business trading within the oil and gas industry. It provides environmental management systems through its products and services: Aberlan clean up and mud recovery equipment; Scavenger waste compaction equipment; DSD oil based mud drill cuttings and crude sludge disposal systems; waste Incineration services; SECO mud mixing and shearing systems; and STS filter screens. The Merger A description of the transactions which have already taken place and which will take place before and on Admission in order to effect the merger of Aero and the ITS Companies ("Merger") is contained in the Admission Document. Group operations The business of OTE is to be run through its four business units: the Crane Division, the Marine Equipment Division, the Engineered Systems Division and the Drilling Services Division. CRANE DIVISION The Crane Division engineers, manufactures, rebuilds and provides replacement parts for cranes for marine applications. These applications include offshore platforms, offshore mobile drilling rigs, floating dry-docks, dockside and shipboard services. The Crane Division also offers crane repair, overhaul and refurbishment services worldwide through service centres located in the US Gulf Coast Region, Malaysia and Nigeria. American Aero Cranes and Titan, the two business units which together comprise the Crane Division, produce different brands of cranes. American Aero Cranes is based in Mobile, Alabama. Titan is based in Covington, Louisiana. Products Both of the business units in the Crane Division manufacture pedestal-mounted hydraulic and mechanical cranes for use offshore. The Crane Division offers customers a wide range of options and capabilities with its four series of cranes: the Baymaster, the Gulfmaster, the Oceanmaster, and Titan. Design Crane design is generated through an in-house engineering staff. The staff utilises computer design methods to meet client requirements. The computer operated designs are tested by independent engineering companies. Manufacture For each series of cranes, the Crane Division purchases certain components (for example, engines, winches, and bearings) and fabricates the crane to customer specifications. The structural crane components are predominantly fabricated in house, which assures strict quality control as well as interchangeability of components on the Crane Division's manufactured cranes. Blasting and painting are also performed predominantly in house. All of the cranes are manufactured in accordance with American Petroleum Institute ("API") specifications. The components of each crane are built of high-strength, low alloy steel for both durability and ease of repair. Marketing The Crane Division's sales personnel monitor offshore platform construction activity in order to identify the needs and requirements of companies undertaking these activities. Many of the Crane Division's sales are made to engineering and construction companies such as J.Ray McDermott Engineering, LLC or Brown Root Far East Engineering PLC as opposed to end users. Servicing and parts The Crane Division provides crane service and inspection from its five service centres located in Nigeria, Malaysia, Houston, Texas (USA), Houma, Louisiana (USA) and Covington, Louisiana (USA). Each service centre is staffed with experienced professionals and stocked with spare parts, tools and equipment. The division's technicians are available 24 hours a day, 365 days a year. The division also offers management services for preventative maintenance, complete with computerised reports, scheduling and repairs. Crane parts typically stocked by service centres include high-use, commonly replaced items. The Crane Division does not enter into long term repair contracts. The division puts in place master service agreements with many of its customers. These agreements specify a start date but no end date. The agreements may be terminated by either party by giving 30 days written notice. The agreements specify hourly labour rate for service work. No quotations are given for parts or materials. Rental The Crane Division markets a rental fleet of six cranes. The OTE Directors believe that there is a shortage of API-standard cranes in the market for rental cranes and the division is in the process of constructing two new API-standard cranes to offer for rent. Rental Operations Four cranes are available for rental in the Gulf of Mexico and two are available in Malaysia. All of the rental cranes are designed for use on a variety of platforms with substructures and beams that allow rapid assembly and dismantling. The OTE Directors believe that by renting cranes, the Crane Division's customers are able to avoid capital investment and maintenance costs. Providing rental services increases the utilisation of the Crane Division's existing manufacturing and service infrastructure, and increases the Crane Division's market presence. The Crane Division is able to identify potential rental opportunities through its activities in selling and servicing cranes. Facilities of Crane Division The Crane Division's primary crane manufacturing facility is located on 11 acres near Mobile, Alabama with approximately 40,000 square feet of manufacturing space under roof. The Crane Division also owns a crane manufacturing and service facility in Covington, Louisiana consisting of approximately 20 acres of land and 35,000 square feet under roof. The division also has a facility in Houston, Texas, which is used for service and limited manufacturing. This latter facility consists of one manufacturing building with 12,000 square feet under roof and 5,000 square feet of open air facilities on approximately eight acres of land. Also, the division owns a 9,500 square foot facility in Houma, Louisiana for crane repair services and recently improved an additional two acres of land to assist the expansion of this service centre. The Crane Division also operates service and repair centres in Nigeria and Malaysia. Customers The Crane Division's customers in its offshore crane operations are major and independent oil and gas exploration and production companies, drilling contractors, and other marine construction companies. The five most significant customers of the Crane Division's during fiscal year 1997 were Chevron Co., USA, Shell Offshore, Inc., Halliburton Inc., Noble Drilling Corporation and Handal Engineering Inc. Customers that account for a significant portion of revenue in one fiscal year may represent an insignificant portion of revenue in subsequent fiscal years. Some of the division's major customers in the offshore crane service market include Chevron Co., USA, Shell Offshore, Inc., Texaco Co., Halliburton, Inc., and Exxon, USA. In fiscal year 1997, approximately half of the Crane Division's manufactured cranes were sold in the US. The large majority of the Crane Division's products are sold to companies in the oil and gas industry. Market The OTE Directors believe that the construction business for offshore cranes is highly competitive. In recent years this market has been characterised by over-capacity, which has resulted in substantial pressure on pricing and operating margins. The Crane Division competes with several crane manufacturing businesses worldwide. The division focuses its crane business exclusively on the offshore and marine markets. Most of the Crane Division's largest competitors are located in the Gulf of Mexico region. The crane service and repair business is highly fragmented and most of the Crane Division's competitors that provide similar services are also located in the Gulf of Mexico region. The OTE Directors believe that crane manufacturers and service companies compete on the basis of quality, price, service availability of spare parts and reliability. Employees The Crane Division employs approximately 235 full time staff. None of the employees are represented by collective bargaining agreements. MARINE EQUIPMENT DIVISION The Marine Equipment Division manufactures component and replacement parts used in the offshore oil and gas, dredging, marine and mining industries such as gears, winches, ball joints, pumps, valves and fittings. The division has the ability to offer a comprehensive service in engineering, machining and assembling component parts. The Marine Equipment Division owns and operates a foundry in Mobile, Alabama which produces large castings and also has smaller fabrication and machining facilities on Pinto Island in Mobile, Alabama. The Marine Equipment Division also provides a fabrication and machining facility at two vessel drydocks in Mobile, Alabama. Following the acquisition of MPMW, which owns and operates the foundry, by McGowin I. Patrick, Jr. and Clifton C. Inge, Jr. through IPC in 1993, Mr.Patrick and Mr.Inge founded MPMS, which operates from the smaller facility on Pinto Island, in Mobile, Alabama, to fabricate smaller items and sub-assemble machinery, many of which are supplied to MPMW. Products The Marine Equipment Division's foundry operation designs and manufactures original equipment and replacement component parts, including customized pumps, cutter-heads and ball joint products for the dredging and mining industries. Most of the pumps designed and manufactured by the division are custom made according to the specific requirements of each order. The division manufactures components for the oil and gas industry including gas compressors and cable drums. The Marine Equipment Division also performs welding, fabrication and repair services on equipment used in the offshore oil and gas and the dredging markets. Design The Marine Equipment Division has its own engineering and design staff. The division's engineers meet directly with customers to develop product specifications. The engineers create unique designs utilising, wherever possible, characteristics taken from earlier designs of similar products supplied to the customer. The engineering department maintains an extensive library of original designs and files. Many of the division's jobs involve some custom design for a customer's specifications. The designs are then translated into a wooden pattern by experienced craftsmen. There are over 7,000 patterns in storage at the division's facility that can be used to manufacture new parts for the replacement market. A pattern may cost up to $50,000, and the OTE Directors estimate the entire inventory of patterns to have a replacement value of approximately $20 million. The Marine Equipment Division possesses the only existing patterns of the parts which it designs and customers are therefore likely to come back to the division to replace customized equipment. Facilities The Marine Equipment Division's largest facility is located on a 25-acre site in Mobile, Alabama, with approximately 280,000 square feet under roof. The manufacturing buildings include a foundry and machine shop of approximately 100,000 square feet each, which produce large steel and iron castings. The Marine Equipment Division also operates a 30,000 square foot fabrication and machining facility with water access of 24 feet which is located on Pinto Island in Mobile, Alabama. The Marine Equipment Division also owns two drydock facilities used to service dredging and waterfront customers along the Alabama River at Pinto Island, Mobile, Alabama. Customers The Marine Equipment Division's largest customers in the dredging industry vary from year to year, depending upon which companies are awarded US Army Corps of Engineers dredging contracts. Its major customers in recent years have included Great Lakes Dredge and Dock Company, Weeks Marine, T.L. James Company, and the Suez Canal Authority. Because of its possession of unique custom made parts and patterns, the Marine Equipment Division derives a significant portion of its revenues from maintaining repeat business from existing customers. The Marine Equipment Division's dredging equipment is currently being used to deepen the ports of New York, Los Angeles and Oakland. In the mining industry, the Marine Equipment Division's main customers are IMC/Agrico and PCS Phosphate, which is based in Aurora, North Carolina, and Syncrude, a Canadian company which mines from the tar sands regions in that country. In the oil and gas industry, the Marine Equipment Division's main customers are Friede Goldman International, Continental Emsco, Inc., and Cooper Energy Services. A substantial part of the Marine Equipment Division's sales are made to the dredging and mining industries. The balance is made to the oil and gas and other industries. Materials and supplies The Marine Equipment Division has developed relationships with a number of suppliers of raw materials and finished goods which are used in the manufacture of its products. None of the purchased parts have only one supplier but several have a limited number of suppliers. MPMS is a major supplier of parts to MPMW. Sales and marketing The Marine Equipment Division employs six sales representatives. The sales staff often consult with the Marine Equipment Division's engineering and design staff in meeting customer needs. The Marine Equipment Division also contracts with sales and service agents based in Egypt, Holland, Australia, Japan, Mexico and Venezuela. Market The OTE Directors believe that the Marine Equipment Division competes with companies which manufacture heavy equipment for the mining industry. However, the Marine Equipment Division derives the majority of revenues from the manufacture of parts for the dredging industry and is currently a significant force in the manufacture of dredging products in the US Employees As of June 1998, the Marine Equipment Division had approximately 245 full time employees. Approximately 140 employees are represented by one of three collective bargaining agreements which are effective for a period of four years, expiring in March 2002. ENGINEERED SYSTEMS DIVISION The Engineered Systems Division, based in Katy, Texas, manufactures and markets EOR equipment, oil and gas production equipment, oil field and industrial water treatment equipment and provides custom fabrication services. Products and services The Engineered Systems Division designs, manufactures and installs injection equipment and ancillary products which are used in EOR projects to inject steam, gas, water or dilutents into subsurface oil and gas formations for the retrieval of low gravity crude oil. The division incorporates around thirty years experience in the skid mounted steam generating equipment industry. The Engineered Systems Division manufactures a range of oil and gas production equipment including the following items: multiphase production separators which separate water, gas and oil flowing from a well; wellhead test separators; free water knockout equipment which conducts the first stage of water removal from oil; gas dehydration packages; and indirect fired heaters which heat oil or gas to facilitate its transportation through pipelines. The division also manufactures pipeline gathering and transmission equipment for the oil and gas industry including pressure regulating components and metering skids. Through its subdivision, Water Technologies, the Engineered Systems Division manufactures, installs, retrofits and services industrial water treatment systems. Products include deaereators and demineralizers, systems for ion exchange, waste neutralisation, waste water treatment, boiler feed water and purified water for industrial processes. The division's service technicians provide training to customers and advice to operators on optimising performance of the water treatment equipment. The Engineered Systems Division has added custom fabrication services to its manufacturing activities. Using its facilities, the division fabricates vessels and other equipment for customers, which the OTE Directors believe that this activity increases the utilisation of the division's facilities. The Engineered Systems Division is certified to International Standards Organisation 9001 and is certified by the American Society of Mechanical Engineers. Material and supplies The Engineered Systems Division has developed relationships with a number of suppliers and manufacturers of components for its products. Purchased components do not have only one supplier but some have a limited number of suppliers. Pumps, burners, controls and pressure switches are manufactured for each separate project by third party manufacturers. While there are a number of sources for components, including pumps, the Engineered Systems Division has developed and maintains strong relationships with a number of its suppliers, resulting in regular supplies of components. Components utilised in the fabrication of water treatment equipment are available from a number of sources. Product development Promising results have been achieved in the area of injecting dilutent into oil and gas formations for the purpose of enhancing the lifting characteristics of low gravity crude oil. Dilutents, such as naphtha, are injected into the near well bore area for the purpose of reducing the viscosity of the low gravity crude oil. The resulting mixture is more easily transported to the surface. This process has been tested in Venezuela and has met with success. Marketing The Engineered Systems Division is represented in the Middle East, China, Brazil, Romania, Turkey, the United States and Trinidad and Tobago. The marketing and process design functions are organised into three separate units: EOR projects; oil and gas production equipment including pipelines; and industrial equipment including custom fabrication. Market EOR projects in Brazil, China, Russia, Canada and Venezuela contribute the majority of the Engineered Systems Division's sales. Purchasers have included several national oil companies. Given the current low price of crude oil and resulting limitations on capital expenditure, the OTE Directors believe that the proportion of sales contributed by EOR equipment will fall in 1998. Custom fabrication is a relatively new area for the division. This service has experienced demand since its introduction in the refining, petrochemical and oilfield industries. The OTE Directors believe that the refining and petrochemical industries are not as sensitive to crude oil prices as EOR projects. Major and independent oil and gas companies and domestic US engineering firms make up the majority of customers for the water treatment equipment. Approximately 70 per cent. of sales of water treatment equipment are made outside the US. Facilities The manufacturing facility for the division is located on 8.6 acres in Waller County, Texas, on a site approximately 40 miles west of Houston, Texas. The facility consists of 5 separate buildings containing approximately 60,000 square feet of covered manufacturing space and 10,000 square feet of office space. Crane capacities range up to 45 tons. All fabricating, painting, in-house repair and retrofitting is performed at the facility. Employees Currently, there are approximately 86 full time employees at the facility. Included in the staff are engineers with degrees and one registered professional engineer. None of the employees are represented by collective bargaining agreements. OTE has an education assistance programme for its employees. DRILLING SERVICES DIVISION The Drilling Services Division provides products which assist in the prevention of pollution and environmental damage through its Aberlan, Scavenger, DSD, SECO and STS product lines and its Incineration service. Headquartered in Aberdeen, Scotland, the Drilling Services Division was set up in April 1995, as part of a major reorganisation of ITS. The Drilling Services Division initially consisted of the three existing operations based in the UK, Singapore and Houston. The Nigerian operation was added in October 1995. The division's business has grown significantly since 1995 as a result of the introduction of existing products into new geographical markets and the development of new products. The products are offered on either a sales or rental basis. The Drilling Services Division provides a package of equipment and support services which is supported by its offices in Aberdeen in Scotland, Houston in the USA, Singapore and Port Harcourt in Nigeria. Products and services Aberlan is a significant force in the market for equipment which recovers spilled drilling and other fluids on drilling rigs and production facilities. The Aberlan equipment range includes the following products: the LRU Liquid Recovery Unit, a portable vacuum system for the recovery of spilled fluids on offshore rigs and land locations; the Sludge Gulper and Rig Vac for the recovery of fluids and sludges with high solids contents such as those found in mud pits and rig drainage systems; the VPW and GRACO which are high pressure wash systems for cleaning in offshore and shipyard locations such as drill floors and pit rooms; and the Expo Clean Zone One certified hot water high pressure water system. Scavenger trash compactors are mobile waste compaction systems, designed to use minimal deck space. They are used primarily to reduce the volume of waste generated on offshore drilling and production facilities. The Scavenger has been developed into three separate models, each with optional attachments and each designed for different applications. The largest Scavenger has a 30 cubic foot compaction bin; the mini Scavenger has a 10 cubic foot bin; and the Recycler has a 4 x 10 foot bin. The SECO mud mixing and shearing system is a low pressure, high volume shearing system which reduces the time required to prepare drilling fluids. This system is effective in remote drilling locations when the costs of transporting chemicals and drilling fluids is high. Some of the SECO range of shearing systems are designed to be mobile and are used both offshore and onshore to enhance the mixing and shearing capabilities of existing mud systems. Using the Scavenger product line, the Drilling Services Division has developed an integrated waste compaction to incineration service which disposes of waste generated from both offshore and land based drilling operations. Bags used in the division's Scavenger trash compactors are collected from customers and taken to incineration sites. This Incineration system provides the customer with a safe and efficient means for the disposal of domestic waste. The disposal process is certified to conform to environmental standards. The incineration sites are subjected to environmental impact studies and are certified by relevant environmental agencies. The incinerators are manufactured to British Standard 3316. The STS is a filtering screen for use on the Shale Shakers of drilling rigs. The screens act as a sieve for removing large cuttings from the well. The screens are mounted over a support cradle which is fitted into a Shale Shaker basket. The screen, when torn beyond repair through solids abrasion, is discarded and replaced by a new one. Product development and patents The Drilling Services Division maintains a development programme for new and existing products and services. In the past year the Drilling Services Division has developed and introduced two new products, an oil based mud drill cuttings and crude sludge disposal system and a self tensioning screen. The oil based mud drill cuttings and crude sludge disposal system, DSD, which processes and disposes of oily waste materials in an environmentally safe manner, is an expansion of the Drilling Services Division's incineration business. It is designed to process up to 3 tons of waste materials per hour. Contracts are currently in place in Nigeria and the first DSD unit was commissioned in July 1998. Patents are either in place or application for patent has been made for the following products: LRU Liquid Recovery Unit, SECO Homogeniser, STS and the DSD system. The DSD Patent is owned by DSD Ventures Limited, in which ITS Holdings Limited has a 50per cent. shareholding. Employees The Drilling Services Division employs a total of 50 employees in its four offices. Facilities The Drilling Services Division operates from four facilities. ITS Drilling Services Ltd which is located in Aberdeen, Scotland is responsible for supplying the Drilling Services Division's products in the European market. The Aberdeen facility consists of approximately 3,600 square feet of warehouse space where the servicing of the rental equipment is carried out. It also produces and assembles some of the Drilling Services' products, specifically the Aberlan equipment and STS Screens. The office area of 2,410 square feet houses the administration and accountancy operations of ITS Drilling Services Ltd, and the divisional management based in Aberdeen. There are 17 employees in total. The division's facility in Singapore supports all the Drilling Services Division's products in the Far East region. With 567 square metres of warehouse, workshop and office space all design, assembly and servicing is conducted at this site. This location employs seven individuals including management, accounting, sales and service personnel. The facilities in Port Harcourt, Nigeria, are the base for all sales, rentals and services of the Drilling Services Division in that country. The incineration and servicing facilities are located at Onne. The Onne facility consists of 15,000 square metres and there is a second incineration facility currently under development at Port Harcourt at the Aker base. The Nigerian operation employs two expatriate and 20 local employees including management, book-keeping, sales and service and administration. ITS Drilling Services Inc., USA, is based in Houston, Texas and provides support for products in the Americas, including the US, Venezuela and Colombia. There are three employees responsible for management, sales and administration. Customers and markets In Europe, the Far East and the USA, no single customer accounts for more than 20 per cent. of the division's turnover. In the Nigerian market a very significant percentage of the Drilling Services Division's annual turnover has been derived from sales and services to Mobil Offshore. As the Nigerian operation has become more established its dependence on Mobil has decreased. Competition At present, the OTE Directors believe that there are several competitors to the Scavenger products range in Texas and the Louisiana Gulf Coast regions, and one primary competitor in the UK. The OTE Directors are not aware of any locally based competitors to Scavenger in the Far East and Nigeria. The OTE Directors further believe that there is one main competitor to the Aberlan products range in the UK and that the SECO products range has two main competitors in the Far East. At present, the OTE Directors are not aware of any competitor that provides the complete waste compaction and incineration services in Nigeria. The DSD has certain competitors which provide alternative processes to remove oil from cuttings. The OTE Directors are only aware of two competitors who operate in England and Venezuela. The OTE Directors believe that STS has one main competitor in the UK. OTE DIRECTORS Details of the OTE Directors are set out below: Robert A. Rayne, Non-executive chairman Robert Rayne, aged 49, has been a director of London Merchant Securities Plc, the parent company of Westpool Investment Trust Plc, since 1983. He is also chairman of Golden Rose Communications plc, and among his other directorships are First Leisure Corporation PLC and EVI Weatherford Inc. McGowin I. Patrick, Jr., Director, President and chief operating officer McGowin I. Patrick, Jr., aged 34, graduated from Washington and Lee University with a B.S. in Accounting and Business Administration in 1986 and began his career in corporate finance with Suntrust Banks Inc., a large US Bank Holding Company. During his time at Suntrust Corporate Finance, he advised clients on mergers and acquisitions and raised debt and equity financing for leveraged buyouts. In 1991, Mr. Patrick co-founded IP Capital Corporation, a small merchant bank and real estate investment company. He has been president and chief operating officer of the Aero Business Units and will fulfil this role for Offshore Tool Energy Corporation. He has been responsible for the organisation of the Aero Business Units. Mr. Patrick will be responsible for OTE's finances at board level and OTE's vice president of accounting and administration will report directly to him. Clifton C. Inge Jr., Director and Chief Executive Officer Clifton C. Inge, Jr., aged 34, graduated from the University of Virginia in 1986 and has worked for Chubb Insurance in New York City and Willis Corroon Corporation in San Francisco. He then proceeded to earn his master of marketing degree from the University of Alabama in 1991 and shortly thereafter co-founded IP Capital Corporation with McGowin I. Patrick, Jr. He was one of the principals that acquired MPMW and established MPMS in 1993 and has been responsible with Mr.Patrick for the organisation of the Aero Business Units. He has been chief executive officer for the Aero Business Units and will fulfil this role for Offshore Tool Energy Corporation. Byron A. Adams, Jr., Director and executive vice president of business development Byron A. Adams, Jr., aged 39, received a bachelor degree from the University of Southwestern Louisiana and subsequently an MBA from Tulane University in New Orleans. He has many years of experience in sales and marketing of oil field services and equipment, having held various management positions with Oil Gas Rental Services, Inc., a privately held company providing rental equipment and services to major and independent oil and gas companies. Mr. Adams is a principal of Aero and will continue his role in business development for Offshore Tool Energy Corporation. He is a member of the Society of Petroleum Engineers and has been active within other oil and gas industry groups. Bernard J. Duroc-Danner, Non-executive Director Bernard J. Duroc-Danner, aged 45, is Chairman, President and Chief Executive Officer of EVI Weatherford, one of the largest oilfield service and equipment companies in the industry. EVI Weatherford combines a line of completion systems, artificial lift and drilling products with rental, fishing, downhole remediation and tubular running services integrated in a worldwide infrastructure of over 400locations. Previously Mr Duroc-Danner was President and Chief Executive Officer of EVI, Inc. where he was responsible for OTE's 1987 start up in the oilfield service and equipment business. In prior years Mr Duroc-Danner worked for Arthur D. Little Inc. and Mobil. He holds a Ph.D in economics from Wharton (University of Pennsylvania). Mr Duroc-Danner is also a director of Parker Drilling Company. Corporate governance The OTE Board has established two committees of the OTE Board to comprise of a majority of non-executive directors as the Compensation Committee and the Audit Committee. OTE has adopted the Model Code for AIM Companies. OTE Directors and relevant employees have been briefed on their responsibilities under the Model Code and procedures have been introduced for its implementation. OTE intends to appoint two further non-executive OTE Directors in the near future, one of whom will have relevant experience of, inter alia, the obligations of companies admitted to trading on AIM. Current trading and prospects The Crane Division and the Marine Equipment Division have experienced an increase in demand for their offshore and marine products and services over the last year which the OTE Directors believe is due primarily to the overall increase in offshore production activity worldwide and ageing offshore infrastructure. The Engineered Systems Division has experienced stable demand for its enhanced oil recovery equipment over the last year. The Drilling Services Division has continued to experience strong demand for its existing products in the last year and has added two new products to its range. The price of crude oil is currently near a ten year low. The OTE Directors expect demand for most products and services for the oil and gas industry to weaken in the near to medium term as oil companies reduce capital expenditure in the low oil price environment. In particular, the OTE Directors expect weaker demand for the enhanced oil recovery equipment of the Engineered Systems Division. In this trading environment, the pattern of business in the Engineered Systems Division is expected to be variable, with peaks and troughs in short term demand based on tendering success. In addition, the Engineered Systems Division's Water Technologies subdivision is currently underperforming. The OTE Directors and the senior management of the Engineered Services Division will therefore continue to monitor the situation and adjust operation and costs accordingly within that division. The OTE Directors expect that demand in Asia for the products of the Drilling Services Division will fall as a result of the economic difficulties in that area, but that sales will grow in Europe and Africa. The OTE Directors expect that demand for offshore cranes and component parts will be stable as customers focus on long-term reserve replacement plans which target offshore areas. In the longer term, industry sources predict a rise in oil prices from current levels. The OTE Directors expect this to cause increased spending among major and independent oil and gas companies which will increase demand for products and services for the oil and gas industry. The OTE Directors expect that several trends will work to increase offshore exploration and production activity over the next few years which will raise demand for products for the offshore oil and gas industry. These trends include (i) advances in offshore drilling and production technology which have reduced the cost of developing oil and gas fields, (ii) increasing deep water exploration and production activity, (iii) the opening to foreign investment of certain offshore areas including offshore Brazil and West Africa and (iv) the ageing infrastructure of offshore drilling rigs and offshore supply vessels. The OTE Directors believe that OTE will be well positioned to develop its business within its chosen markets. Reasons for Admission The OTE Directors believe that the future development of OTE will be enhanced by its admission to AIM. Admission will raise the profile of OTE in the oil and gas industry, with its customers, both existing and prospective, and with potential investors. It will provide access to capital and provide liquidity to the common shares in OTE. OTE is considering seeking inclusion on the Nasdaq Stock Market when such a listing would be advantageous or appropriate for OTE in the judgement of the OTE Board. There can be no assurance as to when, if ever, such inclusion on the Nasdaq Stock Market will occur. Strategy OTE's strategy is to identify markets where it can increase market share and improve the service and/or depth of products offered to provide its customers with a low cost package. OTE's long-range corporate objective for each business unit is to promote growth, both internal and through acquisitions, and to pursue process improvements which could enhance margins and returns on invested capital while providing customers with a higher quality service. Crane Division The strategy of the Crane Division is to grow its higher margin parts and service business in the US and elsewhere. The new crane construction business will search for more cost effective methods to manufacture its products. The division is presently designing a new series of cranes to compete more effectively in the drilling end of the crane market. Marine Equipment Division The strategy of the Marine Equipment Division is to continue to design and offer new equipment and services and to utilize this division's reputation in the marine industry. To accomplish this the division has recently begun a cost improvement programme to enable it to compete more effectively. The division has also added more value-added services to its existing dredging customers and new marine/towing companies by acquiring two dry-docks in Mobile, Alabama. This enables the division to provide dredger tugboats and barge repair and refurbishment services. Engineered Systems Division The strategy of the Engineered Systems Division is to maintain its position in the EOR product and service market by building, supplying and operating steam generators on long term contracts. The division aims to enhance the marketing and sales of its other equipment through alliances with engineering companies and to extend its services by offering to build and operate these systems. The division aims to expand its sales and marketing activities. Drilling Services Division The strategy of the Drilling Services Division is to grow its business through marketing the new product lines, namely DSD and STS, which have become part of the product range during the last year, through extending the division's product range into new geographical locations and through examining possible acquisitions to extend its existing product range. The City Code The City Code on Takeovers and Mergers applies to takeover offers for listed and unlisted public companies considered by the Panel on Takeovers and Mergers to be resident in the United Kingdom, the Channel Islands or the Isle of Man. The Panel normally considers a company to be resident only if it is incorporated in the United Kingdom, the Channel Islands, the Isle of Man or the Irish Republic and has its head office and place of central management in one of those jurisdictions. OTE is a Delaware company and its head office and place of central management will be at Mobile, Alabama, USA. The City Code on Takeovers and Mergers will therefore not apply to takeover offers for OTE. Further information in this regard is set out in the AIM Admission Document. Dividend policy Bearing in mind the need to further OTE's development activities, the OTE Directors intend to conserve OTE's cash to fund these activities, and accordingly do not anticipate that common dividends will be paid during the early years immediately following Admission. Stock incentive plan OTE has put in place a stock incentive plan, a summary of which is contained in the Admission Document. No options will be granted prior to Admission. Risk factors The business of OTE is subject to a number of risk factors and the principal risk factors perceived by the OTE Directors to be relevant are set out in the AIM Admission Document. For further information Greg O'Brien, Finance Director of ITS 00 1 281 371 3333 Andrew Edwards, Director - Corporate Finance 0171 623 9333 Henderson Crosthwaite Corporate Finance END MSCKLMGGRZGLRMG
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