Expro drills a niche in the oil boom

SHARES

The oil industry is in the grip of a growing boom in deep water drilling and exploration. New areas such as west of the Shetland Isles, the west African coast and the Gulf of Mexico have the potential for major new finds rivalling or even exceeding the North Sea. However, oil companies are under pressure to raise profitability, so they are trimming costs partly by contracting out non-core activities to third-party specialists.

This is good news for oil service outfits and for one UK company, Expro International, in particular. Expro - whose shares stand at 408p - is a global oil services group with links to the big international players. It starts with a great advantage over many rivals because it learned its trade in the North Sea. This has given it skills and a product range suited to the new markets.

One easy way to grasp the opportunity facing the company is to look at sales by regions. Although overseas turnover is already more than half the total, it has only scratched the surface in most markets outside the UK. Against UK sales last year of pounds 39m the figure for the Americas was just pounds 4m with pounds 14m in continental Europe, pounds 11m in Asia Pacific and pounds 14m in Africa.

Nor will the UK stand still. Finance director Colin Ainger points out that the emphasis is switching to the development of smaller fields with production platform technology giving way to subsea production systems. These reduce the risks of developing offshore fields because subsea systems have much lower upfront capital costs but higher operating costs. For example, Shell's Brent field, developed in the 1980s with a platform system, had start-up costs of $4.5bn and running costs of $1.90 per barrel.

By contrast BP's 1990s development of the Foinaven field west of Shetland had upfront costs of $800m but operating costs of $7.80 a barrel.

This is terrific news for Expro because its measurement, safety and surface and subterranean maintenance systems are targeted at that higher operational spending market. BP used Expro's Dual Bore Subsea Completion System to develop Foinaven. Observers estimate that over the next five years spending on subsea systems worldwide could treble. Those figures were prepared when the oil price was below $20. At $25 a barrel for North Sea Brent benchmark crude, activity could rise even more.

Unlike the US, where oil service groups are stars, UK investors are largely unaware of the merits of oil service companies. Expro is smaller than its US rivals and has a lower profile. In the early 1990s it was a flourishing part of what has become Flextech, a mini BSkyB media group. Expro was sold by Flextech to its management in July 1992, leaving the company with debts of pounds 56m. The group was floated in March last year, reducing the debt to pounds 13m just when activity in the sector was picking up. Since flotation the shares have more than doubled, though they are still modestly rated by US standards. Expro's management has demonstrated real ability in piloting the group: sales have climbed from pounds 49.3m in 1992 to pounds 82.2m for the year to 31 March 1996. And profits have climbed from pounds 7.6m to pounds 14.8m.

The group is also at the leading edge of product development. Expro won the Scottish Offshore Technology Award two years running and is a leader in advanced burners for cleaning up oil operations and in safety systems for deep-water drilling. Expro has developed a system which allows a well to be shut down in 15 seconds and it is working on novel ultrasonic techniques to assist in the removal of oil and drilling waste.

Interim figures are due on 5 December and should show the group on course for another good year after last year's 28 per cent increase in earnings per share and 17 per cent rise in dividend. Earnings per share should rise 17 per cent this year to 20.6p followed by a 20 per cent advance to 24.8p for the year to 31 March 1998. On those numbers the price to earnings ratio would fall to 19.8 and then 16.5, which is not demanding for a high-quality business in the early stages of an oil exploration and development boom.

Suggested Topics
News
Richard Dawkins dedicated his book 'The Greatest Show on Earth' to Josh Timonen
newsThat's Richard Dawkins on babies with Down Syndrome
Life and Style
fashionLidl to launch a new affordable fashion range
News
news
Arts and Entertainment
music
PROMOTED VIDEO
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
Tim Vine has won the funniest joke award at the Edinburgh Festival 2014
peopleTim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
News
people
Life and Style
techApp to start sending headlines, TV clips and ads to your phone
Arts and Entertainment
Taylor Swift crawls through the legs of twerking dancers in her 'Shake It Off' music video
musicEarl Sweatshirt thinks so
Life and Style
tech
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Planning Manager (Training, Learning and Development) - London

£35000 - £38000 per annum + benefits: Ashdown Group: A highly successful, glob...

Asset Finance Solicitor

Highly Competitive Salary: Austen Lloyd: CITY - ASSET FINANCE - An outstanding...

HR Analyst - Banking - Bristol - £350-£400

£350 - £400 per day: Orgtel: HR Analyst - Banking - Bristol - £350 - £400 per ...

Techincal Accountant-Insurance-Bank-£550/day

£475 - £550 per day + competitive: Orgtel: Senior Technical Accountant-Insuran...

Day In a Page

Ferguson: In the heartlands of America, a descent into madness

A descent into madness in America's heartlands

David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

BBC faces corruption allegation over its Sir Cliff police raid coverage

Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home
Lauded therapist Harley Mille still in limbo as battle to stay in Britain drags on

Lauded therapist still in limbo as battle to stay in Britain drags on

Australian Harley Miller is as frustrated by court delays as she is with the idiosyncrasies of immigration law
Lewis Fry Richardson's weather forecasts changed the world. But could his predictions of war do the same?

Lewis Fry Richardson's weather forecasts changed the world...

But could his predictions of war do the same?
Kate Bush asks fans not to take photos at her London gigs: 'I want to have contact with the audience, not iPhones'

'I want to have contact with the audience, not iPhones'

Kate Bush asks fans not to take photos at her London gigs
Under-35s have rated gardening in their top five favourite leisure activities, but why?

Young at hort

Under-35s have rated gardening in their top five favourite leisure activities. But why are so many people are swapping sweaty clubs for leafy shrubs?
Tim Vine, winner of the Funniest Joke of the Fringe award: 'making a quip as funny as possible is an art'

Beyond a joke

Tim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

Sadly though, the Lawrence of Arabia star is not around to lend his own critique
Wicken Fen in Cambridgeshire: The joy of camping in a wetland nature reserve and sleeping under the stars

A wild night out

Wicken Fen in Cambridgeshire offers a rare chance to camp in a wetland nature reserve
Comic Sans for Cancer exhibition: It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans

Comic Sans for Cancer exhibition

It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans
Besiktas vs Arsenal: Five things we learnt from the Champions League first-leg tie

Besiktas vs Arsenal

Five things we learnt from the Champions League first-leg tie
Rory McIlroy a smash hit on the US talk show circuit

Rory McIlroy a smash hit on the US talk show circuit

As the Northern Irishman prepares for the Barclays, he finds time to appear on TV in the States, where he’s now such a global superstar that he needs no introduction
Boy racer Max Verstappen stays relaxed over step up to Formula One

Boy racer Max Verstappen stays relaxed over step up to F1

The 16-year-old will become the sport’s youngest-ever driver when he makes his debut for Toro Rosso next season
Fear brings the enemies of Isis together at last

Fear brings the enemies of Isis together at last

But belated attempts to unite will be to no avail if the Sunni caliphate remains strong in Syria, says Patrick Cockburn
Charlie Gilmour: 'I wondered if I would end up killing myself in jail'

Charlie Gilmour: 'I wondered if I'd end up killing myself in jail'

Following last week's report on prison suicides, the former inmate asks how much progress we have made in the 50 years since the abolition of capital punishment