Cover story: Changing the region's oilfields

In an exclusive interview, Bernard J Duroc-Danner, the chairman, CEO and president of Weatherford International, talks about the company's operations and expansion plans in the Middle East

Bernard J Duroc-Danner, the chairman, CEO and president of Weatherford International.
Bernard J Duroc-Danner, the chairman, CEO and president of Weatherford International.

How did Weatherford International start operating in the Middle East's oil and gas industry?

Weatherford has had a presence in the Middle East for more than 40 years, with operations in Egypt and Abu Dhabi dating back to the 1970s. Our first milestone contracts with Middle Eastern NOCs were for TRS and cementing accessories. We later expanded both our footprint and our capabilities in the region. That was the start of our adventure in what would become our largest region in the eastern hemisphere.

Our journey has progressed exponentially since those early years, and we recently achieved a new measure of success in the region. At the Excellence in Energy Awards presented at ADIPEC last year, Weatherford was awarded 'Best Oilfield Services Company' — an honour that recognises leadership in project management, adherence to timelines, cost control, and overall efficiency and productivity.

How profitable has operating in this region been for the organisation?

The Middle East and Africa (MEA) region makes up a significant part of our business. Over the years, this region has contributed to the growth and strength of Weatherford. Today, the MEA region is somewhere we absolutely must be and, over time, it must form an increasing share of our overall activity.

We have been upgrading our offerings, from simple hardware and services to a more complete offering, to become a better partner to our customers in drilling, well construction and production optimisation.

What products have Weatherford recently developed and launched in the market?

In the area of production optimisation, we have a set of sensors, both classical and fiber-optics based; the largest SCADA solution in the industry, which connects 350,000 wells; and production software that optimises more than 110,000 wells.

We are currently upgrading our portfolio to be easier and lighter to use, via the cloud, and are completing our physics-based applications with advanced analytics, as part of our collaboration with IBM. As we extend the link to our sensors by using newly developed Internet of Things (IoT) capabilities, we will be able to deliver a truly intelligent digital oilfield.

One of the motivating factors behind this initiative was increased demand from our clients in the Middle East for advanced well management solutions. We will be visiting with executives at several Middle Eastern NOCs this fall, following presentations about this technology at both SPE-ATCE (in September) and ADIPEC.

What is the scope of each of Weatherford's business lines – Drilling and Formation Evaluation, Well Construction, Completion and Stimulation, and Production?

In line with our overall focus on operational discipline and meeting client needs, we have refined our offerings in each of our four global business units. As a result, our differentiated portfolio contains highly engineered and integrated technologies that more closely align with the expectations of our clients.

Our distinctive Drilling and Formation Evaluation offerings include high-pressure, high-temperature logging-while-drilling (LWD) services and a unique cased-hole reservoir evaluation tool. We also offer world-class laboratory services including core evaluation.

Well Construction, long an area of strength for Weatherford, is becoming increasingly integrated — and innovative — as we tighten our focus on well integrity. Managed pressure drilling, tubular running services, cementing products and pressure control devices remain the cornerstones of this business unit.

Our Completions portfolio has been entirely refreshed from top to bottom. We now have modern completions systems built for today’s deep, complex wells, including safety valves and packers certified to the highest industry standards. Additionally, we are the only company within our peer group to offer RFID-enabled downhole tools.

In terms of Production offerings, Weatherford is specialised in the areas of artificial lift and production optimisation. Highlights within our portfolio include comprehensive lift systems, optimisation for all forms of lift, asset management software and our SCADA solution.

Which major clients do you work with in the Middle East?

We work with all operators in the Middle East. Our history and DNA make us easy to work with, first as a supplier, then a partner. We have been working very hard so that we are now seen as a full partner with whom strategies can be developed and carried out, not just a simple – although reliable – supplier. The strongest areas of growth in terms of market share are production optimisation, tubular running services, well construction products, surface well testing, surface logging systems and managed pressure drilling.

We work closely with NOCs in the Middle East, as well as with IOCs — ExxonMobil, Total, BP, ENI, Shell, Occidental, OMV and other independents — either directly or via their joint ventures within the MEA region.

We understand our customers’ needs and believe that we have been up to the challenge in providing them with unique products and services that, in some cases, would not otherwise have been available to them.

What trends are you seeing in oilfield services in the Middle East, based on your clients' demands?

The extended low-price environment has driven the market towards CAPEX reduction and re-prioritisation of projects across MEA. At first, the industry took the simplest path, where clients requested discounts across the board. As things progressed, we began turning more and more toward value-added optimisation and efficiency in operations. We see clients seeking productivity-enhancing solutions, and they are therefore more open to accepting innovative business models that enable them to meet their objectives while addressing their bottom line. This trend seems to be here to stay.

At Weatherford, we see more opportunities surfacing in integrated drilling services, well intervention solutions and fields rejuvenation. We do engage selectively, especially where we see our unique offerings of products and services would help our clients deliver on their plans and meet their objectives.

Again, our services help clients maximise recovery in mature reservoirs and conventional and unconventional fields, while minimising associated risks and costs. We are able to do this using our extensive experience, the depth and breadth of services we offer, leading edge technologies, and global footprint.

What major projects are you currently working on in the region?

Our most notable contract wins in the Middle East are centred in Saudi Arabia, Kuwait, Abu Dhabi and Oman, and are dominated by drilling-related services, with some completion add-ons.

Recently, we were awarded a five-year Drilling Services contract by an NOC that effectively doubled our market share in the country. We won this work on the basis of our advanced LWD technology, combined with our outstanding performance record and superior service quality. We have also seen an increase in Formation Evaluation Services contracts in the Middle East.

This comes on top of multiple large well construction contract awards by a number of NOCs that firmly cement our position as the market leader in this space. The awards were based on our significant technological edge and superior service quality delivery that spans many years.

How has Weatherford International performed financially so far this year?

We continue to drive progress both operationally and financially. Our results reflect the impact of our multi-year cost transformation, which has been as structural as it was cyclical.

The second quarter evolved as we expected. In spite of activity drops in select regions, largely in the western hemisphere, operating income actually improved significantly. This is entirely due to cost management and excellent operating execution. In the eastern hemisphere, we believe we have crossed the low point. It is, as a whole, turning, albeit slowly.

To what extent has Weatherford been affected by the low oil prices?

Earlier this year, I described the market as brutal. This was not an exaggeration and, in fact, if anything may understate the severity of the industry decline. However, in spite of the unprecedented challenges to our industry as a whole, Weatherford has not hesitated in pursuit of our ongoing areas of focus: core, cost and client.

Our steadfast direction has resulted in a company that is fundamentally operationally stronger than at any time in our history. With our transformation complete, we are now in the best possible position to benefit from the market recovery. Now it is time to intensify our focus on our operational direction and strategy.

At the end of the day, the most important measure of success is the long-term and sustainable performance of our clients. One of the ways this is achieved is through safety, which is a moral imperative and the gateway to quality.

In their efforts to slash capital expenditure, NOCs and IOCs often pressure contractors and oilfield services providers for discounts – has this affected your business?

Moving from an environment of $100 per barrel to one of $40–50 per barrel, clients required aggressive discounts from service suppliers to meet cost-cutting initiatives. Moving forward, we will be addressing these requirements through innovative solutions and technologies that reduce costs, rather than continuing to apply these same across-the-board discounts.

How does Weatherford source its workers, and what skillsets do you look for when hiring staff?

The Middle East is a key growth area for us, not only in terms of market share but also in terms of talent. One of the objectives of our new global recruitment initiative, NextGen, is to increase the diversity of our workforce through strategic hiring in growth markets such as Saudi Arabia.

High-potential engineering graduates have many options. What we offer that is unique is an opportunity to grow in many directions, depending on their interests and strengths. Starting with a strong technical base, our training programmes focus on developing strengths in non-technical areas such as finance and relationship management.

Stakeholders in the energy sector worldwide have been compelled to downsize their workforce. To what extent has Weatherford cut jobs?

Our operational transformation is now complete. Most of the workforce reductions are behind us. The structural changes we have made will continue to drive efficiency and productivity as the market turns.

In addition to reducing the support ratio of indirect to direct labour, we have delayered the organisation and have thoroughly upgraded our operating and financial management. As a result, our human resources are more empowered, with an emphasis on training, career development and leadership that promotes accountability at every level.

What are your expansion plans and how are you working to grow Weatherford's business in the Middle East?

Our focus remains on increased deployment of core services. For example, we want to aggressively grow our Drilling Services, Wireline and Completions product lines and further expand our Well Construction and Production product lines while we also look at re-engaging in integrated and turnkey projects that fit our operational and technological strengths. We have been increasing our services breadth and depth by introducing additional products and services that we have not used before in this region.

Weatherford has a number of production complexes in the Middle East, but do you also plan to invest in an innovation facility here – something that will enable you to more effectively reach out to your customers?

Our Abu Dhabi manufacturing (ADM) facility exemplifies how we are investing in centres of excellence and innovation in the Middle East. First, it is the only multi-product line plant in the world. By placing a formidable suite of capabilities under a single roof, we are able to control both quality and cost.

Additionally, our operational leadership and processes are supported by a comprehensive LEAN Six Sigma training and certification programme. Furthermore, the facility is API certified in recognition of our robust quality management systems, and is licenced by the leading tubular suppliers to apply premium connections.

The ADM plant is in line with our overall culture of lean manufacturing. By applying efficient, safe and environmentally sound processes and disciplined operational principles, we have delivered more than $4mn in hard savings in Abu Dhabi alone.

Baker Hughes has bought Weatherford's Pipeline and Specialty Services business, while Lubrizol has acquired your global oilfield chemicals business. What impact has this had for customers?

The transactions we completed in 2014 were part of our overall strategy of core, cost and cash. Through divestments, we were able to monetise our non-core businesses. This has allowed us to increase our focus on driving further innovations within the areas in which we lead the industry.

In an energy sector as heavily populated with oil and gas service providers as the Middle East, how do you tackle competition?

Our portfolio of products and services is both complementary and competitive, relative to our larger peers. There are overlaps in our product lines, especially in completion and formation evaluation. However there are also areas where we stand apart. Weatherford is more dominant in development and production than exploration. Our market shares are greater on land than offshore. We have an extensive global infrastructure, including manufacturing capabilities. For these reasons, we are best positioned to benefit from the first turn in the market.

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