ABERDEEN oil services business Plexus Holdings is to focus on developing new drilling technologies after selling its entire business interests to Houston-based FMC Technologies, a subsidiary of TechnipFMC.
The deal will see FMC Technologies pay an initial sum of £15 million for Plexus’s trademarked POS-GRIP technology, which is used for oil exploration on jack-up oil rigs.
The company will also be entitled to up to an additional £27.5m depending on the performance of the business over the next three years, meaning the total amount it could receive for the sale is £42.5m.
While the jack-up business accounted for 99.7 per cent of Plexus’s £11.2m turnover in the year to December 2016, the company’s chief executive Ben Van Bilderbeek said that selling it in its entirety while retaining some of the intellectual property rights would allow the business to concentrate on developing other ways of using the technology.
It will do this together with FMC Technologies under a collaboration agreement on condition that the new uses do not focus on jack-up exploration, which FMC Technologies will have exclusive rights to.
“I believe that the disposal and collaboration agreement with TechnipFMC opens up new opportunities for our technology,” Mr Van Bilderbeek said.
“TechnipFMC is acquiring a business which has supplied a wide range of blue-chip operators of the calibre of BP, Centrica, ENI, Maersk, Royal Dutch Shell, Statoil, and Total with wellheads for use on hundreds of wells worldwide and which already has a strong market reputation in the UK Continental Shelf and European Continental Shelf.
“Going forward there are numerous opportunities for the application of POS-GRIP technology and encouragingly, as the recent contract win from Centrica for the supply of surface production application equipment demonstrates, we are already making progress in this regard.”
Last month Plexus confirmed that it had signed a contract to supply Centrica with a wellhead that the oil and gas firm will use to help boost production from the Chiswick platform in the Southern North Sea.
Plexus, which describes itself as an intellectual property-led business, will now be focusing on how its technology could be used in subsea and geothermal exploration.
“Being IP-led, Plexus does not have to support significant manufacturing operations,” Mr Van Bilderbeek said.
“The company remains in a robust financial position, with reduced capital spending commitments alongside a strong cash position and debt free balance sheet following the implementation of cash conservation measures over the last 24 months including a series of cost-cutting initiatives.
“Despite this Plexus has continued to protect and progress the existing range of future opportunities, including continued investment in ongoing research and development and POS-GRIP product extensions at a time when the industry continues to actively pursue innovative cost-saving disciplines and safety driven technologies.
“The company is continuously developing new technology and even when earlier patents expire the company has an extensive body of knowledge and know-how.”
As the deal will result in a fundamental change in alternative investment market-listed Plexus’s business it remains subject to shareholder approval.
The company, which is considering returning some of the proceeds of the sale to shareholders via a special dividend, said it will publish details of a general meeting in due course.
It will also confirm details of any dividend within six months of the transaction completing.
The deal comes after a tough trading period for Plexus, which saw turnover fall by over 60 per cent from £28.5m to £11.2m in the year to June 2016.
During the same period it saw a pre-tax profit of £5.9m convert to a pre-tax loss of £6.9m as a result of what it called a “challenging oil price environment”, which resulted in a reduction in drilling activity.
Shares in Plexus rose strongly when the deal was initially announced yesterday, going from 82p to 91p in early morning trading before closing at 85p. That represents a rise of four per cent during the day.
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