With the heightened expectations of stakeholders in the aftermath of the Deepwater Horizon incident, Hyundai Heavy Industries (HHI) has listened to its drilling operator clients and designed a new generation of drillship. The new 80k class, heavy duty, wide beam drillship design, HD12000, can drill up to depths of 12,000 feet.
It has greater versatility, strength and more available deck space than its predecessors and has been developed drawing on previous experience of drillships. The HD12000 has an increased beam, which allows for larger and more variable load capacity (up to 24,000 metric tonnes) and reserve buoyancy for heavy duty – with compartment arrangement improvements – as well as being able to accommodate a cylinder rig concept that could be used for bigger derrick load requirements.
The JDP put the wide beam drillship design through design review, ship motion analysis, fatigue and FE analysis. Throughout, and on a global basis, Lloyd’s Register experts in hull structures, marine, mechanical, electrical and drilling systems worked in co-operation with HHI’s lead engineers to review and give feedback on the design development.
At the closing meeting at HHI’s Ulsan shipyard, Gyung-Jin Ha, Executive Vice President, Hyundai Heavy Industries, commented: “HHI and Lloyd’s Register have strong advantages in their own specialised fields, and it is therefore desirable to share experiences with each other and have cooperation between the two companies. HHI will never stop innovating to meet new market demands.”
Lloyd’s Register Drilling Integrity Services specialists in Moduspec were able to provide 25 years of valuable ‘people, systems and equipment’ insight and perspective regarding the drilling systems arrangements, when considering the operational integrity of the proposed design. At 223 metres long, 40 metres wide and 18.5 metres deep, the HD12000 drillship can probe a depth of 40,000 feet below the rotary table and is designed to accommodate the increasing complexity, pressures and sizes of drilling equipment and their handling needs. In addition, the arrangement of mud pumps and riser hold storage inside the hull envelope provides for a large free deck area for tube storage and other equipment, as well as greater flexibility and versatility of operations.
It has fully dynamic, positioning-compliant, station-keeping capabilities, with sufficient power to allow it to maintain position in emergency situations. Efficient The HD12000’s innovative hull form design is based on HHI’s longstanding and accumulated technology on merchant vessels. It enables a high transit speed of 11.5 knots (reduced form resistance with integrated thruster pod to hull) with a reported 40% less fuel consumption, enhanced sea-keeping performance (reduced roll angle by 20%), reduced interaction and thruster efficiency improvement and enhanced DP capability (reportedly 20% less fuel consumption).
A patented thruster canister design allows for in-site inspection and maintenance of the thruster without the need for docking, with reduced non-productive time.
Alan Williams, Lloyd’s Register’s Korea Marine Operations Manager, said: “Lloyd’s Register has been able to clearly demonstrate to a significant customer for drillship construction how it can support them, drawing upon the pool of expertise from across the organisation for that segment. Korea represents the technological coalface for drillship construction, gaining momentum for innovation, and we will continue to play our part. Lloyd’s Register is positioned to fully support the drilling operators and building yards through integrated marine and drilling system specialist teams, working closely with these clients to develop and offer solutions.”
The latest revision of LR’s rules for Mobile Offshore Units utilises the specialist drilling integrity capabilities of Moduspec and WEST, and will incorporate new classification notations for mobile offshore drilling units. These will be released in February.
- South Korea: STX O&S Wins Mega Project Award (worldmaritimenews.com)
- Pacific Drilling: A Growing, Well-Capitalized Offshore Drilling Company (seekingalpha.com)
Seadrill has entered into a turnkey contract to build a new ultra-deepwater drillship at the Samsung yard in South Korea. The project value price is estimated to be around US$600 million (including project management, drilling and handling tools, spares, capitalized interest and operations preparations) with tail-heavy payment terms payable upon delivery, which is scheduled within the fourth quarter 2014.
Delivery is scheduled for the fourth quarter 2014. In addition, Seadrill has agreed a fixed price option to build a further drillship at the yard, with delivery in the first quarter 2015. With the current strong demand there is limited availability of rigs in 2014 and Seadrill believes it is likely that the option will be exercised and is currently discussing details of upgrades of that unit.
The drillship will be of the same design as the existing six drillships under construction at Samsung and will have a hook load capability of 1,250 tons and a water depth capacity of up to 12,000 feet targeting operations in areas such as the Gulf of Mexico, Brazil and West and East Africa. Also, these units will be outfitted with seven ram configuration of the blowout preventer (BOP) stack and with storing and handling capacity for a second BOP.
Yard costs are currently at very attractive levels. This together with the delivery time in 2014, the strength of the ultra-deepwater market and Seadrill’s proven track-record of taking delivery on time and on budget makes this into an investment which is likely to deliver an excellent return to our shareholders.
Seadrill’s construction program now totals 19 units, including 7 drillships, 2 harsh environment semi-submersibles, 5 tender rigs and 5 jack ups. In addition the Company has fixed priced options for three ultra-deepwater/harsh environment units.
The initial installments for the new drillship will be funded by liquidity from the recent US$1 billion bond offering.
Chairman of Seadrill Limited John Fredriksen says, “We have a unique environment where both daily rates and contract duration are increasing to new highs, while yard prices remain low due to the overcapacity in the shipyard industry. This presents an excellent investment opportunity under which we can continue to aggressively grow Seadrill. The new ordering has been evaluated up against several M&A and asset proposals but the Board has concluded that organic growth through contracting new buildings at attractive prices is likely to give higher long-term return to shareholders. The deepwater drilling industry is transforming from an exploration to a development industry. Such a transformation will trigger a significant increase in the need for the drilling of production wells in order to connect the fields that have been successfully explored in the recent years.”
Fredriksen continued: “Seadrill is best positioned within the drilling industry to meet this tightness. We have in total nine ultra-deep/ harsh environment units for delivery in 2013 – 2015 plus options for an additional three. Two of these units have already been employed on long-term contracts. We are currently in specific discussions regarding attractive long-term employment opportunities for a majority of the remaining firm units. Clarification around these fixtures should be expected in the months to come. The Board has in recent press releases expressed that they are confident that an attractive financing package can be arranged for the new building program. This situation has further improved in the recent months, driven by a well oversubscribed bank financing, good progress on the export financing side as well as the successful trading of the new US$1 billion five-year unsecured note. With a total order backlog in excess of US$20 billion which is likely to increase further in the months to come the Board is confident that the new ordering can be financed without raising additional equity and will contribute positively to future valuation as well as dividend capacity. Seadrill will continue to monitor opportunities in the new building market including the possibilities to declare the existing three options. The target is to continue to grow Seadrills organization, fleet and earnings potential in an optimal and dynamic way. The Board is increasingly excited about the strength of the market and the way Seadrill is exposed to this operationally and financially.”
- Pacific Drilling Extends Option to Build Eighth Drillship (South Korea) (worldmaritimenews.com)
- Ultra Deepwater Drilling Poised to Take Advantage of Supply Demand Imbalance (dailyfinance.com)
- Rolls-Royce to Power High Tech Drillships (maritime-executive.com)
- Seadrill Secures Contracts for Three Ultra-Deepwater Units in GoM (worldmaritimenews.com)
- It Seems That Seadrill Will be Buying Beers Today (gcaptain.com)
- SDRL – Seadrill Partners LLC Files for Initial Public Offering (sys-con.com)
Rowan Companies plc (“Rowan” or the “Company”) announced that it has exercised its option to build a fourth GustoMSC P10,000 design ultra-deepwater drillship with Hyundai Heavy Industries Co., Ltd. (“HHI”) with delivery scheduled in March 2015.
The cost for this rig, including commissioning, project management and spares, but excluding capitalized interest, is estimated to be approximately $620 million. This cost compares to peer companies’ previously announced 12,000 foot capable rigs equipped with 10,000 feet of riser. Rowan plans to equip its drillships with 2,000 feet of additional riser to enable operations in water depths up to 12,000 feet upon delivery. Each drillship will also be equipped with a second BOP for minimizing non-productive time. The Company will also incur operational training and personnel ramp-up costs in readying the drillships to commence well operations. Expected costs for the additional riser, BOP and training and ramp-up costs will be approximately $75 million. Total cost for the Company’s fourth drillship will be approximately six percent higher than the Company’s first three drillships primarily due to equipment price increases and projected labor cost increases. The agreement with HHI also includes an option for a similar fifth drillship exercisable in the fourth quarter of 2012, for delivery in the third quarter of 2015.
Matt Ralls, President and Chief Executive Officer, commented, “We are very pleased to add a fourth ultra-deepwater drillship to our fleet. The recent three-year contract obtained for our first drillship, the Rowan Renaissance, and strong customer enthusiasm for Rowan’s history of operational excellence, high-specification drillship design and experienced deepwater team, reaffirms our confidence in our expansion into the ultra-deepwater market.”
The Rowan Renaissance struck steel in July 2012 and is expected to be delivered in late 2013. The second and third drillships are expected to be delivered in the second and fourth quarters of 2014, respectively.
Hornbeck Offshore Services, Inc. announced today that it has expanded its OSV Newbuild Program #5 and has commenced a new 200 Class OSV Retrofit Program, among other recent developments.
Expansion of OSV Newbuild Program #5:
The Company has exercised the first four of its 48 options to build additional HOSMAX vessels at an aggregate incremental cost of approximately $180 million, excluding construction period interest, for vessel deliveries in the fourth quarter of 2014 and first quarter of 2015. These four new vessels will expand the Company’s fifth OSV newbuild program, which was announced in November 2011, from 16 vessels to a total of 20 U.S.-flagged HOSMAX class DP-2 new generation offshore supply vessels (“OSVs”) for its Upstream business segment.
These 20 vessels are being built at two shipyards in the United States, which qualifies them for coastwise trade in the U.S. Gulf of Mexico (“GoM”) under the Jones Act; however, the Company expects them to service the anticipated increase in deepwater and ultra-deepwater drilling activity in all three of the Company’s core geographic markets of the GoM, Brazil and Mexico. The HOSMAX class DP-2 vessel designs contemplated by this newbuild program feature three different size vessels (300, 310 and 320 feet in length) each with cargo-carrying capacities ranging from 5,650 to 6,200 deadweight tons and more than 20,000 barrels of liquid mud. The Company considers the option vessel pricing to compare favorably with all other recently announced newbuild programs for vessels of similar size and specifications.
In connection with exercising the first four shipyard options under this high-spec OSV newbuild program, the Company was able to extend the exercise dates for its 44 remaining options by approximately 60 days each without changing the favorable pricing and original delivery dates. Accordingly, the Company’s decision with respect to the exercise of the next option at each of the two shipyards is now not due until February 1, 2013 and February 19, 2013, respectively. These exercise date extensions afford the Company more time to assess market conditions before determining whether and to what extent to exercise additional options. In addition to the 20 newbuild vessels already committed that are scheduled to be placed in service on various dates between the second quarter of 2013 and the first quarter of 2015, the delivery dates for the remaining 44 vessels, if such options are exercised, will be approximately 24 to 26 months following the date of each respective option exercise, with the last potential newbuild vessel under this program (the 48th optional and 64th overall) to be delivered in January 2018. The Company currently intends to exercise all of its remaining 44 options to build additional HOSMAX class vessels should future market conditions, the pace of permitting in the GoM and its company-wide fleet complement continue to warrant their construction, providing the Company a very attractive, strategic five-year organic growth opportunity.
The Company expects the aggregate cost of the first 20 vessels committed under this potential 64-vessel construction program, including the four option vessels announced today, to be approximately $900 million, excluding construction period interest. At June 30, 2012, the Company had a cash balance of approximately $392 million and added net cash proceeds of approximately $266 million to the balance sheet from its 1.500% convertible notes offering, which closed on August 13, 2012. Together with cash on-hand and available capacity under its currently undrawn $300 million revolving credit facility, and based on the key assumptions outlined in the Company’s August 3, 2012 earnings release, the Company expects to generate sufficient cash flow from operations to cover all of its growth capital expenditures for the first 20 HOSMAX vessels under construction, all of the capital costs related to its new six-vessel 200 class OSV retrofit program discussed below, the planned retirement of its 1.625% convertible notes in November 2013, and all of its annually recurring cash debt service, maintenance capital expenditures and cash income taxes for the remainder of fiscal 2012 and for the full duration of the currently committed 20-vessel HOSMAX newbuild program.
In summary, the Company’s fifth OSV newbuild program now consists of vessel construction contracts with two domestic shipyards to build four HOSMAX 300 class OSVs, six HOSMAX 310 class OSVs (up two from the previously announced four), and ten HOSMAX 320 class OSVs (up two from the previously announced eight).
Based on the above schedule of projected vessel in-service dates, the Company expects to own and operate 51, 56, 69 and 71 new generation OSVs as of December 31, 2012, 2013, 2014 and 2015, respectively. These vessel additions result in a projected average new generation OSV fleet complement of 51.0, 52.2, 63.0 and 70.9 vessels for the fiscal years 2012, 2013, 2014 and 2015, respectively. The aggregate cost of the Company’s fifth OSV newbuild program, excluding construction period interest, is expected as noted above to be approximately $900.0 million, of which $242.2 million, $429.8 million, $178.5 million and $6.9 million is expected to be incurred in 2012, 2013, 2014 and 2015, respectively. From the inception of this program through June 30, 2012, the Company had incurred $120.4 million, or 13.4%, of total expected project costs, including $41.0 million that was spent during the second quarter of 2012.
Commencement of 200 Class OSV Retrofit Program:
In addition to the expansion of its HOSMAX newbuild program, the Company has decided to move forward on a new retrofit program that will upgrade and stretch six of its 200 class DP-1 new generation OSVs converting them into 240 class DP-2 OSVs. The vessels the Company has committed to this program are six of its ten Super 200 class DP-1 vessels, four of which are the vessels that recently completed two-year charters with Petrobras in Brazil. These new generation OSVs were built in 1999 and 2000 and were acquired by the Company in 2007. Due to their 56-foot wide beams, the planned 40-foot mid-body extensions and DP-upgrades are expected to add approximately 600 tons to the vessels’ 2,250 tons of current deadweight capacity and roughly double the vessels’ current liquid-mud capacity to approximately 8,000 barrels. The Company is now in the process of finalizing negotiations with a domestic shipyard it has selected and expects to enter into a definitive contract in the very near future. Based on preliminary estimates, the Company expects the yard to complete two of the six vessels in each of the following redelivery months: May 2013, August 2013 and December 2013, respectively.
The project costs for these discretionary vessel modifications are expected to be approximately $50.0 million, in the aggregate, and the Company expects to incur approximately 762 vessel-days of aggregate commercial downtime for the six vessels (127 vessel-days each), as follows:
Other than a modest amount of cash outlays and commercial downtime in the third and fourth quarters of 2012, this retrofit program is not expected to materially impact the Company’s financial results for fiscal 2012. However, upon completion of this program in 2013, the Company expects the newly retrofitted 240 class DP-2 vessels to command higher dayrates, higher margins and higher returns-on-invested-capital than they would have as 200 class DP-1 vessels, such that the Company anticipates a cash-on-cash pay-back of its additional capital investment within approximately 2.5 years. Given the market’s preference for high-spec DP-2 vessels and the Company’s relatively low pro forma net book value for its retrofitted vessels compared to the construction costs of comparable newbuilds in the market today, the Company should be even more competitive in meeting customers’ demand for high-spec vessels at very attractive relative economics.
Prospectively, the Company will report the projected cash outlays for its 200 Class OSV Retrofit Program under the caption “Maintenance and Other Capital Expenditures,” rather than “Growth Capital Expenditures.” Accordingly, the following figures will update and supersede the forward-looking guidance the Company provided in its earnings release on August 3, 2012. The Company now expects maintenance capital expenditures and other capital expenditures to be approximately $58.2 million and $17.4 million, respectively, for the full-year 2012. The Company now expects maintenance capital expenditures and other capital expenditures to be approximately $39.2 million and $50.0 million, respectively, for fiscal 2013, with the cash outlays relating to the 200 Class OSV Retrofit Program included in the latter category. For fiscal 2014, the Company expects that its annually recurring maintenance capital expenditure and other capital expenditure budget, in the aggregate, for its company-wide fleet of vessels will range between $45.0 million and $55.0 million.
GAAP Treatment of Recently Issued 1.500% Convertible Notes:
In accordance with ASC 470-20, convertible debt that may be wholly or partially settled in cash is required to be separated into a liability and an equity component, such that interest expense reflects the issuer’s nonconvertible debt interest rate. Upon issuance, a non-cash original issue discount (“OID”) is recognized as a decrease in debt and an increase in equity. The debt component accretes up to the principal amount over the expected term of the debt. ASC 470-20 does not affect the actual aggregate principal amount of the convertible notes that the Company is required to repay, nor does it impact the actual amount of cash coupon that the Company is required to pay with respect to the convertible notes.
On August 13, 2012, the Company closed on the issuance of $300 million in aggregate principal amount of 1.500% convertible senior notes due 2019 (the “1.500% convertible notes”). The Company’s estimated nonconvertible debt interest rate on such date was 5.75%, based on indicative market quotes for the Company’s publicly traded 5.875% senior notes due 2020. Therefore, as of the date of issuance of the 1.500% convertible notes and in accordance with the GAAP treatment described above, the Company recognized $73.3 million of non-cash OID, which decreased the book carrying value of the 1.500% convertible notes and increased the Company’s additional paid-in-capital equity account by a like amount. Such non-cash OID will be amortized through interest expense over the seven-year life of the 1.500% convertible notes. Accordingly, while the incremental annual run-rate of cash interest expense for the 1.500% convertible notes will be a constant $4.5 million, the gross book interest expense for such notes for financial reporting purposes will vary from year-to-year. The initial annual run-rate of GAAP interest expense for such notes is expected to be approximately $13.3 million. However, GAAP interest expense is expected to fluctuate based on the levels of capitalized construction period interest.
Due to changes in the timing of certain cash interest payment dates associated with the Company’s recent retirement of its 6.125% senior notes in March and April 2012, the issuance of its 5.875% senior notes in March 2012, and the issuance of its 1.500% convertible notes in August 2012, aggregate annual cash debt service for the full fiscal-year 2012 is expected to be $42.2 million. However, inclusive of the planned redemption of its 1.625% convertible notes in November 2013, the Company expects to incur aggregate annual cash debt service for the full fiscal-year 2013 in the amount of $52.3 million, excluding any cash interest expense related to potential revolver draws. Commencing with fiscal 2014 and beyond, the Company’s aggregate annual run-rate of cash debt service should revert to $48.0 million, excluding any cash interest expense related to potential revolver draws.
Hurricane Isaac Update:
The Company experienced no damage to any of its vessels as a result of Hurricane Isaac, including those currently under construction or in drydock at various GoM shipyards, although such yards may claim force majeure delays that may have occurred as a result of the storm. In addition, Hurricane Isaac did not result in customer cancellations of any pre-storm spot or term vessel charters. The Company’s new generation Upstream fleet continues to operate in-line with its pre-storm utilization guidance reported on August 3, 2012, which remains subject to, and primarily driven by, the pace of permitting in the GoM. No physical damage related to Hurricane Isaac occurred to the Company’s corporate headquarters in Covington, LA, which remains fully operational with all electrical power, Internet connectivity and telecommunications service. In addition, HOS Port, the Company’s logistics shore-base in Port Fourchon, LA, is fully operational.
ATP Reorganization Proceeding:
ATP Oil and Gas, Inc., a customer of the Company, initiated a reorganization proceeding under Chapter 11 of the United States Bankruptcy Code on August 17, 2012. As of the date of the bankruptcy filing, ATP was indebted to the Company in the amount of approximately $4.8 million. While the Company believes that its claims are secured by liens arising under law, it is too early in the proceeding to assess ATP’s plans and ability to repay the Company. ATP has indicated its plan is to reorganize and to that end has received post-petition financing. The Company will pursue all rights in the bankruptcy case in order to maximize its recovery.
Hornbeck Offshore Services, Inc. is a leading provider of technologically advanced, new generation offshore supply vessels primarily in the U.S. Gulf of Mexico and Latin America, and is a leading short-haul transporter of petroleum products through its coastwise fleet of ocean-going tugs and tank barges primarily in the northeastern U.S. and the U.S. Gulf of Mexico. Hornbeck Offshore currently owns a fleet of 80 vessels primarily serving the energy industry.
- GL to Provide DP Services to Hornbeck Offshore (USA) (mb50.wordpress.com)
Deep Down, Inc., an oilfield services company specializing in complex deepwater and ultra-deepwater oil production distribution system support services has been successful in its proposal to a major international umbilical manufacturer for the manufacture, installation and commissioning of a portable umbilical carousel.
The project has an estimated value of $4 million in revenue to Deep Down and is scheduled for delivery in the second quarter of 2013, with procurement of long lead items commencing this month.
Ron Smith, Chief Executive Officer of Deep Down, Inc. stated, “We are delighted with this opportunity. We currently have outstanding quotes in excess of $30 million for our carousel design and this project further recognizes that we are a leading provider of innovative umbilical solutions to the oil and gas industry.”
- Houston, Texas: Deep Down Receives Multiple Services Contracts (mb50.wordpress.com)
More than one year prior to delivery Denmark’s Maersk Drilling has signed a contract with a major oil company for the first in a series of four identical ultra deepwater drillships currently under construction.
The contract duration is three years and commencement is expected by end 2013 upon delivery from Samsung Heavy Industries in South Korea and mobilization to the US Gulf of Mexico. The estimated contract value is USD 610 million including mobilization, but excluding cost escalation and performance bonus.
“With the signing of this contract for the first of our four ultra deepwater newbuild drillship we are able to add another USD 610 million to our contract backlog providing a solid basis for our further growth,” says Claus V. Hemmingsen, CEO of Maersk Drilling and member of the Executive Board of the A.P. Moller – Maersk Group. “The US Gulf of Mexico remains a focus area of Maersk Drilling, and we are pleased to enhance our presence in this attractive market. With permitting activity normalizing after the Macondo incident in 2010 and the lease sales in the region, we believe the fundamental demand for our services in this region is in place”.
Maersk Drilling has performed deepwater operations in the US Gulf of Mexico since 2009 with the ultra deepwater semi-submersible MÆRSK DEVELOPER.
Facts about the four newbuild ultra deepwater drillships
In 2011 Maersk Drilling ordered four ultra deepwater drillships at Samsung Heavy Industries in South Korea. The rigs will be delivered in 2013 and 2014. The total investment was USD 2.6 billion.
The design and capacities of the new drillships include features for high efficiency operation. Featuring dual derrick and large subsea work and storage areas, the design allows for efficient well construction and field development activities through offline activities.
With their advanced positioning control system, the ships automatically maintain a fixed position in severe weather conditions with waves of up to 11 metres and wind speeds of up to 26 metres per second.
Special attention has been given to safety onboard the drillships. Equipped with Multi Machine Control (MMC) on the drill floor, the high degree of automation ensures safe operation and consistent performance. Higher transit speeds and increased capacity will reduce the overall logistics costs for oil companies.
- USA: Statoil Extends Maersk Developer Contract for GoM Work (mb50.wordpress.com)
- Strong Demand for UDW Drillships Spurs Seadrill to Order One More from SHI (South Korea) (mb50.wordpress.com)
- Diamond Offshore Orders New Drillship in South Korea (mb50.wordpress.com)
- Pacific Santa Ana Drillship Arrives in U.S. Gulf of Mexico to Work for Chevron (mb50.wordpress.com)
- UK: Nautronix to Supply Acoustic Positioning System for Noble’s New Drillship (mb50.wordpress.com)
- Ensco in $645m drillship buy (mb50.wordpress.com)
- South Korea: Stena Drilling Wins 5 Year Contract for Its Newbuild Stena IceMAX Drillship (mb50.wordpress.com)
- USA: Vantage Drilling Acquires Titanium Explorer Drillship (mb50.wordpress.com)
Deep Down, Inc. , an oilfield services company specializing in complex deepwater and ultra-deepwater oil production distribution system support services, today announced it has been awarded multiple contracts for subsea hardware and deployment equipment orders worth in excess of $2.6 million.
Two orders were placed by a major controls OEM and the third order placed by an international installation contractor.
Deep Down, Inc. will be manufacturing Umbilical Termination Assemblies (UTA), Flying Leads, Umbilical Termination Heads (UTH), Rapid Deployment Cartridges, Moray® and Flying Lead Deployment Frames; the majority of the work is scheduled to be completed in the first quarter 2012, with the remainder completed in the beginning of the second quarter 2012. The products and equipment will be used on three international projects in the Far East and Mediterranean and one project in the Gulf of Mexico.
The patent-pending Moray® Termination System contains a light-weight and compact termination head and very flexible steel tube bundle allowing for easy make up of the heads by the ROV on the ocean floor.
Ron Smith, Chief Executive Officer stated, “These awards continue to build upon Deep Down’s expansion into the international oil and gas market. Deep Down continues to gain recognition outside of the Gulf of Mexico as a solution provider. By working with our customers, we are able to provide them with innovative cost effective solutions for their offshore projects.”
- USA: Deep Down Receives Two LSFL Orders
- USA: Deep Down Lands Two Carousel Orders
- USA: Drilling Moratorium Has No Material Negative Impact on Deep Down Inc.
- USA: Deep Down Inc. Begins Construction of New Carousel System
- Australia: Oceaneering Announces BHP Billiton Umbilical and Distribution Equipment Contract
- Ichthys: The Largest Subsea Gig for McDermott (Australia) (mb50.wordpress.com)
- UK: Aker Solutions to Supply Subsea Modules for Western Isles Project (mb50.wordpress.com)
- USA: FMC Technologies Provides Subsea Systems for Anadarko’s Lucius Field (mb50.wordpress.com)
- Shell Awards Subsea 7 with Two Gulf of Mexico Contracts (mb50.wordpress.com)
- UK: Key Oil Majors, Plexus Team Up to Develop New Subsea Wellhead (mb50.wordpress.com)
- USA: Shell Sets World Record for Deepest Subsea O&G Well at Perdido Development (mb50.wordpress.com)
- USA: FMC Technologies Wins Subsea Systems Contract from LLOG – Who Dat project (mb50.wordpress.com)
- USA: FMC Technologies Inks Global Alliance Agreement with Anadarko Petroleum (mb50.wordpress.com)
To win the jobs war, America needs to be the best in the world not only at entrepreneurship and innovation, but also at customer science.
The country simply cannot win new jobs unless it uses the most advanced sciences in the world to create billions of new global customers.
Simply put, new global customers create new U.S. jobs. That’s why America needs to more than triple exports in the next five years — or continue on a downward slide. The battle for global customers will be the defining element in the new war for jobs and GDP growth.
Whoever sells the goods and services, and whoever owns the companies that own the customers, wins. The United States needs to average a minimum 10% annual increase in exports over the next 30 years to maintain its leadership of the free world.
The big advantage China has over the United States right now is that China wins customers with low prices. This strategy really can work — not great, but OK for a while — because as long as America invents the new products and innovations, it can produce them for the first iteration and create millions of great jobs. But when China evolves to understanding customers and their needs better than U.S. companies do, the United States loses its advantage.
If America allows China — or India or anyone else — to get further into behavioral economics and customer science than it does, the country will lose the jobs war. That is what Toyota, Volkswagen, and other automakers did to U.S. car companies.
They won by simply listening to customers better and then delivering what customers wanted at fair prices. America cannot afford to concede the science of customer insights or customer-centric innovations to China or any other foreign competitors or it risks losing to them. This is a “game over” moment for America.
Why? Because if those countries learn to provide better service and meet customers’ needs better, then customers won’t need U.S. retailers and supply chains to deliver products. China will set up its own retailers and supply chains, and God help America if that were to happen. Its best retailers, shops, banks, car dealers, restaurants, grocery stores, malls, and even movie theaters would be Chinese owned and controlled, which means that the best cash flows, margins, and stock values all become foreign owned.
There has already been a trend lately toward foreign-business takeovers, and the effects have been economically and psychologically devastating in headquarter cities. Belgian-based conglomerate InBev bought American icon Anheuser-Busch. When that happened, a little bit of St. Louis died. Brazilian-backed 3G Capital acquired Burger King, and a little bit of Miami died.
When a national oil company in Venezuela bought out CITGO, a little bit of Houston died. When the Arcapita Bank, formerly First Islamic Investment Bank, bought a majority of Caribou Coffee, a little bit of Minneapolis died. No question, when foreign companies take over American businesses, something changes. Americans feel somehow that they’re not what they used to be.
This might sound controversial to some Americans, but they should all love Walmart, no matter what particular beef they might have with the company. If it weren’t for Walmart eating up all the little corner grocers and hardware stores, the Germans, Japanese, French, and for sure the Chinese would have.
Somebody will come do it better. Walmart, Target, and Costco should be applauded for leading the way in reinventing retailing in America because if they hadn’t, foreign companies would have. Right now the big box stores are worried about the “dollar stores.” That’s great — Americans want Americans competing against other Americans.
The flip side of great performers like Walmart, Target, and Costco is poorly run companies. They’re job killers, especially in their headquarter cities. Local firms, big or small, that are bad with customers will be cannibalized by outside companies. The most dangerous outside companies, as far as your city is concerned, are foreign. Jobs appear in combination with customers and GDP growth and then again in combination with American ownership and control.
You might think I’m an advocate of protectionism. I am not. Quite the opposite, I am 100% pro trade, pro competition, and pro law of the jungle. By no means do I think America should erect barriers against foreign-owned companies.
Leaders have yet to learn that relationships trump price in almost all businesses, from hair salons to high-tech consulting.
The solution isn’t to avoid competition, but to take it head-on. Americans have to know more about American customers and all customers in the world than Europeans do, and especially more than the Chinese, Brazilians, and Indians do. The country that best knows the needs and preferences of all 7 billion customers will have a prohibitive advantage in winning the world’s best jobs.
Sure, companies should do a great job of executing Six Sigma, lean manufacturing, reengineering, TQM, and so on. These practices all work and are essential to winning, but they are no longer enough. I don’t know about your organization, but Gallup has squeezed the last drop out of most of these brilliant practices, all to its great benefit. But the low-hanging fruit of improving processes and efficiency has all been picked. What remains untapped is the incalculable opportunity within the emotional economy of customers.
In fact, one of the biggest blind spots in most American businesses is that they don’t realize how big the emotional economy is within their own customer base worldwide. The best corporate leaders in the United States are still unaware that they are leaving a great deal of money on the table through abysmal execution of the employee-customer links because they are so focused on the “hard numbers,” of which they have already squeezed every dollar to diminishing returns.
You and your teams can double and quadruple exports and foreign sales by increasing the number of your current customers who give you a 5 for partnership on a 1-5 scale. Let’s assume that 20% of your customers give you a top score, which is about the global average. By raising that number to 40%, you will experience record sales increases without spending a nickel more on advertising and marketing. You grow, America grows, jobs grow.
From my 40 years of studying customers, this represents the biggest missed opportunity of all organizational leadership — probably because it is easier for leaders to talk a good game and then at the end of the day, just cut their price, falling back to the rule of classical economics that every decision is rational, which is not true.
What customers at any level really want is somebody who deeply understands their needs and becomes a trusted partner or advisor. The business world fails at managing this one most critical behavioral economic variable more than any other, but it remains the lowest hanging fruit for organic growth for virtually all businesses.
Leaders have yet to learn that relationships trump price in almost all business circumstances, from hair salons to high-tech consulting. He who most deeply understands the customer’s needs tends to win and always gets the highest margins. That’s why talent and relationships can almost always beat low price — they inspire customer engagement. To measure customer engagement, these are the best 11 questions Gallup scientists have found to ask customers anywhere in the world:
CE1. Taking into account all the products and services you receive from them, how satisfied are you with (Company) overall?
CE2. How likely are you to continue to do business with (Company)?
CE3. How likely are you to recommend (Company) to a friend or associate?
CE4. (Company) is a name I can always trust.
CE5. (Company) always delivers on what they promise.
CE6. (Company) always treats me fairly.
CE7. If a problem arises, I can always count on (Company) to reach a fair and satisfactory resolution.
CE8. I feel proud to be (a/an) (Company) customer.
CE9. (Company) always treats me with respect.
CE10. (Company) is the perfect company/product for people like me.
CE11. I can’t imagine a world without (Company).