Interview: Peter Rose
27 Jul 10
Robert Outram meets the FD of Energy services specialist Hunting
In uncertain times, it’s no bad thing to have more than £300m in the bank. That’s the fortunate position Peter Rose finds himself in, as finance director at oil and gas services group Hunting plc.
Hunting disposed of its Canadian subsidiary, Gibson Energy, in 2008 and its latest trading statement shows that the group still has a net cash position of approximately £310m. It’s effectively a “war chest”, as Rose explains, earmarked for acquisitions and capital projects to replace Gibson Energy’s high-volume, low-margin business with high-margin operations that will replace Gibson’s earnings, and more.
Rose says: “Our strategy remains acquisitive.”
He adds, however, that Hunting’s strategy is also selective. As he explains: “We want to look at businesses that fit into our ‘play area’, which is the well bore. We don’t want to move outside that zone because we know it, we know the suppliers, the customers and the products… we don’t want to get involved in catering, providing helicopters to oil rigs, or providing drill bits or ships.”
Hunting’s origins lie in shipping, and it still lays claim to being the market leader in the tanker broking sector, but its main business now is energy services. More specifically, what it does mostly involves the use of technology, engineered to very high specifications, to help drill new wells or maintain existing wells. “Mud motors” for example, accelerate the speed at which a drill bit turns, reducing the time needed for drilling and leading to lower costs for the operator.
Hunting’s customers are typically the large operators in the oil and gas sector, such as Chevron, Exxon, BP and the national oil companies of countries such as Mexico, Brazil or Saudi Arabia.
As Rose explains: “Most oil wells use the same fundamental equipment. The deeper you go the more technical it becomes, and that’s our sweet spot. We have premium products, which are capable of withstanding high pressures and high temperatures. Some of the new wells, particularly those off Brazil or deep water Gulf of Mexico, are going very deep indeed. Or deep water North Sea where we have some very big operations.
“People are now looking at resources that are harder to reach and typically that means going offshore, into deeper water. The Brazilian ‘sub salt’ oil reserves are at tremendous depths where the pressures are enormous.”
This is the area on which Hunting is now focused, although it wasn’t always so. From the Second World War up to the 1980s it was a classic UK conglomerate, with interests in shipping, oil services and aviation, with the latter arm producing successful aircraft such as the Jet Provost, a military training plane, and the passenger airliner, the BAC 1-11.
While the group is based in London – about 25 staff work in a head office just off Trafalgar Square – it is a truly global business, with its chief executive working out of Houston, Texas and operations wherever its customers require them.
Rose says: “The number of oil services companies in the US dwarfs the number we have here in the UK, and therefore the opportunity for M&A activity is that much greater. But we don’t want to become too focused on the States because then, when there is a recession there, it would really hurt us. With the global footprint that we have, while I would not say we are ‘recession proof’, we are better placed to get through the current downturn. Our south east Asian operations, for example, have continued to perform very well.”
Hunting’s Singapore arm does business in the Middle East and also, for example, in China. Last year the group acquired a facility in Batam, Indonesia, which gives it additional manufacturing capability in Asia, with cheaper labour and land costs than in Singapore.
Rose says: “That’s where our global footprint and our global structure come into their own, where we have intellectual property that we can put into our facilities in Singapore or Indonesia, and manufacture there. We are well positioned to move our technologies wherever they are required.”
Hunting’s global strategy has also limited its exposure to the impact of regional problems such as the BP oil spill, which has meant a temporary moratorium on deep water drilling in the Gulf of Mexico.
Financial control of such a widely distributed business is clearly a key issue for Rose as FD. He says “We have a good team of financial people in various locations, like Houston, Aberdeen and Singapore, and here in London. With the globalisation of IFRS, that has made our life easier because, in theory, everyone is using the same accounting policies. We employ qualified personnel – there’s an extra cost, but greater security.”
In fact, Hunting’s HQ could have been almost anywhere, but London makes sense, not just because of the company’s history but because it means it is closer to its bankers, brokers and investors.
Rose came to Hunting as financial controller, a newly created post, in 1997. A few years later, he added the company secretary role to his remit, which meant exposure to the board. It proved to be useful experience when he became FD in 2008, following the retirement of his predecessor, Dennis Clark.
He had trained as a CA in Edinburgh with McKerrell Brown & Gray, before moving to work with Price Waterhouse (now, PricewaterhouseCoopers) in London, Edinburgh and Hong Kong.
Rose says: “I was in a typical audit group at PwC working with a wide range of clients, from garment manufacturers and jewellers to utility providers. It was a fast-moving environment, where you worked hard and played hard.
“Hong Kong was an invigorating place but it wasn’t a place to stay as a married person... I came back to get married and raise a family.”
Back in the UK, Rose decided it was time for a career change and he left PwC for engineering group Babcock. As he puts it: “I’d enjoyed my time with PwC, it was an interesting challenge, but I wanted to be more focused. Typically, in the profession you are looking after a portfolio of clients but it’s not possible to focus on one, and if you do that, you can contribute more.”
Now he is a key member of the Hunting executive team, helping to steer the group’s strategy through challenging conditions. In the long run, the increased emphasis on safety in the wake of the BP spill may help Hunting, which has always prided itself on the quality and reliability of its engineering. Above all, however, it is the group’s global outlook and ability to deploy its expertise and technology around the world that is likely to be its greatest strength.
DOSSIER›
1983: Qualifies as a CA with McKerrell, Brown & Gray. Moves to Pricewaterhouse Coopers (London, Edinburgh and Hong Kong)
1990: Moves to engineering group Babcock, first as financial accountant and finally group financial controller
1997: Joins Hunting plc as financial controller
2008: Becomes FD, Hunting plc
Peter Rose is married (to an ICAEW-qualified chartered accountant), with three children. He lives in Amersham, Buckinghamshire.
TANKERS, MUD MOTORS AND FINE ART: THE HUNTING STORY
Hunting began as a shipping company in the 1870s, but its focus on oil started with the founder’s son, Charles Samuel Hunting, who travelled the world to learn all he could about the oil business, then still in its early days.
Hunting ran one of the world’s first tanker fleets, which saw service in both world wars. Between the wars, the company diversified into aviation which, post-1945, led to the production of best-selling aircraft such as the Jet Provost and the BAC 1-11.
Meanwhile, the company was also growing its expertise as a provider of precision engineering for the oil sector. Through the 1970s and 1980s, Hunting operated as a typical British conglomerate, with three separately quoted companies that were consolidated into one plc in 1989 by the then chairman, Clive Hunting. Diversification was no longer welcomed by the stock market and since then, the company has focused increasingly on the areas in which it can add most value.
Hunting is now described as an “upstream energy services business” and the sale of its “midstream” Canadian subsidiary, Gibson Energy, means the group is once more on the acquisition trail. The group now focuses on well construction, well completion and well intervention (technology that can fix problems in the well bore, such as digging out a stuck drill bit).
It is the leading supplier in a number of its markets, and has more than 400 patented technologies. Hunting’s subsidiary, Premier International Ship Brokerage, EA Gibson Shipbrokers is the largest oil & gas tanker brokerage worldwide, and probably the oldest tanker brokerage in the world. For 2009, Hunting plc recorded revenue of £359.9m and profit, before exceptional items, of £35.8m.
Over the past 30 years, the group has sponsored the Hunting Art Prize, the USA’s most valuable art prize. Altogether, more than 35,000 works of art have been submitted. The winner for 2010 is Lane Hagood with her work Books I have possessed.