Can I Get Another Inch of Slack?

November 14th, 2016 | Chris Speziale

Friends, let me start off this President’s Message with a disclaimer – this is actually the second one I’ve written for ERD Magazine this quarter. The first one was entitled “Herding Cats”, and contained such varied items as a reminiscence on Geomechanics team-development foibles, to my personal 9-point management philosophy, known colloquially as “The Coward’s Method of Personnel Management” (It’s pretty effective, actually – send me an email if you’d like to adopt it. Think of it as a bridging document).

Unfortunately, the boss lady, Nicole, read it and decided it was not up to my literary standards(?!). She then, immediately and without hesitation, ratted me out to Joe, and he agreed. So, democracy in action – the first version is out, and this new, more serious version is in.

I think I’ll entitle this one:

Can I get another inch of slack?

In past issues, I’ve written about how HXR has survived the downturn so far, and focused on how we continue to upgrade our services, our software, even our personnel. Right now, poor Ekene and Carl are changing DEEPWATERPro® platforms. Actually, more than upgrade – we’ve expanded them, and brought on some of the world’s top experts in the fields of drilling engineering and geomechanics as senior advisors. We can confidently say, without question, that HXR is the only ERD company that offers all the services needed to successfully design and drill ERD and Ultra-ERD wells, both on and offshore. More than ERD, in fact – horizontal, complex, and deep HPHT wells of any trajectory can all benefit from our services (most deepwater exploration wells are near-vertical, but you know they have at least a pore pressure specialist on board). “All the pump, all the rotary, all the time” is not going to cut it anymore, folks. From new MW window regulations in the GOM coming into effect, to the need to drill depleted brownfields (or THROUGH brownfields..) to reach new reserves – Geomechanics, Pore Pressure Prediction and MPD are beginning to play a larger role in drilling operations globally, as is the need to extend a wells reach from a central drill site, whether that be a hard-fought but finally permitted pad to a drilling island or platform.

And the gamble has worked, with more interest than ever before from operators all over the world, and a new MSA being signed almost monthly – not bad for a couple of half-froze drilling hands from up on the tundra. The problem, though, is that not many projects are imminent – most are Q2, Q3 2017; even 2018 for a few of them… And we are thankful for every one of them, and I thank our clients here.

But if two and a half years of downturn wasn’t bad enough – how do we handle three and half? How do we find that extra inch of slack to allow us to make it another 9 – 18 months?

I’m here to tell you, folks – it ain’t easy…

I’m a huge fan of the HBO series, “Silicon Valley”. It’s a comedy about how a small startup develops into a going concern. There are many similarities between HXR and “Pied Piper”, though I’d like to point out that HXR has a much better, more experienced management team.

I’d like to point that out… I really would…

In every episode, the main focus is “runway”. How many months can a company last with their current financing? And what are they going to do about it?

It’s a problem everyone in the industry reading this, right now, is facing, so I’m not afraid to try and address it. I’m not going to lie and say we’re doing great – we’re not, and neither are you, so what are we going to do about it? Maybe this will help to give someone else, another small business owner maybe, some insight. Regardless of what some politician said, we did indeed “Build That”; no one is going to take it away from us. I think there are worse things than death – losing everything you’ve worked for, risking it all, your fortune, years of your life, your reputation; that’s much worse.

As I’ve mentioned earlier, we never stopped developing services and software, and we never stopped developing our team. From day one, we knew that failing to improve, to innovate, would ensure our demise as a company. You see it, in some fashion, every day – companies simply shut down, cold-stacked, no visits from salesmen anymore, no updates to the services they will be able to provide their clients once things come back. Laager in place, turrets down, wait for them to get close, then sabot up. Or as my artillery buddies, seems like a lifetime ago, would say – Fire for effect.

That’s the smart play. But is it the right one? Should companies stagnate during the downturn, or should they use it, as we have, to continue to build their forces up?

I think every company is different, every owner is different. For us, it is a resounding NO. Small engineering and “tech” based companies, like ours, have to continue to innovate or die. That’s the bottom line. Sometimes it requires leveraging the income from more successful divisions within the company to assist the ailing divisions. We do that ourselves, and will likely have to do more of it, the longer the drilling side of things stays down. Your banker is definitely on your speed dial or voice-command, if he wasn’t already. Your LOC’s are extended to 3 or 5 years. Those are a given. But I’d like to remind other owners that YOU ARE THE OWNER. You might have to double down, go once more into the valley, and put up more personal assets. You’re either all in, or you’re not. It’s painful – you’re not just risking everything you have, you are risking your families well-being. It’s not an easy decision. My advice, though, is this: If your company and its services were in demand, even for a short time, prior to the bust, then those same services will be in demand after the bust. Probably in spades, because your clients, once given the go ahead, will want to get drilling again immediately, if not sooner. They’ll be understaffed, they may be under experienced due to layoffs at that point, and if you did your absolute best for them before, back when they were drilling, they will remember that. If you build it (and keep it standing), they will come.

I’ve been told that one should never talk about a company’s finances, even in general terms. It might make a prospective client nervous; make them think you can’t handle the job. I don’t believe that. In fact, I believe the opposite – any company that can make it through the past two and a half years has got it going on, I don’t care what anyone says. As an operator friend of mine told me recently, “Chris, if operators have a cold, service companies have pneumonia”. He’s right about that.

I guess I’d like to just tell everyone, operators and service companies alike, to keep the faith. Outside forces have always shown us contempt; tried to hurt us, dismiss us, devalue us. But at the end of the day, the world still needs us to power it, as we creep past 7 billion on the planet and counting. I’m proud to say that, as hard as it has been, and as hard as it still is, HXR is going to make it. Our Project Management division is going strong, with several projects currently up and running, Deepwater Drilling and it’s Pore Pressure services are moving forward, and even ERD, slow as it has been lately, has some very significant projects on the horizon. We’ve had to make some tough decisions; there are some members of our family sitting at the house right now, others are working like mad to contact every client they can find, and others are feverishly working on bids or tender qualifications for upcoming projects. And yeah, I’ve had to pump a few cash infusions into ol’ Betsy… But it’s worth it, because, like many other small companies, we never gave up, we never quit innovating, and we stand ready to drill any well, anywhere in the world, regardless of how complicated. We’re proud of that. I’m proud of that. Most importantly, I’m proud of our team.

I don’t know how we did it; I wish I could tell you the exact, step by step method. But somehow, through everything we’ve gone through, we found that extra inch of slack we needed to make it work; at least, for a while longer. After that, well, I guess we’ll do it over again, and try to find another inch. I hope everyone reading this finds that extra inch they need to keep reaching out to the finish line. Hang in there, you’re going to make it – the bastards won’t be able to keep you down forever, right?



Chris Speziale

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