Speedy today announces that it has entered into a 50/50 joint venture with J. & J. Denholm Group ("Denholm") to provide asset management and equipment rental services to the extensive oil & gas sector in Kazakhstan, including the "super giant" fields at Tengiz, Karachaganak and Kashagan, three of the largest oilfields in the world.
Denholm, through its specialist oilfield services business has a market-leading position in the provision of maintenance and turnaround services in Kazakhstan which it has established through 20 years of operating in the region. Since 1999 it has operated this business through Denholm Zholdas LLP ("DZ").
DZ is headquartered in Atyrau, with an operating hub at Karabaton, adjacent to the onshore processing facilities at the huge offshore Kashagan field. In addition to Karabaton, it has permanent facilities at the onshore production plants at Tengiz and Karachaganak and at the export port of Aktau, which also acts as a supply base to Kashagan.
The joint venture will trade and operate under the brand "Speedy Zholdas" in Kazakhstan. Both Speedy and Denholm have identified the opportunity to leverage DZ's existing infrastructure by providing a full range of asset management and equipment rental services in support of existing clients of DZ, who include amongst others Chevron and Exxon, whilst at the same time extending such services to other oil & gas clients with whom Speedy already has, or is targeting, long-term relationships.
Speedy Zholdas already has a pipeline of near term opportunities supporting DZ in the services it provides major international oil companies under long-term framework agreements. Given the seasonal nature of its activities, the joint venture is expected to breakeven during FY14 and to be earnings enhancing in FY15 and beyond.
As part of the transaction, Speedy has acquired a 50% interest in DZ's existing equipment rental operation for a total cash consideration of US$4.4m, of which US$1.4m is being paid on or around completion and US$3m is payable by equal instalments of US$1m on each 1 November 2014, 2015 and 2016. In the 9 month period to 30 September 2013, the business generated operating profits of US$1.4m on revenues of US$6.7m. The gross book value of the assets comprised in the joint venture is US$4.5m. Further investment by the parties to fund growth in the joint venture will be made on a dollar for dollar basis.
Commenting on the joint venture, Speedy's CEO, Steve Corcoran, said:
"We are delighted to be accessing the exciting oil & gas market in the Caspian by working in partnership with such a well-established and highly-regarded partner. Denholm has an enviable reputation, built up over 20 years, for providing outstanding levels of service to major international oilfield clients in Kazakhstan. Having recently supported Denholm Zholdas on planned turnaround projects in the region from our existing business, this joint venture is a natural next step for both parties.
"Together with the Zadco project at Abu Dhabi's Zakum field, this joint venture means that Speedy now has a long-term presence at four of the largest oilfields in the world."
John Denholm, J. & J. Denholm's Chairman and CEO, added:
"We are delighted to be bringing Speedy in as a partner in our Kazakh plant hire business and believe their expertise and access to equipment will enable us to improve the level and range of service that we can offer our customers."