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the competition they are chasing. Because as a new technology is launched and is becoming accepted in the marketplace, the company trying to follow the leader tries to catch up and deliver a similar technology. But while they are trying to “catch up” to the leader, the leader is already working on the next product evolution. So it’s a no-win situation for counterfeiters.

What’s important to your customers in the Middle East, simply price? Or are they more demanding in terms of enhanced bit life, improved penetration rates etc? The increase of global drilling activity has increased drilling costs, especially in the Middle East. But during this time, the Middle East has become a market of early adopters of new technologies. Historically, the North Sea and the Gulf of Mexico were the playgrounds for new and emerging technologies. But as the Middle East market has grown they have focused on improving their drilling efficiency which has modified their culture to embrace new and emerging drilling technologies. They have done this so well that I would say the Middle East is on par with the North Sea and Gulf of Mexico for testing new and emerging drill bit technologies. For example, PDC drill bits were once seldom used in the Middle East. But in recent years, operators and drilling contractors working in this area have upgraded their rigs, improved their motors and drilling systems all in the name of drilling efficiency and drilling performance. Customers in the Middle East have their eye on value, but value for total cost of ownership. With the onset of more advanced drilling systems, along with a commitment to safety and safe drilling practices, and a strong focus to performance and drilling efficiency, allowed PDC bits to enter into and thrive in this market. Varel has experienced this change in attitude about technology adoption first-hand.

We often leverage our customer relationships in the Middle East to allow us to field test and refine new and emerging technologies. Our customers are very receptive to these opportunities and we are very appreciative of them as they result in win-win scenarios.

What is Varel’s philosophy for designing drill bits? At Varel, it is our goal to provide customers with a total drilling solution rather than just a drill bit. We believe drill bits have a special relationship to directional drilling systems in that they should not be looked as separate, independent tools. They should be considered a total drilling package and, therefore, should be designed as one package. To do this, we use data and information supplied by the customer and numerous proprietary software applications, design tools and manufacturing processes.

Arcapita to acquire Varel International for US$369mn

ARCAPITA INC., A leading private equity investment firm, announced that its affiliates have signed a definitive purchase agreement to acquire Varel Holdings, Inc. from KRG Capital Partners for approximately US$369mn. Varel is the world's fastest growing manufacturer of drill bits for the oil and gas, and mining and industrial industries. Stockton Croft, Director at Arcapita, said, "Varel's growth is being driven by excellent industry dynamics, superior customer service and a talented and highly experienced management team. In addition, Arcapita is excited about the opportunity to assist Varel in expanding its presence in the important markets of the Middle East, where Arcapita's local knowledge and extensive contacts will be a major competitive advantage for Varel."

Jim Nixon, Chief Executive Officer of Varel International, stated, "We are excited about continuing our growth journey with our new partner Arcapita. We look forward to leveraging Arcapita's strong relationships in the Middle East and to expanding our global position in Energy and Mining applications."

Oil Review Middle East Issue Five 2007 89

Technical Focus

Fast Fax Enquiry No. 86

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