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Lloyd's Register acquires Senergy

Thursday, December 19, 2013

Risk management organisation Lloyd's Register has acquired oil and gas consultancy and software house Senergy

Risk assurance organisation Lloyd's Register, based in London, has acquired oil and gas consultancy Senergy, in its largest ever transaction.

The deal matches Lloyd's Register's topsides oil and gas expertise with Senergy's subsurface expertise, so the two organisations can manage risk and provide support across all aspects of the oil and gas industry.

Lloyds Register is expecting fast growth from its energy division. Revenues were £260m to £270m in the year 2011 to 2012, and expected to be £350m for 2013. The company expects revenues of £1.5bn in three years, says John Wishart, energy director of Lloyd's Register.

The company currently has around 800 employees in Aberdeen, and expects this to grow to 1,000 over the next year or two, not including the Senergy employees.

'I'm incredibly excited.' Mr Wishart says. 'You can do a lot of analysis around it but this deal just feels right.'


Complimentary

Before the acquisition, Lloyd's Register did not have a great deal of subsurface expertise, if any, but it is very strong in production risk assurance, shipping and marine operations.

By adding Senergy's subsurface and drilling expertise, the combined companies will be able to offer services which cover exploration, production, tanker operations, over the entire life of the field.

Lloyd's Register also provides drilling technical expertise following its acquisitions of ModuSpec and West Engineering Services.


Senergy

Senergy was founded in 2005, and has over 650 employees and a further 100 'associates', with turnover in the last financial year of £121m. It has offices in the UK, Norway, Middle East, Malaysia, Australia, USA and Indonesia.

Senergy sees its core expertise as being in subsurface, well engineering and operations, site survey and geo-engineering, facilities development solutions and power engineering.

Senergy has been deliberately structured similarly to the way upstream oil and gas companies are structured, says James McCallum, CEO of Senergy. Many employees have previously worked in oil companies in different roles. This means that it has people who can look at problems from different perspectives.

'We are very strong in subsurface, and, I would argue, a market leader in well design,' he says.

Senergy's drilling expertise is recognised by insurance companies, to the extent that insurance companies offer a reduction in premium if Senergy has been involved in de-risking the drilling operation, he says.

Senergy gets a third of its revenues from software sales.

The company was founded in 2005 'with 4 people around a kitchen table,' Mr McCallum says, and now has 800 staff. Growing the company so fast, and putting in the necessary management systems, human resources and legal infrastructure has been a challenge, he says.


Transaction

The price of the transaction was not disclosed, but Lloyd's Register said it was the largest investment it has made to date. Senergy was previously owned by company employees.

Under the agreement, Senergy will operate as an independent company for 3 years, and during this time LR will acquire all of the shares. Senergy will become a member of the LR group and LR will have representation on the board of Senergy.

Mr Wishart will continue as chair of the combined Lloyd's Register Energy Group, and the management of Senergy will stay the same.

James McCallum, CEO of Senergy, says that the company has been looking for a financial partner for 2 years, and contacted over 20 companies during this time, with discussions with Lloyd's Register starting in May 2013.

Each potential partner was asked to provide 2 submissions in separate envelopes, one explaining about their ambition, integrity and what made them a unique partner, and the second saying what they thought the company was worth. 'We didn't open the 2nd document until we were happy with the first one,' he said.

'We said, we are strongly committed to our people and values, we want a partner with a similar culture,' he says.

Mr McCallum says he likes the fact that Lloyd's Register is owned by a foundation, rather than shareholders, so profits are either re-invested or transferred to the LR foundation, a charity which supports the advancement of engineering-related education, and funds research and development that enhances safety of life at sea, on land and in the air.

'It is entirely unique in the modern business word,' he says. 'It has a vision and growth targets but it is entirely owned by a foundation. We see a strong alignment in terms of objectives, culture, excellence and management style.'

In discussions with employees at its London and Aberdeen offices, 'unanimously, the response was extremely positive,' Mr McCallum says.

After the efforts, 'I'm delighted to get back to the day job of running the Senergy Group,' he says.



Associated Companies
» Lloyd’s Register
» Senergy
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