Plexus Holdings PLC, the AIM quoted oil and gas engineering services business and owner of the proprietary POS-GRIP® friction-grip method of wellhead engineering, is pleased to announce its Russian licensee, LLC Gusar (‘Gusar’), has secured its first major contract to supply POS-GRIP rental wellhead gas exploration equipment to Gazprom, the global energy giant.
The contract covers the first year of an up to five-year jack-up gas exploration drilling programme on the Kara Sea Shelf at shallow water depths of less than 150 metres, and carries rental rates similar to the ones historically achieved in the UK Continental Shelf. Under the terms of the 2016 Licence Agreement with Gusar, Plexus will receive a licence royalty of 20% based on the invoice value of Plexus products rented or sold. In addition, under the terms of an additional Royalty Agreement entered into with Gusar at the time of the recent share buy back transaction, a further 20% royalty of the invoice values of this 2019-2020 contract with Gazprom will apply. The two POS-GRIP 18-3/4″ rental wellhead sets Gusar recently purchased from Plexus for circa £1.6m will be used on the first well of the programme, which is due to spud in the second quarter of 2019.
Today’s contract announcement represents a significant milestone towards establishing Plexus’ best in class gas proof POS-GRIP equipment in Russia and the CIS, one of the top three hydrocarbon producers in the world with significant gas reserves. Due to the importance of gas in its energy mix, Russia represents a key market for Plexus as its friction grip technology and HG® metal sealing have been proven to be ideally suited to the high pressures and temperatures associated with gas.
As announced last year, Gusar will also supply under the contract the Tersus™ TRT Mudline Suspension System (‘MLS’) equipment, which provides important environmental, operational and safety advantages. The winning of this order by Gusar with Gazprom represents the culmination of three years of effort to enter this important gas market, and Plexus and Gusar will continue to work together on developing further business opportunities in the region.
Plexus’ CEO Ben Van Bilderbeek said, “This is the breakthrough rental wellhead order that both Gusar and Plexus have been working towards since we signed the Licensing Agreement in January 2016. As the holder of the world’s largest natural gas reserves, Gazprom is the latest major operator set to join the likes of BP, Centrica, ConocoPhillips, eni, Royal Dutch Shell, and Total on the long list of operators that have used our proprietary POS-GRIP technology around the world. We are therefore anticipating that today’s order will prove to be the first of many, not just for Gazprom, but in time from other companies operating in the CIS market.
“This initial contract between Gusar and Gazprom will provide us with our first Gusar licence royalty revenue stream. Together with our cash rich balance sheet and the remaining earn out period and Collaboration Agreement with TFMC for existing and new POS-GRIP IP applications outside of jack-up exploration, we are strongly placed to advance our objective of establishing POS-GRIP as the enabling gas-proof technology for the wider energy sector including production and subsea applications, and decommissioning and renewables markets.”
Gusar’s General Director Alexander Beryozkin said, “Gazprom has welcomed Plexus’ technology introduced by us as the local supplier. Working in Arctic conditions dictates the need for the highest standards of safety and reliability. Having carefully considered the existing conventional alternatives, Gazprom has ruled in favour of POS-GRIP technology that has been repeatedly chosen by industry leaders for complex jack-up exploration wellhead drilling programmes around the world due to the technical advantages that POS-GRIP avails.”
Following the completion of the disposal of its wellhead exploration equipment and services business for Jack-up applications (the ‘Jack-up Business’) to TFMC, Plexus retained the right to pursue jack-up exploration related business in Russia and the CIS via the Licence Agreement. Please see the announcement of 26 January 2016 for further information on the Licence Agreement, which grants Gusar and Konar the right to manufacture and rent Plexus’ proprietary jack-up exploration equipment within the Russian Federation and the other CIS states.