Pace-setting for Aker’s Lieungh run
  from: Offshore Engineer
  by: Darius Snieckus
  Monday, April 21, 2008

Having left Aker Kvaerner in the summer of 2007 to run the oilfield services arm of Norwegian shipping group Arne Blystad, the contractor’s former executive vice president of field development, Simen Lieungh, last month returned – to take over the chief executiveship. He speaks to Darius Snieckus about harsh environments, balanced industrial portfolios, and playing the ‘What’s in a name?’ game at the company soon to be known as Aker Solutions.

When the call came from Aker Kvaerner Simen Lieungh was ‘surprised and thrilled’. Some six months after leaving the company he had been with in various roles for nearly 20 years, he was being offered the top post in time with the then-CEO Martinus Brandal’s nomination to the chairmanship of parent Aker Kværner ASA. ‘I had been so many years with the company, so to be approached did make me feel my efforts had really been appreciated – and I had always felt Aker a very rewarding company to work for,’ he offers. ‘My heart has always been here, and indeed it had been a long and difficult process to decide to go [to take up the managing directorship of shipowner Arne Blystad] in the first place.’

‘The thinking behind the board’s offer – and it is something which I strongly agree with – is that given the number of CEOs we have had in recent years, we needed someone for the job who could serve to provide continuity for this company going forward,’ says Lieungh. ‘Working closely with Martinus, as I will be, will help us achieve this aim.’

With a CV at Aker Kvaerner that stretches back to 1988 and had ‘executive vice president, field development (2002- 2007)’ as its most recent entry, there must have been few other candidates in the running. Still, Lieungh has no illusions as to the task at hand.

His return coincides with a period of historic strategic consolidation within Aker Kvaerner’s ownership structure, which has been capped by the contractor’s proposed rebranding as Aker Solutions. The ‘simplifying and strengthening’ name change is no mere cosmetic refashioning of logo and letterhead, however. Significantly, last year more than 40% of shares in the company were transferred from Aker AS to Aker Holding with the ‘mutual agreement’ by the owners that this stake would be maintained ‘for at least 10 years’ as part of plans aimed at ‘clarifying the many business opportunities foreseen’ for the contractor and other Aker group companies.

Successful conclusion to the contractor’s involvement last year on such high-profile projects as Norway’s pioneering Ormen Lange and Snøhvit gas developments, now both in production, the vast, multistage Kashagan field offshore Kazakhstan, where Aker supplied the megadevelopment’s first process modules, and Chevron Blind Faith in the US Gulf of Mexico, for which it delivered a maiden ‘deep draft’ semisubmersible – as well as ongoing building works on what promise to be the world’s two biggest drill rigs, the Aker H-6es Spitsbergen and Barents – suggests the time is ripe for such a move.

The decision was doubtless helped by Aker’s financial standing as it travels into 2008, for the company turned in record results for last year: consolidated revenues up 15% to some NKr58 billion, a 36% increase in earnings before interest, taxes, depreciation and amortisation, and ‘strong’ cash flow from operations of around NKr2.7 billion. Earnings per share in 2007 leapt 95%.

‘This is a very strong starting point for us as Aker Solutions,’ states Lieungh, ‘even though the share price has dropped recently due to the general financial crisis that is at work around the world. Aker’s market can be a complicated one to explain to the financial community, so we have spent a lot of time in recent days [around the announcement of the fullyear results] with investors and analysts explaining our plans and the way forward for the company and this effort has been very well-received.’

Name game

The proposed name change has also proved a topic for discussion in these ‘tête-à-tête’ investor meetings, he continues. ‘Of course there is the question asked of us: “Why change the name?” To me, it is partly because it better integrates the company into the group – the name Aker Kvaerner is a hybrid, though a very strong brand.With the recent clarification of our ownership and the options opened by interfaces between Aker Solutions and the other Aker group companies, it seemed the right time. The new name is a simplification and strengthening of our corporate identity and speaks to our offering comprehensive industrial solutions.’

From his experience following the 2002 merger of Aker and Kvaerner, Lieungh reckons that personnel and clients alike ‘will not take all that long’ to come round to thinking of the company under its new banner. ‘I have the feeling it is going to be the same with Aker Solutions as it was with Aker Kvaerner,’ he offers. ‘I have been given the pleasure of being the first CEO of the newly-named company. It is the same company, but, at the same time, it is an evolving company, one that is looking for new opportunities across business areas. I strongly believe that our being part of a larger Aker group under the new brand is a real advantage to us and we can make the most of it. And Aker Solutions can be the locomotive for the group as a whole.’

One dimension of this group-wide growth is greater internationalism, something that is clearly being appealed to with the Aker Solutions name. Lieungh acknowledges that the Kvaerner brand continues to have its admirers in the Asia Pacific market, but he believes the new name is the one to bet on as the company attempts to build on its breakthrough successes in US Gulf with the semisub for Blind Faith and the deepwater installation of its Multibooster subsea pumping units on BP King (OE July 2007), takes on Asia Pacific’s gas value chain with floating production systems and concrete ‘island’ technology for LNG terminals, and positions itself for the future Arctic field development market. ‘Aker Solutions is the name we feel can cross over boundaries for us,’ he states.

Much as the 2007 was a banner year for Aker, Lieungh says he is encouraged more by the ‘balanced industrial profile’ the company has looking forward. ‘We see very clear opportunities within the product and technologies area – and subsea is the diamond, there is so much untapped potential here – and though there will probably be some fluctuations in this market we expect it to be a good one for us for years to come,’ he states. Subsea, representing as it does an estimated $100 billion capital spend over the next five years, is necessarily central to Aker’s forward planning. But it is not the whole picture.

Combination lock

The continuing rise in deepwater drilling activity, FPSO construction, and growing number of increased oil recovery projects around the globe are seen as ‘key’ to Aker Solutions’ near-term growth as the three markets’ demands are perceived to be a good match for some combination of the contractor’s technology and services portfolio. This currently ranges over drilling equipment and systems, mooring systems, offloading systems, upstream process technologies, floater design and installation, subsea construction and installation, and well intervention.

‘Floating production combined with subsea solutions and well services is something we think there will be an increased demand for,’ Lieungh states. ‘Oil and gas are increasingly found in difficult places – harsh environments, deep water, remote locations – and these areas of technology and services are what are needed.We are very well-placed in this respect.We expect to be positioning ourselves more and more to capitalise on the deepwater production market the world over, and we are working with Aker Floating Production and other floating production companies for this reason, although we also have are own standalone solutions and concepts for the biggest deepwater offshore developments.’

‘Together with our growing subsea capability, I think we have a combination that is very attractive to oil companies out there,’ he adds.

Leading the charge in the deepwater drilling arena will be the two newbuild H-6e rigs now under construction at Aker Stord. Based on Aker H-4.2 and H-3 designs, the Aker Spitsbergen and Aker Barents – the first scheduled for sailaway in July under contract to StatoilHydro – will be able to drill and complete wells in ultraharsh environments and water depths ranging from 100-3000m using subsidiary company Maritime Hydraulics’ high-efficiency double ram rig .

‘These are extreme rigs and they are able to drill in ultra-deepwater and in the harshest environments to the northwest off Norway and Russia and in the Golden Triangle regions, working for long stretches without resupplying,’ underlines Lieungh. ‘Of course they are expensive, but as the owners said: “They might not be the cheapest but they will work all the time.” So they will be costefficient. And availability is more the issue today.’

With dayrates of over $600,000 not unheard of now and newbuilds such as Saipem’s S12,000 ultra-deepwater drilling unit being constructed to sail straight into service off West Africa, clearly cost is not the topmost consideration at E&P;companies. ‘Globally, there are some 100 rigs being built in the next few years and you can count the number of extreme rigs among them on two hands,’ he adds, ‘so there is somewhat less competition if you are willing to invest in the specialised units. Deepwater Norway, Russia,West Africa, Gulf of Mexico; all these regions will be attractive for these rigs.’

Though the Arctic continues to be an industry talking point as an emerging region, to Lieungh the circumpolar continental shelf is on the far horizon. ‘I feel about our Arctic capability at Aker just the way I did when I left, very strongly, but there are complex political issues here that are going to lead to further postponements – I mean we had what we thought were solutions for the [Russian Barents Sea] Shtokman field 20 years ago but it still isn’t developed. However, in the longer-term there is huge potential in the Arctic. Even in Russia, get beyond Shtokman and there are vast reserves to the east, much of which isn’t even on the oil industry’s agenda yet.’

Revolution and evolution

In 2004, two years into the post-merger integration process with Kvaerner, Lieungh, then EVP for field development, reasoned that unifying the former rivals into a single company that could export competence and project execution capability, not just technology, was the main challenge for the combine (OE April 2004). In 2008, that objective, applied upward to the group level, remains the same.

‘Aker Kvaerner and now Aker Solutions has always aimed to be a strong technology holder. Success however remains about executing projects. That is where the risk lies: we must be able to invest in new technology and commercialise it through our projects, and that way create new business opportunities for ourselves. This is what we are aiming for both within the company and with the Aker group. Growth will come out of this.We will grow both organically and through acquisition and co-operate when it is advantageous for both us and our partners.’

The change of name to Aker Solutions, in fact, says Lieungh, is informed by both a pragmatism – a statement of the company’s reconstituted ownership structure and place within the Aker group – and symbolism – a kind of ‘final signing off ’ on the merger inked back in 2002. ‘Aker Solutions describes the completion of the merger, a step into a new era.We have delivered stable growth for the last three years, which is what we had promised. Likewise, in the future, I am looking to a long time horizon: I am not only here to satisfy every quarter, I am here to satisfy for the next ten years and develop the company and maintain stable, positive growth. Right now we have a good order backlog, committed ownership, and are receiving promising signals from every one of the business areas we are working in.’

Four years ago Lieungh characterised the merger with Kvaerner as a ‘corporate revolution’.With the integration soon to be sealed by the new name, the question of what comes next raises its head. ‘Aker and Kvaerner are inextricably linked now. The revolution was always mainly at the top levels within the two companies and once that battle was won the rest followed surprisingly quickly. The challenge now is to sustain profitable growth in new areas in a controlled manner. It might sound a little boring but life is not all about step-changes. It’s all right to be a little boring so long as there is a continual improvement process under way,’ he concludes. ‘And, as we have done up until now, we will undertake restructuring activities continuously.We have found our people prefer it that way because it is not an ultimatum; it is part of a recipe for success.’

As OE went to press, a vote on the name change to Aker Solutions was planned for the company’s April AGO.OE

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