Growth plan

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At our Capital Markets Day in November 2012, we updated our strategy for growth to adapt it to the evolving market. Our focus includes:
  • Increasing our market share
  • Diversification of our customer base
  • Expanding offshore drilling capability
  • Expansion and improvement of workover capacity
  • Broadening of our technology platform

This strategy update is predicated on the following key market factors:

  • Secure fundamentals

    Our core market environment is less volatile than other major drilling markets globally, as the contractual model in Russia favours longer-term agreements with our key customers. The Russian government continues to support industry growth with tax incentives for tight oil, offshore, remote and arctic exploration and development. This environment coupled with excellent customer relations provides good visibility on activity plans.

  • Market growth

    EDC currently enjoys multiple growth opportunities:

    • Brownfields - the maturity of Russia's producing provinces and the Russian government's desire to maintain and gradually increase oil production will require ever more aggressive drilling. Observers believe this provides underlying market volume growth of 5% to 10% per Annum (range is a function of horizontal metres drilled which take longer).
    • Greenfields - declining prospectivity in Russia's mature brownfield regions is spurring exploration and development in the more remote, more challenging greenfield regions and these require more advanced equipment and more complex solutions, for which our younger, heavier rig fleet and expert rig crews are ideally suited.
    • Horizontal metres - are expected to grow at 10%-15% per annum as this technology is used to arrest declione in mature fields and as a development method of choice for greenfields. It is also the only method to drain and produce tight oilfields (Bazhenov).
    • Offshore - demand currently outstrips supply in the Caspian Sea jack-up market. This is expected to continue for forseeable future and we will own and operate 4 of 5 active jackups by 2015 in this market.  
    • International - we see excellent opportunities to expand in the MENA region, a market with many parallels to Russia, chiefly via acquisition. We own and operate 4 rigs in the Kurdistan region of Iraq.  
  • Competitive environment

    The industry trend to outsource drilling departments from E&P companies continues. Since Lukoil in 2004, TNK-BP, Gazpromneft, Bashneft and Gazprom have followed suit, resulting in more independent drilling contractors. Approximately 45% - 50% of the drilling market (measured by metres drilled), remains with in-house E&P drilling departments. In 2014 Rosneft increased its inhouse drilling capacity by acquiring rigs from Weatherford (ex TNK-BP rigs) and Orenburg Drilling Company to be able to meet more of its drilling needs. The competitive environment continues to be constructive.

    Against this backdrop, EDC's size, market lead, large investment in rigs, personnel training and HSE enable us to offer extremely cost effective and efficient drilling & workover services to all customers.