MTR100: Teledyne Oil & Gas (PART II)

Mike Read is the President of Teledyne Oil & Gas, a division of Teledyne Technologies and a group he formed six years ago. MTR caught up with Read on the occasion of the MTR100 to discuss his corner of the Teledyne world and how it is faring in the subsea sector.

I know your group well, but in your own words can you give us a description of the group that you lead?
    I created this team six years ago on the first of August. I was originally the president of ODI – Ocean Design, Inc.  And after the completion of the merger by Teledyne, we decided to put together the harsh environment connector companies, which included ODI, Impulse and DGO. , In 2008 we acquired Cormon which brought us into sensing and monitoring for asset integrity. So then we had a couple hundred million dollars worth of harsh environment sensors and interconnect, and we came up with a very original name called Teledyne Oil & Gas.  Subsequently, in 2012, we were given the Cable Solutions business made up of Storm Cable and VariSystems which added a nice harsh environmental cabling solution, land-based mainly. And then several months ago Teledyne acquired Bolt and we picked up a nice facility in Houston and another product brand under the name of AG Geophysical Products: primarily side-linked, but it gives us a much stronger position in Houston. So seven product brands, and we go to market globally as Teledyne Oil and Gas.

So the rationale then behind your group is what?
    We are innovative but we needed more scale. To get in front of an operator as a small connector company is quite difficult; however,  at $300 million with seven brands, you can get an audience with an operator and ask, “What are your technology gaps? We might be able to work together to fulfill them.” That was the primary reason, and then that scale gives you cost effectiveness as well.

Can you discuss the markets that you serve – and today when you look at those markets, what do you see?
    There are three major markets, and the most dominant is the offshore oil & gas production market. For the subsea distribution system,  the linkage of power and optical interconnected systems that provide the power to, and around, the subsea oil field, the FMC trees, the Cameron manifolds, all have to be interconnected. Large modular pieces of equipment are placed across a wide area on the seafloor.   We provide harsh environment wet mate and dry mate interconnect solutions that allow electrical power and electro-optical data transmission between these modules, providing the functionality for the subsea oil fields.”
That’s the primary market we serve. We then move on to land-based fracking sites, where we have harsh environment land, cable and connectors, built by our cable solutions group.
And then finally we have a very strong position on the U.S. Nuclear Fleet, where we provide the pressure barriers and interconnect solutions on the next generation submarine.

And your view of ‘the market’ today?
When we look at the market today, we are in a fortunate position in subsea as we’ve won the majority of the large projects, so we have good backlog; however, the industry today is very focused on taking cost out, for obvious reasons.

What data do you monitor and what are those numbers telling you right now?
    There’s a lot of public information looking at the CapEx dollars that are going to be invested in subsea, and you can drill that down to a well-known metric that is the number of subsea trees, specifically the number of trees that are going to be awarded in the next quarter, the next four quarters, the next three years.  That’s a dominant factor, but it’s not inclusive, because we’ve experienced growth rates that are higher than industry tree award forecasts, and we’ve then been able to put together a dozen years of positive growth even though tree awards were forecasted to be down. But it’s just as important to consider the subsea field architecture, which is becoming increasingly more complex. That means demand for our equipment is going up faster than the rate of decline for tree awards, for example.
    So if you look at the forecast for trees peaking at about 550 two years ago, even though less than 300 were awarded in the last 12 months, this doesn’t necessarily mean that our business is going to decline.
    We were also able, through acquisitions (Cormon for example) to increase our content per tree. And I would say, conservatively, we have four to five times more content per tree today, than half a dozen years ago, pre-Teledyne Oil & Gas.

How has the continued low oil price impacted your mid-to long-range planning at this point?
    Fortunately it has not affected our subsea business in the mid-term. We have won a significant market share and we have a healthy backlog. So short-term, everything is good. medium-term, we’ve been forced to look hard at our cost structure.  We had to look at our head count, we had to look at where we manufacture our products, and to do it in the most efficient, optimal way because from operator to engineering company to supplier, everybody is being asked to take out 25 to 30 percent from the cost. We continue to partner with our customers and our supply chain to find ways to reduce costs without sacrificing either quality or reliability.

Every business has its challenges. What are your group’s?
    Okay, good question. We constantly focus on operational excellence to be the cost leader, to be the company that provides the best value in on-time delivery and service. And we have to make the right investments in new technology.
So we look for funding from our customers to partially fund medium-term product development, for say, three years, and in this way they show their commitment, and we know that there is really positive demand for the new technology for the products on a three-year horizon. So I would say that one of our significant challenges is, quite honestly, we have too many things to work on.

When you say you have customers ‘funding’ some new products in development, what specifically do you mean?
    Take Shell or Chevron: they have technology gaps in their developments from three to five years out, so they will turn to the industry and they will look for companies like Teledyne who have new technology that can solve high pressure, high temperature, (20K PSI for the Gulf of Mexico), opportunities in three years. And they will then fund, either directly or through an FMC, or through a Cameron, a development program that may last two years. They’re really buying the packaging and testing of that solution, so that when it’s complete it will meet new industry standards.

What do you consider to be the primary strengths of the Teledyne brand as a whole, and what can or will the company do to better leverage those strengths?
    We’re working on answering that as we speak, where Earl Childress who I think you are familiar with, has recently been appointed Executive Vice President of Sales and Global Marketing for the entire Teledyne Marine portfolio of Product Brands. He’s putting a strategy in place where we are much more visible, we’re much more efficient reaching our customers in Asia, reaching our customers in Brazil, in the North Sea, and the Americas. So I think you’re going to see a step up in reach, in performance, in brand recognition, and in service that the industry has not seen before. The other opportunity is in sharing technology and technology developments. We recently opened a Technology Development Center in Daytona Beach – 52,000 sq. ft. and 100 people; a big investment in subsea testing and reliability. I think the message to our customers is ‘if you really want this product to work for 25 years, come to Teledyne because they have a state-of-the-art, world-class testing facility.’ And many of our customers come and test independently here, as well.

What do you see as the defining trends or technologies that will drive your business in the coming generation?
    On the seabed there are going to be more sensors detecting flow and pressures; and that’s going to drive the need for more bandwidth, to deliver more data, which will create additional requirements for optical and Ethernet communications. Enabling power and data transmission and distributions systems is our sweet spot.
    There are going to be more demands for higher pressure and higher temperature capabilities, which again is in our sweet spot with our glass-to-metal sealing and our ceramic technology, which facilitates high power at high pressure in subsea boosting and pumping applications.  As I mentioned before, the number of trees is interesting, but in consideration of the number of pieces of equipment that are going to go on the ocean floor with less human intervention, fewer ROVs, smaller ROVs; there is clearly a great opportunity for Teledyne to invest in new materials, new products, and new services.
 

Teledyne Oil & Gas

Teledyne Oil & Gas, also frequently referred to as Teledyne Marine Interconnect Solutions, is focused on strengthening the value proposition by delivering high reliability engineered solutions for subsea and topside pipeline asset integrity monitoring and  sensing, power/data network transmission and distribution system applications primarily for Ocean Science, Defense and Oil & Gas exploration and production industries. 
Formed in 2009 from a group of market-focused Teledyne Technologies companies, Teledyne Oil & Gas has evolved to become a single integrated organization with seven product line entities:  AG Geophysical Products, Cormon, DGO, Impulse, ODI, Storm Cable and VariSystems, plus a close association with research partner Teledyne Scientific Corporation.  Together the teams have participated in hundreds of subsea projects with hundreds of thousands of units deployed.
A global business with company headquarters in Daytona Beach, Florida, USA, Teledyne Oil & Gas has manufacturing sites in Daytona Beach; San Diego, CA; Portsmouth, New Hampshire; Alton and Worthing, UK; Dallas, TX; Houston, TX; and Mexico. Global aftermarket support centers staffed with cross-trained service technicians and engineers are located close to major customer manufacturing locales in Houston, TX, Ellon (Aberdeen), UK, Johor Bahru, Malaysia and two centers in Rio de Janeiro, Brazil. A new Technology Development Center dedicated to advanced engineered technology development opened October 2013 in Daytona Beach.
Teledyne Oil & Gas excels in new product development and leads with a strong reliability program based on understanding all aspects of our systems’ and subsystems’ 25 year performance life capability from the materials systems through to the physics of failure of each material in the system and to complex accelerated aging performance qualification using the latest advanced methods of combined stress analysis and materials certification in association with Teledyne Scientific, a leading materials science research center in Thousand Oaks, California. 
Teledyne Marine Interconnect Solutions exists as a sub-set of Teledyne Oil & gas product lines focused entirely on engineered solutions for marine application challenges.  These product lines include:
AG Geophysical Products, (AGG) which supplies the world’s marine seismic fleet with ruggedized submersible connectors and marine seismic source management systems engineered for reliable performance in the harshest of ocean conditions. Precision machining capabilities with proven production and quality processes deliver ruggedized performance survivability in repetitive high shock and shallow water sealing applications in the toughest deployment and retrieval scenarios that are applicable to demanding ocean science, defense and oil & gas applications as well.
 DGO is a leader in providing high-reliability connection and penetrator solutions for high differential pressure challenges in extreme environments. Since 1962, Teledyne DGO has incorporated the unmatched reliability of glass-to-metal seals into optical and electrical solutions for our customers. Of the hundreds of thousands of high pressure glass seals delivered by Teledyne DGO, there are no known incidents where these seals have failed to maintain pressure-tight integrity. Technology solutions include standard and custom engineered dry & wet mate connectors and penetrators for extreme temperature and pressure applications. Recent new product development in High Pressure/High Temperature (HP/HT) down hole electrical feedthrough systems are enabling instrument deployments to gather data in the most extreme environment applications.
Impulse has supplied the underwater industry with the highest quality dry mate submersible connectors and cable assemblies to create engineered solutions since 1978 and is a leader in the design and manufacture of electrical and optical interconnection systems for a wide range of harsh environments. Through creative problem solving, rapid response and competitive pricing, an international reputation for exceptional service and quality has been achieved.  Solutions include: Dry Mate Electrical Connectors, Dry Mate Electro-Optical Hybrid Connectors, Wet Pluggable Electrical Connectors, Underwater Mateable Electrical Connectors, Electrical Penetrator Assemblies, Magnetically Operated Proximity Switch and Custom Molded Products.  Recent advances in Gigabit Ethernet interconnect solutions for instrument data transmission are enabling more data and faster transmission times.
ODI is a leader in subsea electrical and fiber optic interconnect and distribution systems. ODI’s wet-mateable connectors include subsea power and broadband data transmission assemblies using electrical and fiber optic connectors. All are based on patented oil filled, pressure balanced (PBOF) technology. Companion dry-mate submersible connectors and Field Assembled Cable Terminations and PBOF distributions systems complement the wet-mate lines. These rugged components can be used at any ocean depth and in the harshest environments. In addition to standard product lines, ODI provides top quality custom engineered solutions for any subsea networking challenge.  Recent new product developments in high power wet mate interconnect systems and advanced broadband communication from “Active” Flying Lead designs are changing the subsea infrastructure profile.
Teledyne Cable Solutions - Storm Cable has provided engineered, custom core, application-specific bulk cable constructions for over 40 years.  Storm cables are designed to meet demanding performance specifications of mixed geometry multi-cored cable elements under a single jacket for size, space, and performance efficiencies.  Storm produces cables for a broad range of harsh environment applications in the Oil & Gas, mining, heavy equipment, defense and marine markets.   Small run prototype quantities for qualification are available with short lead times.

The MTR100 is Marine Technology Reporter's Annual report on 100 leading companies in the subsea industry, published in the July/August 2015 edition of MTR - http://www.marinetechnologynews.com/Magazine