FGI/HLX - Holloway: "We will begin then to operate as Friede Goldman Halter"
FGI Interview
archive.twst.com
Friede Goldman CEO prepares for merger with Halter Marine Group
John L. Holloway, Friede Goldman International, Inc.
JOHN L. HOLLOWAY is Chairman and Chief Executive Officer of Friede Goldman International, Inc. (NYSE:FGI).
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TWST: Let's start out by your giving us a brief overview of Friede Goldman International, the company's history, services, activities, customers and the forthcoming purchase.
Mr. Holloway: Friede Goldman International is one of the world's leading providers of offshore drilling services, including design, engineering, new construction, repair and conversion. We operate the engineering and design firm Friede & Goldman, Ltd. and four shipyards in the U.S. and Canada through our subsidiaries Friede Goldman Offshore and Friede Goldman Newfoundland. The company also designs and manufactures equipment for the offshore and marine industries through its subsidiary BLM. Friede & Goldman, Ltd. is a 53-year-old company that is world renowned for its capabilities and technological advances in the offshore industry. The company has been designing offshore drilling vessels since the beginning of this industry. Today, we have designed a major part of the harsh environment deepwater semisubmersibles in the world, as well as the jackup market. Our history in this business has been lengthy and very rich. We have a great reputation, as well as the resources to back it up.
Our four shipyards are run by some of the most experienced managers in the industry. We have just completed the construction of a drilling rig - the Marine 700 - that is the first semisubmersible built in North America since 1983. The significance of this particular vessel is that it was built within a record time period, and it is the first rig built at our new offshore manufacturing facility in Pascagoula, Miss. When you have projects of that magnitude you are competing with the Far Eastern yards that have larger labor pools and are government subsidized. We are really proud of what our people in Mississippi and this facility have been able to accomplish.
When we starting building our new facility two years ago, we explained to the marketplace that it absolutely would have the ability to compete on a global basis - compete and win. We have proved that to be exactly true. It has had substantial success thus far in its short history. In addition to the new builds we are working on at our new facility, we also have an established reputation for our work in performing conversions, retrofits, and upgrades for the drilling industry.
BLM, our 157-year-old equipment company based in France, designs and manufactures equipment for both the marine and offshore industries. We have deepwater mooring equipment, as well as jacking systems, cranes, and many other types of smaller pieces of equipment. BLM also builds equipment, such as mooring devices, for cruise ships. Today, we have 50% of the world market for that industry. We are proud of our work in this industry, especially of a patented product we have called a Compacwinch. The cruise ship industry really likes the product because of its enhanced safety features and space-saving size.
In June, we announced a merger with Halter Marine Group, which is also based in Mississippi. Halter Marine has about 8,000 employees worldwide. The merger will be accounted for under the purchase accounting transaction. We think this is an opportunity for both of our companies truly to blend its businesses while cutting costs considerably. This merger should allow us to reduce our costs substantially and, at the same time, enhance our existing products even more.
No matter what business you are in your customers want reliable service and information and the ability to place orders with confidence. We will continue to make customer confidence and satisfaction our top priority. In turn, they will be able to relay that confidence to their customers, and the chain reaction is going to be very positive.
Our two companies basically operate in the same geographical area, compete for the same workers, many times the same vendor group, as well as the same customers. This overlay opportunity allows our employees to win, our customers to have more options, and our shareholders to have both short-term and long-term benefits from this merger. We look forward to finishing the basic legal hurdles. We still have to await shareholder approval, but we think that will take place within the next month, then we will begin then to operate as Friede Goldman Halter.
TWST: What are the most significant developments, trends, you anticipate in your markets over the next several years?
Mr. Holloway: Let me talk about that in basically two parts. First, over the next few months (and when I say few months, I mean from six to 18 months out), we see continuous growth and development in the deepwater market in both the drilling and production sides. Developers are discovering that the benefits of going into deep water and being able to produce in these areas are worth the risks and complications associated with it. So, we see the market continuing to require newbuilds or semis that will work in deep water and be capable of having continuing operations there, even in harsh environments. In light of those developments, we see the continuing need to increase our technology and help the drilling and production industry find a more cost-effective way to work.
That leads me to the next area of development. Our company is focused on the production side of deep water because there is not presently a sufficient pipeline infrastructure. We think we will be able to get involved in that industry from a technology basis, as well as a construction basis. We can provide the industry a cost-effective manner in which to produce in deep water. The answer is called floating production or floating production storage and offloading (FPSOs). That system is not used in the Gulf of Mexico at this time, but there is an excellent chance that FPSOs will be approved in the Gulf of Mexico over the next couple of years. They are currently used in the North Sea, West Africa, Brazil, and most other parts of the world. Real efforts are being made to get the Minerals Management Society (MMS) to approve their use, and that would be a great opportunity for our company.
Let me expand that idea a little more. Not only will there be an increased demand for deepwater vessels on the drilling side, but there will be increased demand for FPSOs, which are huge vessels, ranging in cost from $300 to $600 million. An oceangoing, barge-type operation will then be used either to shuttle the crew from the FPSOs back to a landside or a waterside pipeline system. All of these vessels will be built under the "Jones Act," which states that they will have to be built in the United States. We think that is a huge upside for our company's future. Friede Goldman is a significant player worldwide on both the drilling side and the production side. We are continuing to develop our expertise in FPSOs, and the ability to build the shuttle tankers or shuttle barges is within our grasp today. That is a major new market for us in the future.
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