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Energy
SRJ Technologies Group’s (ASX:SRJ) lean operating and intellectual property-based business model has proved ideally suited to a COVID world.
The firm specialises in providing specialist couplings for pipelines in the oil and gas market and is branching out to other sectors such as hydrogen, mining, and petrochemicals.
“COVID has expedited change in the industry and pushed the market closer to us because of the way we operate,” chief executive, Alex Wood, told Stockhead.
“We are on the cusp of real proof in our business model and of our technology,” he said.
Several recent trends in the oil and gas and resources industries have made SRJ’s business strategy more alluring for investors and customers.
These changes include automation, low oil prices and fewer large projects being built. Some have been accelerated by COVID-19.
Companies with large infrastructure assets are operating on tighter margins in an environment of depressed oil and gas prices and have less money to spend.
Also, the oil and gas industry in Australia is producing fewer multi-billion-dollar projects than in the past, as it moves from a capital spending (capex) to an operating expenditure (opex) phase.
Wood said he was seeing a build-up of maintenance work in the pipelines sector that had been put off by operators due to COVID and low oil prices.
“There is going to be a large amount of work next year in terms of deferred maintenance and the repair backlog,” he said.
And, SRJ’s clients are able to install its pipeline coupling products using their own staff, which suits operators seeking to minimise exposure risk to crew from COVID-19.
The company has signed a strategic partnership agreement with Mitsui & Co.
Mitsui will promote SRJ’s products and services to its $US100bn ($137bn) asset portfolio.
“COVID has changed their focus from large capital expenditure projects, to operating expenditure opportunities,” Wood said.
“They understand from their engagement with us that there is a significant volume of EPRS business where funds are going to third-party service providers.” (EPRS stands for emergency pipe repair service).
“We are educating their portfolio companies and working our way through that network, to identify areas of cost savings,” he said.
Japanese conglomerate Mitsui & Co has a large footprint in Australia that ranges from coal mines in Queensland to LNG projects in WA, and wind turbine and power generation plants in South Australia and Victoria.
The company also has a fleet of Floating Production, Storage and Offloading (FPSO) vessels operating off the coast of Brazil.
Two Mitsui & Co staff have joined SRJ to help the company to navigate the Japanese company’s vast portfolio of clients and assets in Australia.
A possible new area of business for the company is hydrogen in Australia.
“We are looking at a project to understand the challenges and complications of entering that sector,” said Wood.
SRJ was appointed as an agent to Saudi Arabia-based Zamil Operations and Maintenance for its oil and gas pipeline business.
SRJ is also benefiting from a recent industry trend, and this is for FPSO operators seeking to reduce the number of personnel on their vessels.
This is due to the risk of COVID and vessel operators now prefer crew to perform repairs instead of allowing contractors to board a ship.
This arrangement suits SRJ as its components are designed to be fitted by operations personnel without the presence of SRJ workers.
In a real-life example, SRJ was able to provide a relevant component to a FPSO operator that had an outbreak of COVID on-board one of its ships.
The crew was able to undertake the repair themselves without any on-board technical presence.
Unlike many of its competitors, SRJ does not have its own workforce, and contracts out the installation work for its products to skilled third parties.
This saves customers a significant amount as each installation job is tackled by SRJ’s local engineering partners in each relevant country.
The company is at the forefront of innovation in the pipeline couplings industry, particularly in weld-free products.
“We can put in a coupling within two hours compared with 30 hours for a welded component,” said Wood.
SRJ is ready to roll-out an app that allows operational staff to identify appropriate containment technology for sealing a pipeline leak.
“We are always looking at issues from the client’s perspective,” said Wood.
SRJ has a number of staff from oilfield services company Petrofac such as its technical director, Paul Eastwood.
“We are a leading driver of technological change in the industry,” he said. “Most of our competitors are reducing headcount and we are adding to our technical headcount.”
SRJ raised $8m in an IPO in September to fund further business development.
“We are debt free and through our IPO we are well capitalised,” said Wood.
“Our goal next year is to consolidate our strategic partnerships and get the business to break-even, and then build on existing revenue streams,” he added.
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