Profile: Wellstream: Strength in the pipeline

From stock market debutant to likely entry into the FTSE 250: Wellstream's growth since it listed on the main London market on April 26 has been outstanding.

In May, the Newcastle-based designer and manufacturer of flexible pipelines for the oil and gas industry opened a new plant in Brazil, potentially adding 150km to annual capacity. In June, it formed its Seastream joint venture with the Nigerian Sea Trucks Group, winning contracts worth more than £100m in July from BHP Billiton for its Pyrenees project in Western Australia.

In August, announcing a 53 per cent rise in revenue to £99.9m for the half year ended June 30, it reported strong performance from its Newcastle manufacturing operation, with higher than expected utilisation rates and an upgrade in theoretical capacity to 260km a year. This was achieved through focus on continuous improvement

And since listing it has seen its share price double, raising its market capitalisation to around £600m.

Selected in the most recent North East Business Awards as 2006 Company of the Year, Wellstream is a prime example of the marriage of traditional north-east manufacturing and marine engineering expertise with leading edge technological and design skills and entrepreneurial ambition.

These qualities, laced with grant aid, were the attractions which led Wellstream, then part of Dresser, to choose Newcastle in 1996 as its principal manufacturing centre. Halliburton later bought Dresser, and Wellstream's senior management staged a leveraged buy-in in 2003.

Wellstream today is the world's second biggest supplier of offshore oil and gas flexible pipe products, with a 2006 market share of around 26 per cent. With demand for oil and gas driving oil companies' focus on deepwater exploration and production - frequently through the use of floating production and subsea technology - this market is expected to expand dramatically. John Kennedy, Wellstream's chairman, said last month that “compelling long term fundamentals” were providing ample opportunity for continued growth.

The company has a plant in Florida, making its FlexSteel onshore pipeline product; production there is being accelerated too. It also has engineering and sales offices in Rio de Janeiro, Houston, Calgary, Denver and Perth in Australia.

In its first half ended June 30, profits fell from £8m to £6.8m due to a charge for exercised share options, conversion of debt into sterling and refinancing fees. Pre-tax profit, stripping out these items, was £11.2m. Gordon Chapman, chief executive, said last month he expected “the robust market conditions” to continue to support margins.

Global staff numbers grew in a year from 567 to 819 at June 30, including 500 at Newcastle. The company is located at the Walker Riverside Offshore Technology Park, former shipyard land where another big subsea sector company, Duco Umbilicals, is also based.

Wellstream's impressive Newcastle site, where huge reels of pipeline tower above the quayside waiting for dispatch to global markets, is an exciting place. “People really enjoy visiting the plant and seeing the buzz,” says Chris Braithwaite, chief operating officer.

The Newcastle location has been very positivefor Wellstream, he says, citing its traditions of heavy engineeringand innovation, highly qualified engineers and technologists and entrepreneurial spirit.

On the minus side, international communications could be improved - direct scheduled flights from Newcastleto the US would be aboon. And Mr Braithwaite adds: “Sometimes the region is abit parochial and inward-looking. I would liketo see the business community being abit more confident in itself.”

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