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Integra brochure
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June 01, 2007

Vladimir Kozhokar: "The Choice of the Region was Appropriate and Natural

Integra Group is one of the biggest oil service companies in Russia, including over 40 industrial oil service and engineering plants. Starting from 2004 the Group was active in buying businesses. Mr. Vladimir Kozhokar, Vice President for the Development of Integra Group, told the ‘Amalgamation and Mergers’ about the experience of investments in Tyumeni region, Yamalo-Nenetsky and Khanty-Mansiysky autonomous regions.
— As far as we know, from the very first day of its foundation, Integra was an active buyer of the oil service companies. How big its success in this field?— Today Integra Group is one of the biggest oil service companies in Russia and in former Soviet countries. Integra ‘started’ three years ago from the idea to consolidate Russian oil services and machinery building markets. The idea was based on the possibility to create a serious actor in this market literally from nothing, due to the correct choice of tactics and strategies. Today, three years later, the company employs over 18.5 thousand people in Russia and CIS. We occupy about 2.3% of the drilling, capital wells’ repair and integrated projects’ managing market in Russia; 15.9% of the seismic and geophysics market and 67.8% of oil and gas engineering market. The list of our customers includes the biggest Russian and foreign oil and gas companies: Gazprom, TNK-BP, Lukoil, Rosneft, Shell and others.Undoubtedly, the first stage of business was based first of all on the inorganic growth: M&A transactions, which have become a leading factor in our development. Talking about the nature and specific features of these assets, first of all we were buying basic service enterprises, which rendered drilling and capital repair services, as well as firms working in geophysics and seismic fields. This was necessary to ‘grow the skeleton and the muscles’. Now Integra is on the different stage of development; this means that we are interested to buy the assets that will enable Integra to render high-tech services to its customers. ‘Smith Eurasia’ became a part of such assets: after merging with this company we included in our order portfolio IPM (Integrated Project Managing) Projects. As to preliminary results of Integra development during these three years, it is very interesting to notice that instead of ‘Schlumbergerzation’ threat, frequently heard before, today the experts mention positive example of ‘integration’ of the oil service field in Russia …
— Integra bought, among others, some assets in Tyumen region, Yamalo-Nenetsky and Khanty-Mansiysky autonomous regions. What stipulated such choice?— Yes, really, Integra bought in this region several drilling companies and geophysical enterprises, as well as engineering assets: Tyumen shipbuilding plant. The choice of the region was appropriate and natural: this is the major oil and gas processing region in the country. That’s why it is not a surprise that such big oil service company as Integra is interested in buying assets in ‘big’ Tyumen region, including the autonomous regions.
— There is an opinion that the oil and gas companies are more and more focusing on Eastern Siberia, which is more perspective. How could you comment on this?— Yes, such opinion exists. But Western Siberia will remain major oil and gas processing region in our country form many long years. Though there are serious assumptions that Eastern Siberia is very rich in hydrocarbons that could be compared to Western Siberian fields, still, this regional is not yet completely explored and there is no enough infrastructure, that’s why in the nearest future the work of the oil processing companies will mostly be focused in traditional region of oil and gas processing, including Western Siberia. It is logical that such oil service company as Integra tries to buy the assets in all the regions where its customers (oil and gas companies) work. In what concerns engineering plants, we are interested in buying the companies that are situated in the regions with high potential of qualified working force, especially engineers and workers, as well as in the regions that are close to our main consumers: oil and gas processing and servicing companies, with whom we have long-term and stable business relationships.
— What are Integra’s requirements to the assets it buys?— We follow several basic criteria in buying businesses. These include uniqueness of the product offered by the company to the customers, the company’s share in the market, and its’ growth potential … These are only some of the requirements which we consider when assessing the company and start negotiations with the proprietors. For example, ‘Tyumenneftegeophyisika’ which we bought last year is one of the leading seismic enterprises in Russia, having stable reputation among the customers, rich experience of work in the Western Siberia and qualified stuff. We calculated that the potential growth might be the result of changing traditional season works by different schedule. The susceptibility of most of the oil service companies in Western Siberia consists in the fact that the works are mostly done in cold season, from November until April. We could realize that due to the big number of customers and geographical ‘presence’ of Integra, we will be able to obtain interesting orders for ‘Tyumenneftegeophysika’, which could be performed in summer. Alongside with considering buying ‘Tyumenneftegeophysika’ we were also interested in ‘Yamalgeophysika’, which is a company of similar profile, but working mostly in Yamalo-Nentsky autonomous region. ‘Tyumenneftegeophysika’ negotiations happened to be more advanced, including the level of business studies, that is why we decided to buy the Tyumen assets first, as it was very important from the point of view of ‘post-acquisition’ procedures; this enabled us to integrate the company into our business at lesser organization and material costs. It could be too difficult to integrate two comparable companies simultaneously.However, we did not loose sight of ‘Yamalgeophysika’ and finally we bought big share of it and received synergetic effect by uniting and coordinating the work of these two and other our seismic enterprises. Though these two companies work in almost the same region, each of them has its own specialization, which makes them compatible within the limits of our business without unnecessary competition, using advantages and leveling the disadvantages of each other.
— What were your relations with legislative e and executive authorities in the region?— Integra came to all the regions where it works now from complete zero: we started everywhere from buying new assets. We are the company whose industrial subsidiaries work locally, and that is why it was very important for us to build normal relations with local authorities. In many cases, we managed to achieve excellent cooperation of private capital with regional and municipal administrative bodies. Example of Tyumen shipbuilding plant may be quoted as an example. When we were buying these assets the enterprise was not working. However, we could see the potential of its industrial facilities and could outline possible synergy with other engineering assets we possessed at that moment. Regional aspect was not of the least importance, due to the fact that the South of Tyumen region is a territory which creates the system of the entire ‘big region’, including Yamalo-Nenetsky and Khanty-Mansiysky autonomous regions. Tyumen was the ‘entrance’ to this region.After the acquisition of the Tyumen shipbuilding plant we managed to integrate the enterprise into the structure of our engineering plants, united by the head company ‘URALMASH-VNIIBT’, restored the production and created new vacancies. Today Tyumen shipbuilding plant is a serious local taxpayer. This required the investments comparable with the purchase itself, or even bigger.Of course, local authorities could only welcome the appearance of a well reputed company with large investment possibilities and ability to manage big engineering plants. I may not say that we were offered any preferences against other participants of the market, but we were at least, warmly welcomed and the local authorities understood that Integra does good thing for the region.
— What would you advice the investors who buy business in this region?— I would not say that there are any specific features that make this region differ from the rest of Russia. I general, this is a very promising region and very favorable for investments.