Plexus local supplier wins contract with Gazprom

The AIM-traded firm said the contract covered the first year of an up-to-five-year jack-up gas exploration drilling programme on the Kara Sea Shelf, at shallow water depths of less than 150 metres, and carried rental rates similar to the ones historically achieved in the UK Continental Shelf.

Under the terms of the 2016 licence agreement with Gusar, Plexus would receive a licence royalty of 20% based on the invoice value of Plexus products rented or sold.

In addition, under the terms of an additional royalty agreement entered into with Gusar at the time of the recent share buyback transaction, a further 20% royalty of the invoice values of the 2019-2020 contract with Gazprom would apply.

The two POS-GRIP 18-3/4 inch rental wellhead sets Gusar recently purchased from Plexus for around £1.6m would be used on the first well of the programme, which was due to spud in the second quarter of 2019.

Plexus said the contract announcement represented a “significant milestone” towards establishing its best-in-class gas-proof POS-GRIP equipment in Russia and the Commonwealth of Independent States, which it described as one of the top three hydrocarbon producers in the world with “significant” gas reserves.

Due to the importance of gas in its energy mix, Russia represented a “key market” for Plexus, as its friction-grip technology and ‘HG’ metal sealing had been proven to be ideally suited to the high pressures and temperatures associated with gas.

As it announced last year, Gusar would also supply under the contract the ‘Tersus TRT’ mudline suspension system (MLS) equipment, which provided important environmental, operational and safety advantages, Plexus explained.

The winning of the order by Gusar with Gazprom represented the culmination of three years of effort to enter the market, with Plexus and Gusar to continue to work together on developing further business opportunities in the region.

“This is the breakthrough rental wellhead order that both Gusar and Plexus have been working towards since we signed the licensing agreement in January 2016,” said Plexus chief executive officer Ben Van Bilderbeek.

“As the holder of the world's largest natural gas reserves, Gazprom is the latest major operator set to join the likes of BP, Centrica, ConocoPhillips, eni, Royal Dutch Shell, and Total on the long list of operators that have used our proprietary POS-GRIP technology around the world.

“We are therefore anticipating that today's order will prove to be the first of many, not just for Gazprom, but in time from other companies operating in the CIS market.”

Van Bilderbeek said the initial contract between Gusar and Gazprom would provide Plexus with its first Gusar licence royalty revenue stream.

“Together with our cash-rich balance sheet and the remaining earn out period and collaboration agreement with TFMC for existing and new POS-GRIP intellectual property applications outside of jack-up exploration, we are strongly placed to advance our objective of establishing POS-GRIP as the enabling gas-proof technology for the wider energy sector including production and subsea applications, and decommissioning and renewables markets.”

Gusar's general director Alexander Beryozkin added that Gazprom had “welcomed” Plexus' technology, introduced by his company as the local supplier.

“Working in Arctic conditions dictates the need for the highest standards of safety and reliability,” he explained.

“Having carefully considered the existing conventional alternatives, Gazprom has ruled in favour of POS-GRIP technology that has been repeatedly chosen by industry leaders for complex jack-up exploration wellhead drilling programmes around the world due to the technical advantages that POS-GRIP avails.”