Ashtead Technology: Operating Model, Vessel Relationships, and the Subsea Equipment Rental Value Chain

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How is the contract structured between you and Total?

If the company representatives on the rig had a good relationship with the Halliburton personnel, they would remain on board. It's challenging to be removed from a rig once you're on it. Normally, the contracts are rig-based. If you're on a rig in an area and it moves, you tend to stay with it. However, if a new rig arrives in a new exploration area, they'll go out to bid and bring in people and equipment once that's finalized.

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Why doesn't Total handle this themselves? Why do they need a company like Halliburton for testing and ensuring the fluid doesn't react badly? Why is it difficult for them to replace providers like you?

Halliburton owns many of the chemicals and the chemical side is significant. As the second biggest service company globally, Halliburton conducts all the testing and holds the specialist equipment. For Total, doing this themselves would dilute their margin. They can subcontract and focus on production, which they aim to optimize and prolong. Service companies are more people and equipment-based. Companies like Total hire them when needed and quickly release them to avoid paying day rates, minimizing costs to increase profitability.

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Why is it difficult for Total to change its service provider or servicing company?

It's not always difficult, but on certain rigs, it can be more complex. The chemicals, reserve chemicals, and laboratory setups are specific to a company. The company personnel know the people and the contracts. Generally, when Halliburton serves Total, they have staff at Halliburton's offices onshore as well. On a single asset, you can integrate yourself so well that it becomes difficult or inconvenient for Total to remove you. Having more services on the rig from a single supplier means they only need to deal with one company, minimizing contractor interfaces. They don't have to manage five different companies; they can manage one that provides five services. That's the aim of most service companies. Schlumberger, SLB, are the ones that do this best. They integrate many services under a single contract, which is why they're probably the world leader.

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