Rig Packages, Mud Pumps Ready for Explosion in Demand

Q: What challenges has TSC Group Holdings faced when entering the Mexican oil and gas market?

A: Our projections for 2012 and 2013 were made under the impression that starting the company was going to be easier than it has been. Building the company from scratch in the Mexican market took longer than expected as we faced several demanding startup challenges. For instance, it took a long time to get the import permits for our inventory to be shipped here. But we are soon getting all our merchandise shipped to Ciudad del Carmen in order to start our operations, so we have high hopes of turning a profit during 2014.

Q: What role have your international dealings with other companies played in your entry into the Mexican market?

A: We are suppliers for several large players in the Mexican market. Nabors is one of TSC Group Holdings’ biggest customers worldwide, Seadrill uses our products all over the world, and other companies such as Diamond, Ensco Drilling, and Noble Drilling use our products in Brazil. This helped us infiltrate the Mexican market to some extent. The fact that companies have used our products in different countries makes it easier for us to secure corporate approval to supply them here. We are counting on positive word-of-mouth from those using our products in other markets to grow here. The same idea does not apply to PEMEX, whom we will continue to provide through local distributors and service companies.

Q: What services and products are at the core of your offering in Mexico?

A: Our product portfolio for Mexico consists of complete mud pumps, ranging from 450 to 2,200 horsepower, fluid end expendables for mud pumps, spare parts for the power end of those mud pumps, and centrifugal pumps and spares. This is not our only range as we are bringing in equipment that is used on a daily basis in drilling operations and includes high-pressure steel hose loops, swivel joints, and similar MRO products. Our products are core products but we will be the only manufacturer that has a presence and a stocking facility in Mexico. We will have between one million and one and a half million units in stock. This inventory will be more than enough to cover customer requirements in Ciudad del Carmen for offshore customers, as well as customers in the states of Tabasco and Veracruz. As far as services are concerned, we are looking at opening a complete repair facility next to our warehouse. This facility is planned to have two overhead 30-tonne bridge cranes, which will allow us to repair heavy equipment such as mud pumps, top drives, and other major components of a drilling rig, both our own products and our competition’s. No manufacturer has a full repair facility in Mexico, while the logistical advantages of having one here are considerable and will give us a huge edge over our competition. We can reduce downtime for companies by having a team readily available to be sent to a rig for maintenance. Having a facility close by to receive a component sent from a rig also allows us to repair it in no time compared to the process of shipping it to the US and back. This facility could be used to carry out direct maintenance services as well as repair contracts with PEMEX.

NAFTA makes Mexico a truly attractive place to set up a manufacturing hub. The opportunity for TSC Group Holdings to manufacture in Mexico lies in the competitive cost of labor in comparison with the US. We are also seeing an increase in labor costs in China, which reduces the advantage we had in manufacturing our products there. In order to regain that advantage, we are planning to bring some of our manufacturing processes to Mexico, although the final assembly will still take place in the US. Therefore, we are looking to either make an acquisition or to create a joint venture in Monterrey to build our manufacturing plant.

Q: What role can Mexico play in TSC Group Holdings’ overall global strategy?

A: We view Mexico as a major part of our overall business due to the number of opportunities to sell components, products, services, and complete rig packages here. The acquisitions or manufacturing of new jack-up rigs, upgrades of existing rigs, and similar operations are expected to take off in Mexico. This will create a huge market for our rig packages, and we are already talking to PEMEX in this regard. We are looking at Mexico, and PEMEX, as a major contributor to our revenue stream. Our long-term objective here is to set up our repair facility, as the first-mover advantage would put TSC Group Holdings in a favorable position.