(06/10/2008) Gulf International Services Press Conference
1- Can you give us a brief overview of Gulf International Services and its Portfolio Companies after it was recently listed on Doha Securities Market?
GIS was duly incorporated under the Companies Law as an Article (68) Qatari shareholding company by MOEC Resolution No 42 dated 12 February 2008. It was incorporated with an authorized capital of QR10 billion, and a paid-up capital of QR1.228 billion divided into 1 Special Share and Ordinary Shares having a nominal value of QR10 each. The Company is engaged in the provision of services to the national and international oil and gas industry, including well-support services, offshore and onshore drilling services, helicopter transportation and maintenance, catering, as well as insurance and reinsurance services.
The Company’s principal activity is to operate as a holding company of the following Portfolio Companies:
- Al Koot Insurance and Reinsurance Company S.A.Q. (a subsidiary company fully-owned by GIS), which provides a range of insurance and risk management services to QP and its subsidiaries. Insurance provided by Al Koot is broadly classified into construction insurance, onshore and offshore operations insurance and marine insurance.
- Gulf Drilling International Limited Q.S.C (owned at 69.99% by GIS), which provides drilling and drilling related services to the QP group and its international joint-ventures; and
- Gulf Helicopters Company Q.S.C (fully-owned by GIS), which operates as the sole provider of helicopter transportation services in Qatar. GHC also operates as a provider of helicopter transportation services in the MENA region and India.
Even though all three companies fall under the umbrella of Gulf International Services, their day-to-day management remains with the respective management teams of the Portfolio Companies.
2- What is the main activity of Gulf International Services?
As mentioned above, Gulf International Services operates as a holding entity for companies engaged in different activities. Therefore, the principal activity of GIS derives from the main activities of its subsidiaries. Three companies currently fall under the umbrella of GIS: Al Koot, GDI and GHC. Al Koot Insurance and Reinsurance was incorporated in 2003. Al Koot was the captive insurance company of the QP Group. Its mainly provides insurance and risk management services to the QP group and QP co-ventures. Following the incorporation of Gulf International Services, QP transferred its 100 per cent shareholding in Al Koot to GIS in accordance with an Instrument of Assignment and Transfer. Al Koot is no longer a direct subsidiary of QP. However, it continues to provide insurance and risk management services to the QP group as if it were still the QP Group’s captive insurer. In the ordinary course of work, insurance provided by Al Koot is broadly classified into construction insurance, operations insurance and marine insurance.
On the other hand, Gulf Drilling International was incorporated in 2004 as a joint venture. It is currently owned at 69.99% by GIS and the remaining stake is owned by JDC, a Japanese drilling company. It operates in the ownership, charter, operation and maintenance of a number of drilling rigs, both offshore and onshore. It provides drilling services to the QP Group and QP’s international co-ventures. GID currently owns five offshore, ‘jack-up’ drilling rigs and four onshore rigs.
As for Gulf Helicopters, it was incorporated back in 1970 as a subsidiary of British Overseas Airways Corporation, operating in Qatar with a fleet of two helicopters. Gulf Helicopters was subsequently acquired by Gulf Air, which sold it to QP in 1998. Given its exceptional performance, it was approved by the FAA as a Repair station and by the QCAA as a maintenance organization. Furthermore, GHC holds an AOC issued by QCAA. It operates as the sole provider of helicopter transportation services in Qatar. Its core business, accounting for approximately 95% of its revenues, is helicopter transportation services, including exploration and production transportation activities in the oil and gas sector, emergency flight services for hospitals and search and rescue operations.
GHC owns a 92% stake in the Al Maha Aviation Company, a private limited company in Lybia and has an office in Crawley, UK, near to Gatwick Airport.
3- What are the constraints GIS Portfolio Companies might be facing?
Under the wise leadership of our Chairman, His Excellency Abdullah Bin Hamad Al-Attiyah, Deputy Premier and Minister of Energy and Industry, the future looks promising Gulf International services. The growth of GIS, a subsidiary of Qatar Petroleum, will be favored by the expansion and growth of the oil and gas industry in Qatar and GIS will build upon its diversified investment portfolio and competitive advantages of its Group Companies. For instance, Al Koot has no competition in relation to direct insurance provided to the QP Group. Al Koot is the sole provider of direct insurance services to the QP Group and effectively, still acts as the captive insurer of QP. Similarly, GDI’s primary competitive advantage is its strong relationship with QP Group. GHC, for its part, faces no competition in Qatar, as it operates as the sole provider of helicopter transportation services in Qatar. It has a relatively modern fleet; the average age of its fleet is approximately 10 years, and it is reducing as the company’s newly purchased helicopters come into service.
4- What are the future expansion plans of the Portfolio Companies and what is their potential impact on the position of the Company?
Gulf International Services is seeking new investment opportunities and expansion plans to foster economic and operational synergies between the Portfolio Companies and support the overall economic growth. It is also seeking to recruit highly-skilled and qualified nationals. All these plans will have a positive impact on the assets and revenues of the Company, which will in turn improve the profits and capital value of the Company, and eventually benefit the shareholders.
For instance, Al Koot envisages to obtaining a credit rating. By obtaining a credit rating, Al Koot may be able to offer insurance and risk management services to third parties outside of the QP Group.
On the other hand, GDI is in the process of implementing a business plan which sets out the company’s aspirations. It intends to increase its share of the market in relation to its core drilling activities, both by serving markets which it does not currently serve (including Africa, the Arabian Gulf, India and the Caspian Sea) and by adding to its roster of clients outwith the QP Group.
Finally, GHC is in the process of increasing the size and diversity of its fleet. Currently, GHC owns 27 helicopters, mainly manufactured by the US Bell company. In its search to continuously improve its services and meet the increasing demand in Qatar, GHC entered into purchase agreement and took delivery of the first of ten new Agusta Westland AW139 helicopters in July 2007. By moving away from the US company Bell as its sole supplier of aircraft, GHC will be able to expand the geographic scope of its operations, which will in turn increase the marketability of its maintenance operations.
5- How can you define GIS business strategy?
Gulf International Services’ strategy is to maximize shareholder value by capitalizing on the Portfolio Companies’ competitive strengths and position in the servicing segment of Qatar’s oil and gas industry, while pursuing attractive opportunities to expand other complementary businesses and create synergies between its Companies.
6- How do you evaluate the current and future performance of the Portfolio Companies and is there any intention to extend GIS to new companies?
As mentioned above, the financial and operational performance of Gulf International Services derives from the performance of the Portfolio Companies. Good governance and sound business performance will be of paramount importance to GIS and will help it become one of the main pillars of the national economy.
According to the Company’s Articles of Association, the Group structure is open to new companies operating in the servicing segment of Qatar’s oil industry, such as well-support and supply services. Accordingly, GIS may enter into new ventures or acquire stakes in existing service companies falling under its primary scope of activity.
7- How do you evaluate GIS share on Doha Securities Market?
Our role as a shareholding company is limited to foster business growth and profitability, which will in turn benefit our shareholders. As per Doha Securities Market regulations, we are requested to continuously disclose any results, events or information that may have an impact on the share price. In other words, we are bound to fully adhere to transparency and disclosure requirements.
However, we are not supposed to comment on the share performance on the stock market…. We are not the experts ……… But we believe the Company’s future is promising.
8- You have disclosed to Doha Securities Market that GIS is in the process of splitting its financial results for Quarter 1, 2008. Could you please clarify?
As per the DSM Internal Regulations and the ensuing transparency and disclosure obligation, we are requested to disclose the decline in the growth rates during Quarter 1, 2008 compared with the same period of 2007. As mentioned above, the Company realized net profit of nearly QR75 million, with an Earning per Share estimated at QR 0.61 compared to QR 0.64 for the same period last year. Besides disclosure, we are also under an obligation to clarify that such change is due to the expansions projects that have not become operational yet. In the absence of matching revenue, the expenses due to the expansion projects had an impact on the Company’s financial position, hence the change in growth rates. On the other hand, those figures do not reflect the performance of GIS and relate to the period from 1/1/2008 to 31/3/2008. They have been prepared for comparison purposes only, since GIS was incorporated by Qatar Petroleum on 12/2/2008, and it was only on 24/2/2008 that QP transferred its stake in the Portfolio Companies to GIS, pursuant to the Instrument of Assignment and Transfer entered into between QP and GIS. GIS was eventually listed on Doha Securities Market on 26/5/2008.
Based on the above, we are in the process of splitting the financial results and carrying out the needed reconciliations to show the financial position of the GIS as from its incorporation date.