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`Growth
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`Industry
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`Magazine
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`Private Property
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`By Scott Westin | January 2, 2013
`
`Starting a company and growing it to
`the point where it becomes an
`attractive acquisition target for a
`larger company is a fairly typical
`strategy for entrepreneurs in the oil
`and gas industry. Dan Themig isn’t a
`typical entrepreneur.
`
`Dan Themig
`
`Themig, Ken Paltzat and Peter Krabben, all had about two decades of
`experience working for large international oil and gas service
`companies. The trio stepped out on their own and launched Packers
`Plus Energy Services Inc. in 2000.
`
`The budding entrepreneurs set out to be a small company that
`created a few innovative tools for niche downhole applications in the
`industry, but the business wouldn’t be for sale – to a private buyer or
`on the public market.
`
`“We said we are going to be this really strong technical company, the
`best in the industry in our four focus areas, and we won’t be for sale.
`Nobody will know what to do with us,” Themig says. “This might
`sound like a bad business goal, and I’ve been told lots of times that it
`is, but that’s okay we’ll stick with it.”
`
`The small company that was launched with five employees 13 years
`ago has grown to more than 700 employees and now operates in 31
`countries. It turns out the Calgary-based company’s products are just
`as innovative as its business strategy.
`
`18 months after Packers Plus launched, Themig was on a flight to
`Texas to present ideas on how to increase production from a
`horizontal well to a Houston-based company. He sketched seven
`ideas by hand during the flight and the U.S. company picked the
`design that would become the StackFRAC system.
`
`StackFRAC was the first ball drop system created for open hole
`horizontal wells. The Packers Plus innovation allowed operators to
`isolate sections of the lateral portion of a well. The pressure of
`hydraulic fracturing fluid could be focused on each section, rather
`than pumping massive amounts of fluid all the way along the wellbore
`in one completion. The system is partly responsible for creating
`access to vast reservoirs of oil and natural gas in North America that
`were previously considered uneconomic to produce.
`
`“People continue to push the limits on what historically have been
`standard practices,” Themig says. “If you go back five or six years, a
`long horizontal well would have been 5,000 feet. Now it’s common in
`North Dakota to drill a well that’s 10,000 feet. We have completed
`some wells that have approached 15,000 feet.”
`
`Story Highlights
`• Dan Themig has no desire to
`take Packers Plus Energy
`Services Inc. public, as being
`private leads the competition to
`underestimate them.
`• The company launched in 1999
`with five employees, today it has
`more than 700 employees and
`operates in 31 countries.
`• The company's StackFRAC was
`the first ball drop system created
`for open hole horizontal wells
`and is partly responsible for
`creating access to previously
`unaccessible reservoirs in North
`America
`
`In conversation with Reynold
`Tetzlaff
`Reynold Tetzlaff is the Canadian
`Energy leader for
`PricewaterhouseCoopers LLP. He
`led the interview on which this
`article is based. More about
`Reynold.
`
`Share This Article
`
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`Further Reading
`When the going gets
`tough...
`Although 2012 began strong, global
`economic uncertainty and a drop in
`commodity prices led to a marked
`slowdown in merger and
`acquisitions (M&A) in the mining
`industry in the first half of 2012.
`This has led to one of the more
`subdued deal-making years in
`recent history.
`
`Creating value through
`industry experience
`Uncertainty continues into the new
`decade. Energy companies must
`control costs and continue to weigh
`the risks versus benefits of new
`projects, new products, how much
`capital to invest and how to
`generate funds.
`
`Canadian Annual Energy
`Report 2012: Pipelines,
`politics and price
`Canada’s proved oil and gas
`reserves—more than 25 billion
`barrels of crude oil and liquids,
`another 150 billion barrels of
`Follow PwC Canada:
`economically recoverable bitumen
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`and more than 40 trillion cubic feet
`of natural gas (and perhaps as
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`The company’s product has become prevalent in the oil and gas
`industry. Packers Plus has become almost a generic term for ball drop
`systems, but Themig felt the company was losing its innovative focus
`a few years ago.
`
`much as 1,400 trillion cubic feet of
`in place tight gas)—are amongst
`the largest and most strategically
`important in the world.
`
`“To be technology leaders you have to be quick, nimble and a little bit
`minimalistic,” Themig says. “We needed to have a rapid development
`mentality and get rid of the research mentality.”
`
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`The FX factor
`
`The company’s research and development signs on its buildings were
`changed to read Packers Plus Rapid Tool Development Centre. Ninety
`per cent of the company’s focus went to tool development, while 10
`per cent was spent on pure research and development.
`
`Development of Packers Plus’ business has also been rapid. A second
`Packers Plus Rapid Tool Development Centre was built in Houston
`and the original Edmonton manufacturing centre is being replaced by
`a new 200,000 to 300,000 sq-ft facility.
`
`“Our manufacturing model has worked out really well, it’s been
`scalable and the quality has been second to none,” Themig says. “In
`addition, we have developed automation and we were the first, as far
`as I know, in the industry to use robotics on the assembly because the
`quantities of the equipment we manufacture are so high.”
`
`As a private company, Packers Plus does not disclose its financial
`results, but the company’s growth has been achieved without
`acquisitions. Themig also eschews even listening to product pitches
`from inventors outside of the company.
`
`“It becomes a slippery slope,” he says. “I tell people we have 80
`engineering projects right now and there’s a really good chance
`whatever you have we’re already working on and we don’t want any
`misconceptions.”
`
`The company’s finished engineering projects are now being used in
`difficult to access oil and natural gas reservoirs around the world. In
`2005, Packers Plus signed an agreement with Schlumberger Ltd. to
`tap into global markets.
`
`The Houston-based company has more than 115,000 employees
`working in about 85 different countries. The agreement allowed
`Schlumberger to provide StackFRAC to its customers in international
`markets under the name StageFRAC.
`
`“To get people to realize our goal was to be world class and really the
`best in our industry took a really long time,” Themig says. “It was
`extremely difficult to get people to accept our innovation and
`technology in the early days. It got progressively easier and now we’re
`really well known as an innovative company. We’re always coming
`out with off the wall, new ideas on how to perform things that have
`been done for 30 or 40 years.”
`
`In Packers Plus’ early strategic planning sessions, the company
`envisioned its business being 40 per cent in Canada, 40 per cent in
`the United States and 20 per cent international. “We’re actually
`coming very close to those numbers now,” Themig says. “For years
`international was a really small unit, but it’s by far our fastest growing
`group and it’s one of the most demanding on technology now.”
`
`While Themig is adamant Packers Plus is not sold to a larger
`company and does not go public, the company’s executive team is not
`inflexible in its strategic planning.
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`Founder and CEO Bob Lipic shares
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`oil & gas mining
`energy
`
`When Packers Plus signed its international agreement with
`Schlumberger, it was originally decided not to work in China. “We
`said we’d work anywhere in the world, but we’re not going to work in
`China,” Themig says. “I began to have doubts on whether not working
`in China was our best strategy.”
`
`Ultimately, Themig, Paltzat and Krabben decided to start deploying
`Packers Plus’ technology in China. The company insulated itself with
`strong security measures and continues to perform all of its
`manufacturing in North America. Packers Plus is also filing for its
`first patent in China.
`
`“The view of most companies is that China doesn’t play by the same
`rules, but they’re heading in the right direction,” Themig says.
`“Whether or not we work in China, we’re going to be working with
`Chinese companies around the world. If you look at who has bought
`the most oil and gas assets, it’s not BP or Shell or Exxon anymore; it’s
`Sinopec and PetroChina and Cnooc.”
`
`Packers Plus also ensures only its employees operate the company’s
`systems in China. Partly as a security measure, but partly as the
`company’s focus on customer service.
`
`“I’m pretty sure they can build a lot of the things that we do, but the
`core expertise is just missing over there and we can provide that,” he
`adds.
`
`In short time, Packers Plus’ China operations have become the
`company’s fastest growing international segment. The increased
`business has helped create increased attention from large service
`companies and investment banks, but Packers Plus still hasn’t been
`persuaded to alter its original succession plan.
`
`“We just have no desire to be a publically-traded company,” Themig
`says. “Being private lets our competitors always underestimate us in
`every way and that’s an advantage.”
`
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