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Plexus Holdings: THE INVESTMENT CASE
INVESTMENT OVERVIEW

Plexus eyes “major commercial opportunity” following partner deal with Gazprom

Plexus' partner Gusar clinched a supply agreement with the Russian energy giant in September
Offshore oil rig
INVESTMENT OVERVIEW: POS The Big Picture
Plexus' equipment will be used in shallow water exploration wells in the Russian Arctic

Wellhead valve specialist Plexus Holdings PLC (LON:POS) has achieved what it says is the “first breakthrough order” in one of its key markets, Russia.

The AIM-listed oil & gas engineering services provider told investors on 27 September that its Russian partner had clinched an initial agreement to supply the company’s equipment to Gazprom, one of the world’s largest gas producers.

Licensee Gusevsky Valves Plant LLC (Gusar) will provide Gazprom with two sets of Tersus branded TRT Mudline Suspension Systems (MLS) to be used in shallow water exploration wells in the Russian Arctic, in the Kara Sea. The wells are due to be drilled next year.

Gusar is also in the process of localising the manufacturing of the Plexus' MLS, under license, in Russia, with the transaction value described as being like those achieved for the product in the UK Continental Shelf.

“Major commercial opportunity”

The deal has been hailed as a breakthrough for the company, which has previously touted Russia and other members of the Commonwealth of Independent States (CIS) as key markets.

“Plexus' MLS equipment will soon be deployed in the huge Russian market which, due to the level of upcoming gas drilling activity, represents a major commercial opportunity for Plexus, and its licensee Gusar,” said Ben Van Bilderbeek, Plexus’ chief executive.

He added: "The CIS is a key target market for Plexus. This is not just down to the vast volumes of hydrocarbon reserves it holds and the importance of gas within the country's energy mix, but also because the CIS provides a readymade example of the licensing model that lies at the centre of our strategy post the sale of our jack-up exploration business to FMC Technologies Limited (excluding the CIS).”

The group had previously sold two POS-GRIP rental wellhead sets to Gusar in February for about £1.4mln.

Second POS-SET order in North Sea

The deal follows a second order placed for Plexus’ POS-SET connector for well abandonment operations in the North Sea in August.

The firm said the order was to supply and rent the connector to Oceaneering A/S, Norway and would involve using the POS-SET to re-connect to a temporarily abandoned well.

Talking about the Oceaneering order, Van Bilderbeek said it “provides a timely reminder that [Plexus has] a suite of POS-GRIP-enabled products ready for market”, adding that “as the world moves increasingly to gas consumption as a preferred hydrocarbon source, the importance of gas tight equipment, including wellheads is becoming critical, especially where for example methane leaks are concerned”.

“Metal-to-metal sealing capabilities are therefore essential, and we believe that our proprietary and patented POS-GRIP seal technology delivers the very highest standard of integrity and long term performance” he added.

Jack-up sale

Last year, Plexus fundamentally restructured its business with a sale of its jack-up rig business to a subsidiary of TechnipFMC.

A collaboration deal for new and existing products based on the POS-GRIP technology was part of the agreement.

Graham Stevens, Plexus’ finance director, said the company is now an “IP-led business”, with the deal proving the success of its technology in the jack up space which is precisely why Technip wanted to buy it.

Following the sale, cash holdings rose to £18.8mln.

Van Bilderbeek described the deal as a “major vote of confidence” at the time.

With shares trading at 49p, Plexus currently holds a market cap of £51.1mln.

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