Uche Dimiri, CEO of Depthwize is embarking on a journey to change the narrative in Nigeria’s drilling industry. He is providing leadership and excellence in the largely underdeveloped Nigerian inland and shallow water drilling market.
For many, Depthwize was not a name that rang a bell 10 years ago but the company has risen from obscurity to arguably a major player in the drilling sector of Nigeria’s energy industry by delivering oil & gas wells for companies in the swamp and shallow water environment, which was feasible due to Depthwize’s recognition of the peculiarities and challenges of drilling operations in the Niger Delta.
Uche Dimiri started his career as a field engineer at Schlumberger in 1988 and went on to work across three continents to become a worldwide drilling training manager. Prior to founding Depthwize, he was the founding CEO of Oando Energy Services (OES) were he had the opportunity of leading a team of talented engineers for over four years who were primarily involved in drilling contracting and drilling fluids business.
Since founding Depthwize in 2011, Uche Dimiri has increased the company’s assets to three rigs, two swamp barges, and one column-stabilized and fully-submersible offshore rig, while also providing marine services, rig move services, as well as other activities according to client’s request.
Fiscal terms are the most important terms of a natural resource contract as they delimit and define the amounts of profit and economic rent that will accrue to each party throughout the life of the contract. For Nigeria, these terms are critically important as the country has remained dependent on the industry for the bulk of its foreign exchange earnings for over thirty years.
Despite the challenges, Depthwize’s standing in the regional market, combine d with high permeability rate for Nigeria’s oil reservoirs, allowed it to not just survive but also build through the 2015-2017 market downturns.
Despite a declining market, Depthwize was able to repay its outstanding loans by trimming its workforce despite retaining quality services, making investments in field development despite general market downturn and drilling some of the best wells in the country, as deep as 19,700ft.
“We realized about six wells for our top client and were able to ramp up production from 8,000bpd to about 25,000bpd, with huge potential for further increases. For the oil and gas industry, 2015, 2016, and 2017 were difficult years. It is beginning to ramp up now, albeit with a lag in increasing prices and confidence amongst oil companies to commit to drilling,” Dimiri said in an interview with businessyear.com
Under the leadership of Uche Dimiri, Depthwize, through its vehicle – Depthwize Funding Company Plc, is seeking to raise N20 billion via series 1 of its N30 billion program. The company intends to use the proceeds to finance its maturing commercial syndicated loan and finance ongoing business operations.
Analysts from ARM Securities Limited believe that Depthwize is an improving credit story. earnings and ongoing deleveraging exercises. “The proposed refinancing as well as analyst’s expectation of higher earnings points to a lower leverage ratio in coming years,” Analysts from ARM Securities Limited said. Analysts from ARM Securities Limited also expect Depthwize’s finance charge to decline by 65percent over 2018, reflecting the 5-year moratorium offered by its lessor, Megadrill Service.
The five-year moratorium given by Megadrill Service will drive finance cost lower over the coming years. With no major capital expenditure in sight, increased EBITDA should translate to improved positive free cash flow.
“Farther out, whilst finance charge will track higher on the back of its bond issuance, the expected jump in earnings given the revival of 2 key rigs will see coverage ratio expand,” ARM Securities Limited said.
However, analysts see some mitigating factors. First, the bond issuance is fully guaranteed by Megadrill Service Ltd – the lessor of the oil rigs to Depthwize Ltd. In addition, the planned refinancing of foreign currency loan to local currency debt creates an opportunity to avert foreign exchange risk.
Dimiri also expects indigenous players to play a bigger role in the oil and gas industry in 2019 although he also thinks funding is still a key issue, and it is why many indigenous players have not attained their true potential.
According to Dimiri, there are issues such as political risk, environmental issues, and insurgencies in the Niger Delta, not to mention the northeast, all of which makes raising capital difficult as many people are scared of doing business in Nigeria.
“One has to often get funding externally, from international investors, which requires local actors to inspire a certain level of confidence,” Dimiri said.
He noted that Nigeria is one of the world’s easiest places to drill for oil because once oil is discovered; permeability is high, meaning the oil will rapidly move through the rock however there is serious need for facilities to transport this crude from offshore locations.
“There is also a security consideration throughout the industry. Nonetheless, Nigeria has skilled professionals who can take a company from the first stage to the last, and this should give confidence to global investors,” Dimiri said.
On his outlook going forward, Dimiri said he wants to keep the three rigs working, acquire five more rigs in the next five years and also have more partnership and collaboration with other companies with the aim of expanding optimization.
“We have to take risks because, quite simply, if nothing is ventured, nothing will be gained. Our plan was to have five rigs within five years, and we were well on our way to fulfill that before to the downturn. Therefore, at present, we are looking at alliances with key partners and a degree of expansion where we can leverage others’ assets,” Dimiri said.
The CEO of Depthwize admitted that competition in the sector is brutal, however his firm remains committed due to the quality of the firm’s personnel, intelligence, and solid assets.
Other risks to monitor is the sensitivity of Depthwize business to oil prices and militant activities in the Niger-Delta area considering it operates majorly in shallow water drilling. Lower oil price will cause a reduction of activities in the oil industry, thus limiting the company’s earnings. Also, a blow-out of militant activities like what was witnessed in 2016 could see business operation decline
