Al Behbehani.. NAPESCO Looks to Expand its Services to Neighboring Markets

Mr. Muhaiman Al Behbehani

NAPESCO was established in 1993 with the aim of creating Kuwait's first local oil field services company dedicated to serving Kuwait Oil Company (KOC). In 2003, the company achieved a significant milestone by listing on Boursa Kuwait, solidifying its position as one of Kuwait's major locally owned oil field services company.

Throughout the years, the company adopted an expansion strategy that has served to broaden its operational scope and reinforce its reputation as a strong player in the oil field services sector. KIPCOLife met with the Vice Chairman & CEO of NAPESCO, Mr. Muhaiman Al Behbehani, to learn more about the nature of the company’s services, performance and strategy.

What is the nature of NAPESCO’s services?

NAPESCO initially focused on providing cementing services to KOC, a highly challenging task given its sole reliance on in-house expertise without the assistance of an international partner. The company excelled in this field and has since become a prominent leader that provided these services to both KOC and Joint Operations (JO).

Over the years, the management diversified the portfolio of the company by adding other oilfield services such as coil tubing, simulation, frac services and environmental services. This strategic expansion has significantly broadened NAPESCO’s operational scope and reinforced the company’s reputation as a strong player in the oil field services sector. Today, we possess capabilities on par with international contracting companies operating in similar fields. We currently derive our revenue from three primary streams: drilling services, well services and environmental services.

Would you describe NAPESCO’s relationship with Kuwait Petroleum Corporation (KPC)?

NAPESCO maintains a robust relationship with most of KPC’s subsidiaries, particularly KOC. NAPESCO’s success story is one that KOC proudly highlights, exemplifying a significant collaboration between the public and private sectors.

Today, KOC recognizes NAPESCO as a dependable local partner, especially during crises and pandemics when international companies may face limitations. The relationship between NAPESCO and KOC transcends the typical client-customer dynamic and is best described as a partnership.

Conversely, NAPESCO has established several medium-sized contracts in the environmental sector with Kuwait National Petroleum Company (KNPC) and Kuwait Integrated Petroleum Industries Company (KIPIC), with plans underway to expand further. However, the majority of our major contracts remain with KOC.

NAPESCO derives its revenue from drilling, well & environmental services

2023 was a significant year for NAPESCO with the acquisition of UOP

How would you evaluate the company’s performance in 2023?

Over the past five years, NAPESCO has demonstrated steady and consistent growth in both revenue and bottom-line profitability. The company's revenue increased from approximately KD 33 million in 2018 to KD 40 million last year. NAPESCO achieved a net profit of KD 8.6 million in 2023, a year that represents a significant milestone in the company's history, marked by its inaugural investment in acquiring a controlling stake in United Oil Projects (UOP).

What is the business case for acquiring a controlling stake in UOP? What are the mid- and long-term expectations from this transaction?

UOP was established in the 1970s and it was the first resin and polyester manufacturer in the region, supplying raw materials to the paint and fiberglass industries. In 2005, UOP diversified into the oil and gas sector and formed a joint venture, United Precision Drilling Company (UPDC), with Precision Drilling International. UPDC specializes in providing high-horsepower rigs for deep drilling operations with KOC, currently operating 10 rigs and recognized as a top performer in Kuwait's deep drilling sector. UOP is also qualified with KOC in the drilling fluid category and has a running contract with KOC since 2019.

Acquiring UOP has provided NAPESCO access to the drilling and drilling fluid market, which was a key expansion target for us. Furthermore, UOP's investment in JTC provides NAPESCO access to the logistical sector. In summary, the acquisition enhances NAPESCO offerings and returns by creating synergies between the two companies.

What initiatives is the company currently working on? And what areas do you aspire to expand into in the future?

Like any contracting company, NAPESCO's primary revenue stream comes from winning cyclical contracts with KOC and JO. Despite our long history of successfully renewing and securing continuous contracts, relying solely on a few customers poses risks, especially considering increasing competition in the market.

To mitigate this risk, we are actively seeking to expand our offerings into neighboring markets where business volumes are larger. This strategic move will reduce our dependence on the limited customers in our home market. We are also diversifying by introducing new services to expand the company offering to existing and potential clients.

Manufacturing is another business line we are exploring, which would provide a steady income independent of contracting cycles. Our ultimate goal is to elevate NAPESCO to the level of international oil and gas companies. We recognize that this journey requires persistent effort, and we are committed to progressing swiftly along this path.