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At Santa Fe International Corporation, our mission is to provide premier quality international drilling and energy services and maximize long-term shareholder value by offering our customers and associates the highest competitive standards of personnel, equipment, and operational performance with uncompromising safety standards and business ethics.
Over the past 50 years, we have earned a reputation for delivering what we promise. Our strength is our ability to execute--which is made possible by the workforce, management team, and systems developed over the past half century. We believe our ability to provide labor, know-how and equipment anywhere in the world and consistently conduct safer and more efficient drilling operations sets us apart from our competitors.
In support of our fleet of drilling rigs, we provide services encompassing design and construction of new rigs, upgrade and modification of existing units, as well as oil field related management services.
Santa Fe International Corporation is one of the world's leading offshore drilling contractors. The company has the world's largest fleet of heavy-duty harsh-environment jackup rigs, mobile rigs that jack down their legs on the sea floor so that the hull of the rig is elevated above the surface of the water. Santa Fe also operates semisubmersible rigs, land rigs, and one platform rig. Semisubmersible rigs operate on top of the water and include machinery and drilling equipment on decks supported by the buoyancy of submerged barges. Land rigs operate onshore. Platform rigs are made up of pieces of self-contained drilling equipment. When this equipment is assembled on an offshore platform, it forms a platform drill. The company drills both within the United States and internationally in countries such as Kuwait, Azerbaijan, Egypt, Indonesia, Saudi Arabia, and Venezuela. Headquartered in Dallas, Texas, Santa Fe also offers drilling-related services, such as platform-rig maintenance, incentive drilling, and drilling engineering. The company was founded by J.D. 'Joe' Robinson, a California drilling superintendent, in 1946. The Kuwait Petroleum Company purchased Santa Fe in 1981. SFIC Holdings (Cayman) Inc., a wholly owned subsidiary of the Kuwait Petroleum Company, owns about 39 percent of the company. Santa Fe went public in 1997, with a follow-on offering in 2000.
A New Venture in 1946
Crude oil production was at an all-time high during World War II when oil was needed to fuel the war. To meet the high demand for oil, most oil companies maintained their own drilling departments. However, when the war ended in 1945, the world had more oil than it needed. Many oil companies closed their drilling departments, which were extremely costly to maintain. They decided instead to outsource their drilling to independent contractors, drillers with equipment who could be paid on a per-day basis.
J.D. 'Joe' Robinson, a drilling superintendent at Union Oil Company in Santa Fe, California, anticipated the company he worked for would follow suit and shut down its drilling department and outsource their drilling. Robinson planned to capitalize on the situation. He planned to start his own drilling company and make an offer to purchase Union's rigs. He would then bid on Union's drilling. Robinson's plan succeeded. On December 19, 1946, Santa Fe Drilling Company was incorporated. Robinson and 61 drillers he had worked with put up $250,000 of their own money and secured loans for another $600,000. They offered Union $750,000 for their eight rigs, and Union agreed. Santa Fe had about $100,000 left over for operating expenses.
Santa Fe set up shop in Union's former drilling headquarters in Santa Fe, California, but later relocated to Dallas, Texas. During its first years in business, the company kept careful watch over its expenses. Included in the purchase of Union's equipment and office space was a warehouse that contained several gallons of orange paint. 'Not wanting to waste anything, the paint went on rigs, office windows, frames, awnings, signs, and anything else in need of paint.' Santa Fe became known for its orange equipment.
In 1947 the company began drilling wells in California. The following year Santa Fe landed its first international job--drilling a well in Venezuela. A few years later, Santa Fe embarked on its first desert job in the neutral zone between Kuwait and Saudi Arabia. Teams of drillers were hired to work in Tunisia, Iran, and Kuwait. The company was in full swing.
Expansion in the 1950s and 1960s
Throughout the next few decades, Santa Fe expanded its fleet and territory as quickly as possible, while striving to maintain a high safety record and offer its customers high-quality service. By 1954, Santa Fe had 21 land rigs operating in the United States, Europe, North Africa, South America, and the Middle East. Around the same time, the company began drilling offshore. Santa Fe won a contract in Trinidad to use a land rig hooked up to a jackup barge that would enable it to drill oil offshore.
The company realized, however, that if it wanted to capitalize on offshore drilling, it needed to design rigs suited for this purpose. In 1957 Santa Fe unveiled Blue Water No. 1, its first semisubmersible rig. Blue Water No. 1 enabled the company to drill the first well ever drilled by a semisubmersible rig in the Gulf of Mexico. Two years later, Santa Fe landed a contract for Blue Water No. 2, an enhanced version of Blue Water No. 1. To increase its cash flow, in 1963 Santa Fe entered into a joint venture with the Kuwait Drilling Company.
Despite its ambitious expansion, however, Santa Fe knew that the drilling business was precarious at best. The drilling industry was highly competitive and vulnerable to fluctuations in oil and natural gas prices, political turmoil and war in international countries, unfavorable weather conditions, and the extraordinarily high cost of repairing and replacing rigs. The company knew that consolidation was the key to its future success.
In 1981, Santa Fe was acquired by the Kuwait Petroleum Corporation (KPC). KPC was founded in 1980 to help manage Kuwait's growing oil endeavors. The company quickly become a world leader in the oil industry. Its aim was to protect Kuwait's oil reserves and maximize its revenue. After the acquisition, Santa Fe became a wholly owned subsidiary of KPC.
New Rigs and an IPO in the 1990s
Santa Fe believed it could find a niche in the drilling industry in which it would offer services in areas with extremely harsh weather conditions--such as winds of up to 100 mph and waves as high as 38 feet. Meeting this demand, however, required the construction of rigs that could stand up to such fierce weather conditions and drill effectively in spite of them.
In 1991 Galaxy I, one of the largest harsh-environment jackup rigs in the world, was delivered to Santa Fe. Galaxy I was built for Santa Fe by Keppel Fels of Singapore. Galaxy II, a $150 million, enhanced version of Galaxy I, was delivered to Santa Fe in 1998 under a five-year contract. The heavy-duty rig earned Santa Fe approximately $130,000 a day.
Santa Fe went public in 1997 and sold 35 million shares of common stock. The proceeds from the initial public offering went to KPC (which now held 69 percent of Santa Fe) to help finance its exploration and production in Kuwait. During the same year, Santa Fe announced an agreement with U.K.-based Amoco Exploration Company to provide a new heavy-duty, harsh-weather rig--Galaxy III--for drilling operations in the U.K. sector of the North Sea. Keppel Fels, the company that constructed Galaxy I and II, also constructed Galaxy III. 'This is a momentous occasion for Santa Fe,' said Steve Garber, Santa Fe's president and chief executive officer. 'Building a new rig of this caliber is a powerful signal not only of our position in the marketplace, but of the strength of the demand in our industry. We are extremely pleased to expand our long-standing relationship with Amoco through this new addition to our rig fleet.'
Galaxy III reached its destination in the North Sea on December 5, 1999. The new rig was transported from Keppel Fels in Singapore aboard the Transshelf, a heavy-lift ship. Moving such a large rig was not easy, and the journey took 61 days. With the addition of Galaxy III, Santa Fe operated six of the industry's 17 heavy-duty, harsh equipment jackup rigs.
Around the same time, Santa Fe also landed a three-year contract for a 3,000 horsepower land rig in Kuwait. The $19.5 million rig was larger than any other land rig operating in the Middle East. The rig was named Santa Fe Rig 180 and was equipped with three mud pumps and five diesel engines. Garber commented on the Rig 180 in a company press release: 'The addition of Rig 180 to our fleet, coupled with the recent completion of four new land rigs in Venezuela, each with a term contract, reinforces Santa Fe's confidence in land drilling activities in the major international oil provinces. We have been engaged in land rig operations in the Middle East for forty-seven years and are one of the largest drillers in the area.'
In mid-2000 Santa Fe completed its second public offering of 30 million shares via its immediate parent SFIC Holdings (Cayman) Inc, a wholly owned subsidiary of KPC. As with the first public offering, Santa Fe did not receive the proceeds from the offering; instead, KPC used the proceeds to fund other ventures. After the second public offering, SFIC owned about 44.5 million shares or 39 percent of Santa Fe's stock.
Drilling in 2000 and Beyond
In 1999 the drilling industry--vulnerable to many uncontrollable factors, including the demand for oil and fluctuations in oil prices--suffered a downturn that affected Santa Fe. That year the company posted a net income of $149.8 million on revenues of $614.2 million, down from its 1998 net income of $287.1 million, posted on revenues of $811.3 million. The company attributed the slip in sales to a sluggish year for the drilling industry as a whole and the cost of new equipment.
In 2000, the company believed that if oil and gas prices remained at or around current levels, the offshore drilling market would improve somewhat in the near future. Santa Fe President and CEO Steve Garber indicated that in the future the company planned to solidify its niche as a harsh-weather driller and would focus on drilling in 'deep, difficult, and remote' places. To reach this goal the company was designing a new, high-tech semisubmersible rig. 'We are convinced that in the long-term demand for high quality rigs aimed at the deep water field development market will be strong and we intend to be in a good position to take advantage of that demand,' said Garber. Also in 2000, Santa Fe had bid to construct and operate a new winterized rig on a man-made island in the northern Caspian region of Kazakhstan.
Principal Subsidiaries: Sphere Supply.
Principal Competitors: Ensco International; Noble Drilling Corporation; R & B Falcon Corporation; Transocean Sedco Forex, Inc.
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