RigNet CEO Assesses Markets Outside of Oil and Gas
[Via Satellite 08-24-2016] RigNet, one of the leading suppliers of connectivity to the energy sector, is diversifying its business to address new verticals. The energy sector has been hit hard by oil prices, which have stayed low due to oversupply, among other factors. Reduced spending by oil and gas operators has cut into RigNet’s profits, causing the company to shed personnel and ultimately to restructure. While energy remains RigNet’s core market, the company is branching out to serve other areas in order to find new sources of revenue.
Steven Pickett, CEO of RigNet, told Via Satellite the company is now looking broadly at a number of different verticals that rely on remote communications services. In particular, RigNet is evaluating markets where it can leverage existing capabilities, or where the technologies needed are not radically different from the energy sector.
“We are assessing these verticals and entering a small number of them in a more focused way. The markets we are focused on include maritime, which is one of the largest initiatives we have focused on the last couple of years, and the mining industry. In addition, we are continuing to explore other verticals. We plan to make some decisions, in the coming quarter, about other verticals we will turn our attention to,” he said.
Pickett described the resources used to support maritime vessels as not too dissimilar from those used to support rigs. RigNet is already active in maritime today, mainly through rig support vessels like supply boats and crew boats. Pickett said the company now wants to pursue growth within commercial maritime.
“We will continue to operate in this part of the maritime industry, but we are also looking at expanding further into maritime. As a result, we have created a dedicated team for this market,” he said.
In addition to maritime and mining, RigNet is also musing an aviation play. Earlier this year the company closed the acquisition of Mexico-based Tecnor, a telecommunications solutions provider for remote sites on land, sea and air. Tecnor provides services that were beyond RigNet’s original scope, thus bringing talent the company hopes to employ in reaching less familiar markets.
“As a result of our acquisition of Tecnor, in Mexico, we have entered the aviation market,” Pickett explained. “We are looking to leverage the expertise at Tecnor to expand the business in Mexico and Latin America.”
These new markets are likely to increase RigNet’s need for space segment resources. The company is already global, operating in 48 countries across six continents, and uses a myriad of telecommunications resources for connectivity, such as WiMAX and LTE. RigNet also operates the world’s largest microwave network for connectivity in the Gulf of Mexico. Pickett said the majority of the company’s services, however, are satellite-based. Describing the company as a “substantial provider of satellite services,” he said the new verticals would spur RigNet’s capacity demand.
“One of our goals is to enter new verticals to scale our business. This will drive the need for more satellite bandwidth and for even larger backbone networks as well,” he said.
RigNet is continuing to invest in the energy sector as well. Pickett said the diversification by no means implies a move away from this core market. The company is continuing to add capabilities that Pickett said would allow it to serve the energy market in a more impactful way.
“We are developing an applications platform that can be used to support our customers’ operations on rigs and to support other energy activities. We have some applications already available to our customers. We are focused on expanding our portfolio of applications to improve our customers’ operational efficiencies and maximize their bandwidth services,” he said.
Moreover, though the expansion into new markets does constitute a major pivot for RigNet, Pickett said he anticipates the energy market will eventually rebound, validating the company’s commitment to the market.
“The general view, which I support, is we have probably, to date, dealt with the strongest headwinds. The current thinking is that there will be headwinds on a go-forward basis, but we believe they will not be as severe as those in the recent past. At some point, the industry will turn and thus we will experience tailwinds,” he said.