THE ABBOT GROUP PLC
Company Overview
Abbot Group plc is a world leader in providing drilling and related well and facilities engineering services in the global energy industry (Data monitor 2004). Headquartered in Aberdeen, Abbot is the largest offshore platform drilling contractor in United Kingdom (UK) and also happens to be one of the largest land drilling operators outside North and South America (Abbot Group 2004a). In particular, Abbot has a fleet of 45 land drilling rigs and 34 offshore drilling platforms in Europe, the Caspian region, Russia, North and West Africa, the Middle East, Asia and the United States (US) (Duncan 2005; Data monitor 2004).
Core business services of Abbot include: conceptual and front end studies; detailed design; engineering procurement and construction; offshore drilling and work-over; onshore drilling and work-over; drilling and well engineering; rig refurbishment and upgrade; slick-line services and well intervention; integrated project management; technical limit drilling and specialty engineering; and, consultancy services (Reuters 2005). These activities are basically carried out by the company’s wholly owned (operating) subsidiary, KEA DELTA, that is involved with providing drilling, well engineering and facilities engineering services—both onshore and offshore—within the international oil and gas industry (FALL exchange 2005; Abbot Group 2004b). KEA Delta is the offspring of KEA Drilling and DELTA merger, with the latter being acquired by the Abbot Group on October 1, 2001 (Abbot Group 2004b).
Another subsidiary of Abbot is Benter, an international drilling and oilfield systems company, and with BancTec’s expertise in both onshore and offshore drilling operations, the Company provides a range of onshore and offshore drilling facility design, fabrication, installation and project management services (Abbot Group 2004b; Reuters 2005).
Figure 1 (below) illustrates Abbot’s company structure:
Figure 1: Abbot Group PLC Company Structure (Source: www.abbotgroup.com)
Abbot Group’s Human Resource Management
The employees of Abbot Group plc are one of the key stakeholders of the company, and since Abbot have long recognised the importance of balancing the expectations of all their key stakeholders (other key stakeholders include the customers, shareholders, and the communities where Abbot operates) so as to be a well run business, the company naturally has policies and procedures developed and improved “for the management of safety and the environment, and the protection of the welfare of our employees” (Abbot Group 2005, p. 2). This section, however, will focus only on the policies and procedures concerning Abbot’s workforce.
Abbot Group employs 3,907 people worldwide (Data monitor 2004). Now, in order to ensure fair and just labour standards for their operations, Abbot implements a framework of policies and procedures to make sure that the company’s operations adhere consistently to labour standards (Abbot Group 2005). Nevertheless, valuing people is the core of this framework of policies, and it follows key principles that include: recruitment and advancement within the business based on ability; recognition of workers’ right to freedom of association and collective bargaining; and, prohibition of the use of forced, compulsory or child labour (Salter 2005a).
In particular, recruitment and advancement within Abbot is based on ability, and this is as such because Abbot considers any form of discrimination within their workforce as detrimental to achieving their aim, which is to employ the best people that will meet the organisations and the expectations of the organisation’s clients (Abbot Group 2005).
Meanwhile, Abbot’s recognition of their employees’ freedom to association and collective bargaining is accordingly translated into practice through workers councils, trade unions and workforce representatives (Abbot Group 2005).
With regards to the third key principle, Abbot accordingly only employs throughout their operations people who are of 18 years, basically because of the nature of work in the company. Abbot Group (2005) further disclosed: “Our operating sites are generally small and the work involved in our operations requires trained labour for often demanding physical work. We believe that these considerations, together with the level of company supervision and training always present at an operating site, minimise the chances for inappropriate labour practices among our contractors taking place” (p. 10).
In addition, Abbot Group also have, over the years, developed a business model that “recognises the strength of local relationships and the employment of local staff, and commensurate with ‘best person for the job’ principles, we endeavour to employ local people wherever possible regardless of creed or gender” (Abbot Group 2005, p. 10). In this lieu, Abbot local workforce is supported by undertaking “a variety of activities aimed at personal development and training at all levels of the business” (Salter 2005a, p. 14). Examples for this are: promotion of scholarship awards for students from the Azerbaijan State Oil Academy in Azerbaijan; sponsoring of Human Resources Co-ordinator for a post graduate diploma in Human Resources Management in Kazakhstan; supporting Azeri national students at the Caspian Technical Training Centre in Azerbaijan; and, operating student training scholarship scheme in Oman, “where students participate in work placement with KEA DELTA to enhance their studies” (Abbot Group 2005, p. 10).
Abbot Group also focuses on its responsibility to each of their workers to promote human rights in its daily activities, where tangible action to promote human rights, and the commitment of individuals at the management level within the Group, is strong” (Salter 2005a, p. 14). The company also accordingly places great emphasis on the issue of human rights and security in regions of conflict and thus, in 2004, Abbot decided not to carry out operations in Iraq and Sudan (Salter 2005).
On the other hand, one key performance indicator for the company is the safety of workplaces, because the objective is to ensure the safety of employees (Salter 2005b). In this regard, Salter (2005b) said that although Abbot exceeded the AID (International Association of Drilling Contractors) measured performance of their peers with regards to providing a safe workplace for employees, the company’s own set target was not met and thus, efforts will be redoubled in 2005 to achieve these set targets.
Finally, Abbot Group is accordingly committed to “involving employees in the business through a policy of communication and consultation” (Barnyard 2005, p. 24). In this lieu: “Arrangements have been established for the regular provision of information to all employees through briefings and well-established formal consultation procedures. Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes and abilities of the applicant. If employees become disabled every effort is made to ensure that their employment with the Group continues and that appropriate training is arranged. It is the policy of the Group that the training, career development and promotion of a disabled person should, as far as possible, be identical to that of a person who does not suffer from a disability” (Barnyard 2005, p. 24).
Financial Matters: Highlights of Abbot Group plc’s Fiscal Year 2004
During the fiscal year ended December 2003, Abbot Group’s recorded revenues were only £401.2 million, which is an 8.5% decrease versus year 2002 primarily blamed on discontinued operations (Data monitor 2004). Figures for the fiscal year ended 31 December 2004 shows a 9% decrease of turnover as compared to 2003, with Abbot Group’s sales only amounting to £366.95 million (US0.30 million) (Reuters 2005; The Winthrop Corporation 2005). Accordingly, this turnover “reflects decreased revenues from the offshore and onshore drilling business segment and engineering and other services” (Reuters 2005).
With the company currently employing 3,607 people, Abbot Group’s sales of £366.95 million (US0.30 million) accordingly equates to sales of US4,149 per employee (The Winthrop Corporation 2005). Comparing Abbot Group’s turnover against three other Oil and Gas Field Services in Western Europe, namely Presage ASAP of Norway (2004 sales of 3.16 billion Norwegian Kroger [US0.61 million] which 45% was Drilling Services), Smudging ASAP of Norway (3.08 billion Norwegian Kroger [US8.03 million] of which 38% was Mobile Units), and Core Laboratories NO which is based in the Netherlands (342.10 million Euro [US0.29 million] of which 61% was Reservoir Description), Winthrop Corporation (2005) said “the sales per employee levels at the three comparable companies vary greatly, from US,842 to US3,589 [and this variations] may be due to the way each of these companies counts employees”. Table 1 illustrates the sales comparisons of these three companies.
Company
Sales
(Summons)
Sales
Growth
Sales/
Imp (US$)
Largest Region
Abbot Group Plc
700.295
-8.5%
194,149
N/A
Presage ASAP
500.610
8.7%
343,589
Norway (51.4%)
Smudging ASAP
488.030
1.4%
130,107
Norway (59.8%)
Core Laboratories NO
440.288
-3.7%
97,842
Rest of the World (45.1%)
Table 1: Sales Comparisons (Fiscal Year ending 2004) (Source: The Winthrop Corporation 2005)
On the other hand, Abbot Group’s profitability appears to be promising. According to Winthrop Corporation (2005), the gross profit margin of the company is accordingly better in 2004 than in 2003, with the cost of goods sold totaling to £283.74 million, or 77.3% of sales (i.e., the gross profit was 22.7% of sales); these figures are the highest of the previous five years. Further, earnings before extraordinary items at Abbot Group Plc during the same year were £14.44 million, or 3.9% of sales, which is an improvement over the level the company achieved in 2003, when the profit margin was 2.9% sales (Winthrop Corporation 2005). Finally, there is also the improvement on the company’s return on equity from 2003’s 8.9% return to 9.9% return in 2004 (Winthrop Corporation 2005).
Finally, Abbot Group’s financial position also shows improvement. Accordingly, as of December 2004, the long-term debt to equity ratio of the company is 0.27. In particular, the company’s long term debt was £41.09 million and total liabilities (i.e., all monies owed) were £211.00 million, whereas the accounts receivable for the company were £71.10 million, which is equivalent to 71 days of sales (Winthrop Corporation 2005).
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