n November 2020, Varel International Energy Services (VIES) announced a new path forward, which included a new brand renamed Varel Energy Solutions (VES). According to the company, the “major reset” includes “a redefining vision for business growth.” The new strategy was announced three months after the company received a multimillion-dollar investment from Blue Water Energy. The deal brought on Derek Nixon as the company’s new CEO.

Nixon worked for 12 years at VIES. Prior to taking on the role at VES, he served as the vice president of downhole products (DHP). He joined Varel as a field salesman in 2006, later becoming regional manager before transitioning to DHP in 2014.

Nixon recently joined E&P Plus to discuss the company’s new strategy and how oilfield service (OFS) companies can thrive in a price- and demand-challenged environment.

E&P Plus: Varel recently announced a “major reset” in its branding and its operations. Can you explain what that means?

Nixon: While Varel’s been around for a very long time—going back to 1947 all the way to today—it’s what we refer to as a little bit of an untold story at times. I know people know of Varel and know we offer drill bits. And when they think of Varel, they think of drill bits. We also have the DHP brand. So it’s really the formal bringing together of both brands as we go off on this new path. It’s understanding what you’re good at and keying into those key competencies to be able to really drive the brand forward and create value for shareholders.

E&P Plus: And will this reset include new products and service offerings? If so, what would those be?

Nixon: Yes, absolutely. We are actively looking at many deals. We have a good slush fund, so to speak, that’s actively looking at making any deals that make sense. We look to expand on our completion portfolio. So things like toe sleeves and potentially frac plugs, casing flotation systems, packers, these sort of tools along with the stage tools make a lot of sense to us.

E&P Plus: What can the industry expect to see from Varel over the coming year?

Nixon: I think we’re extremely active in getting the new brand out there [and] getting the new messaging out there. When we look at the purpose itself, it’s just to create impact and be part of a winning team. Who doesn’t want to do that? It’s making sure we have the right people on board and the right people to create value for our customers, both E&P and service companies moving forward. Everybody says that the key differentiators are people. But we’d like to take it a little bit farther than that and say really it’s the relationships between our people, both internally and externally, that drive the value for the business. People are always a core competency, but it’s understanding that everything that we do moving forward is about solving a problem for the service company or E&P company alike.

E&P Plus: How have the demands from your customers changed over the past year?

Nixon: It’s shifted, largely geographically. One of the key strengths we have is a large worldwide network that we do business in, from the Middle East to Asia to Europe and North America as well as Latin America. But our revenue shifted to more of a 70-30 split, international versus domestic now, whereas historically it’d be more around a 50-50 split.

Varel is a leading manufacturer of a range of drill bits. (Source: Varel Energy Solutions)

E&P Plus: What might you be looking for in a potential acquisition?

Nixon: Everybody’s seeing right now, but there are a lot of deals to be had. It’s finding deals that fit and go back to that core competency of what we want to do and how we want to be placed in the market. The main M&A activities we’re looking for… we’re looking for businesses that have, it doesn’t have to be huge eval but positive eval right now.

Free cash flow is obviously a must and then synergies. What sort of synergies can we find between the organization that we’re integrating into our footprint? And how quickly can we develop it?

We have the global platform ready, offices everywhere around the world, and the sales and operations infrastructure. So what can we take into that platform and really grow the business with it?

E&P Plus: How do companies like Varel and other OFS companies thrive in the low demand and low price market we’re in?

Nixon: It’s doing the simple things right now [and] concentrating on things that we can control. There are so many things outside of what we do every day that we can’t control. We can’t control the oil prices. We can’t control the pandemic that’s happening. So I think really just focusing on the business [and] getting back to just simple business [is key]—selling to good customers and making sure we’re getting paid on time, and using our inventory value to help drive cash flow.

When we look back at this year [2020], the year has been extremely challenging. But it’s been a good year from a business standpoint. When we bought the business back in March [2020], we didn’t know what was going to happen. But we were planning for change anyway, and we wanted to change up the business [and] the approach. So this has really fast forwarded that a little bit, and it’s really going to allow us to go back to retooling the industry.