Alberta company’s extensive reach provides recession protection

New Technology Magazine — Despite the current drilling downturn in Canada, an Edmonton-based company that specializes in providing equipment used in the cementing of wells has more than doubled revenue in three years — thanks to international expansion.

Top-Co LP specializes in two product lines: float equipment and centralization equipment, both of which are used in the primary cementing of casing in oil and gas wells. Centralizer products, just as the name suggests, are used to centre casing in the wellbore so it can be surrounded with cement. All casing has to be cemented.

The float equipment is a check valve that, when cement is being pumped, opens and enables the cement to pass through the casing. Once pumping is completed, because it’s under high pressure, the valve closes to keep the cement in the hole; otherwise it would come back to surface.

The company also supplies about 1,500 “part numbers” to producers — a lot of different sizes, materials and threads, depending on the well, the formation they’re drilling in, if they’re encountering a lot of heat, the depth and other factors.

Top-Co does nothing but design, manufacture and distribute casing cement equipment. “We’re specialists. There’s only a handful of companies that do this in the world and we don’t want to move outside our niche,” says a well-travelled Gerald McLaughlan, president and chief executive officer, who spends at least half of his time outside Canada. In the past two years he has been to virtually every country where Top-Co is represented.

In fact, he recently noticed he has to replace his two-year-old passport because it’s full. “You’ve got to go where the business is.”

Most of Top-Co’s growth is in the Middle East and Southeast Asia, as well as the North African countries of Libya, Algeria, Tunisia and Egypt, while Russia is becoming an important market.

McLaughlan says being international has been key to Top-Co’s success. “Primarily because geographic diversification insulates you from cycles in the industry,” he says. There’s a serious downturn in drilling activity in Canada and the United States because 70% of drilling is for natural gas, which is currently oversupplied, he says. Meanwhile, offshore markets tend to focus more on oil and that market is stable, he adds.

Three years ago 50% of the company’s revenue was derived from Canada whereas it is now split 25% Canada and 75% exports. “Hence our nomination for an export award,” McLaughlan says.

Top-Co was one of three companies nominated by the Alberta division of Canadian Manufacturers and Exporters for the inaugural Alberta export awards in the category of “manufacturing – oil and gas.”

“We nominated Top-Co for CME’s Alberta Export Award because it is really a great example of a home-grown success story,” says Dee Pannu, acting senior trade commissioner for the Alberta regional offices of the Department of Foreign Affairs and International Trade. “Now active in 62 countries worldwide and working with the Canadian Trade Commissioner Service in several of them, Top-Co has expanded by consistently being an innovator and enhancing its product lines into technology-intensive applications for horizontal and directional drilling and heavy oil.”

The company has been designing and manufacturing float and mechanical cementing products since 1963. It has 275 employees working from a 165,000-square-foot facility in Edmonton and a 25,000-square-foot plant in Weatherford, Texas. It is opening a third facility, in the Persian Gulf, in 2010.

Top-Co has distribution and customer support centres in Edmonton, Calgary, Houston and Weatherford, as well as Mexico, Russia, Azerbaijan and the United Arab Emirates. Independent sales agents and distributors are in more than 40 countries.

Virtually all design, manufacturing and testing of its products is performed in-house using electronic design media and three-dimensional modelling before release, so the company is not relying on sub-contractors, who can create delays and lead to loss of quality control.

 This vertically integrated structure provides maximum flexibility — an emergency order can be processed quickly and if there is a spike in demand for a particular product, the company can change its production very quickly and fill that void without relying on outside sources.

Speed is critical in this time-sensitive industry. McLaughlan says 99%, if not 100%, of the time Top-Co ships out domestic orders within 24 hours of receiving a customer request.

In addition, its $3-million computerized flow-loop test facility enables the company to test new products and conduct failure analysis before they go to the field, or to conduct failure analysis on problematic equipment. The test stand circulates drilling mud through float valves and digitally monitors and records flow volumes, temperature and the valve’s ability to handle the back pressure it would encounter in an actual well. It also ensures oil meets American Petroleum Institute standards. “There is nothing like it in the industry, and it’s sitting here in little old Edmonton,” says McLaughlan.

It recently tested a special cementing plug designed for a project offshore Newfoundland, where rigs can cost $500,000 a day to rent, so it’s important there are no problems or delays. “We were able to design it, build it, test it, and, through a web broadcast, engineers in Newfoundland and Calgary were able to witness the test so they could be fully satisfied it would perform to their specifications before taking the risk of putting a unique product in the well and encountering a problem,” says McLaughlan.

The item was built in five days, says Faisal Rashid, an engineer who does Hibernia’s desk design evaluation and services for clients. He witnessed the test in St. John’s and was very happy with Top-Co’s service. “The response was very quick, professional and we got very good support, very good communication,” he says.