The resources industry, and the sub-sea oil and gas sector in particular, is creating opportunities for innovative WA companies.
WHEN Fastwave Communications was established in 2001, the resources sector was moribund and the company was focused on opportunities in satellite communications.
Since then, the team at Fastwave has quietly plugged away, using their own capital to pursue a variety of business opportunities.
Right now they have more opportunities than ever before, and a key driver has been their penetration of the sub-sea oil and gas sector.
Fastwave’s technology is being used on the state’s two largest projects – Woodside’s Pluto gas development and Chevron’s Gorgon development.
In both cases, the company has developed innovative products that enable the project developers to meet stringent environmental monitoring conditions.
That opportunity wasn’t on their radar when Fastwave was established, but it illustrates what can be achieved by nimble businesses.
In that respect, Fastwave joins a growing list of innovative local businesses that have developed technical solutions for the oil and gas industry.
It’s a trend that Fastwave director Nick Daws finds encouraging.
“What we’re finding is that there is quite a strong nucleus of smaller companies based in Perth that are competing in the sub-sea domain against the traditionally dominant players from the Northern Hemisphere,” Mr Daws told WA Business News.
Some, such as Matrix Composites & Engineering, have listed on the stock market and delivered spectacular returns to their investors. Others, including Henderson-based Ocean Industries, have been taken over by international firms – in this case, Houston-based Oceaneering – that are keen to quickly build their capability in the fast-growing Western Australian market.
But most are local privately owned businesses, such as Velocious, which won this year’s WA Business News Rising Stars award, and Fastwave, which has won a string of accolades this year for its OceanStar Marine Environmental Monitoring System.
OceanStar won a WA Information Technology and Telecommunications Award, two categories in the inaugural Subsea Energy Australia awards, and a state iAward.
This year’s success has provided a boost for Fastwave, which still faces the same issues as any other growing small business – managing cash flow and recruiting quality staff.
“We read about people who have one good idea and make a fortune, but the reality for most businesses is that success takes a long time,” director Phil Sarich said.
“For us it’s been a slow grind.”
Mr Daws said the company’s core skill set was developing integrated, remote data acquisition systems that could be applied in many ways, from the satellite tracking and safety systems customised for many clients to the seatbelt monitoring system Fastwave is building for a mining company’s buses.
The satellite communication services provide the steady cash flow that keeps the business ticking over, while the directors pursue larger opportunities with a longer pay-off period.
“The larger projects have a long lead-time, there is a long decision making process, and there is usually a lot of R&D, so for a small company like ours to fund that is fairly challenging,” Mr Daws said.
He believes Fastwave has succeeded by finding high value-added niches, helped by being close to its customers and local market conditions.
“What we do is fairly unique; it is either too difficult or too esoteric for the mainstream contracting companies. As a result, we have been pretty successful in getting work with companies that would never normally deal with a business of our size.
“Once you do that, they get more confidence in you and more work comes in; that’s where we are at, at the moment.”
Fastwave’s Oceanstar product was created because the project developers could not find a solution in the market.
The problem they faced was finding a system that would provide real-time monitoring of conditions on the ocean floor, with the ability to transmit that data to a remote office location.
The industry context is that there is an increased amount of dredging and marine construction associated with big oil and gas projects, and more rigorous and prescriptive environmental standards being introduced.
Local edge
Mr Daws said international suppliers that were remote from the local market were unable to supply appropriate solutions.
“We had to develop something from scratch, and that was the genesis of the Oceanstar system that has won all of these awards,” he said.
“Effectively it was the first of its kind, integrating subsea, satellite and internet technologies into a turn-key data acquisition system.”
Mr Sarich said the product introduced a whole new paradigm to environmental monitoring.
“It’s easy to monitor water conditions on the surface, but getting the data off the bottom, in real-time, reliably, is a much bigger challenge,” he said.
“Our sensors actually sit on the sea floor, on the coral or seagrass, for months at a time.
“That was very challenging but we’ve solved that.”
Mr Daws said the ability of a small firm such as Fastwave, with only a dozen staff, to win work on mega projects like Pluto and Gorgon should be very encouraging for other suppliers.
“It’s given us the capacity to ramp up, to look at other opportunities,” he said.
“We see the next level of development with this type of integrated data acquisition system in the area of subsea wireless networking for environmental, infrastructure and security applications.”
At the moment, looking for international opportunities is a longer-term prospect.
“To be honest, there is so much going on locally, that can keep us busy for a while,” Mr Daws said.
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Many businesses in the oil and gas sector look at the example of Matrix Composites & Engineering for inspiration.
Matrix has used its stock market listing to raise $65 million from investors, at progressively higher prices, over the past two years. It has used the proceeds to build a new manufacturing plant at the Australian Marine Complex at Henderson, which it describes as the world’s largest and most sophisticated composite foam plant.
The next step in its physical investment is the construction of a new headquarters on the adjoining property.
The company was established in 1982, but under the guidance of managing director Aaron Begley has developed innovative new products.
Its core business is the design, application and manufacture of advanced composite materials, engineering plastics and buoyancy systems for the subsea oil and gas sector.
The company, and Mr Begley, have won a swag of awards over the past year in recognition of their success.
These include an Ernst & Young Entrepreneur of the Year award for Mr Begley, a Subsea Energy Australia award for the company, and an Australian Exporter of the Year of award in the large manufacturer category.
In its most recent financial accounts, for the half-year to December, the company reported a doubling of sales revenue to $92 million and an even larger rise in net profit to $19.3 million.
Investors will get an update next year when Matrix releases its annual results.
They will be looking for more good news to lift the company’s share price, which is currently about $6, well below the all-time high of about $9 recorded early this year.
While early investors in the stock, particularly those who bought shares in its initial public offering at $1, are still well ahead, investors who participated in its most recent capital raising at a price of $8.15 per share are currently in the red.