Measured approach brings success for Accord Energy
Firm shows true value to clients in the oil and gas industry
THIS week three entrepreneurs who are pioneering the employee ownership model in a specialised branch of the oil and gas industry provide a reminder that late payments pose challenges for SMES in all sectors. Names: Alan Spence, Phil Stockton and James Arthur
Ages? 58, 52 and 37 respectively What is your business called? Accord Energy Solutions.
Where is it based? Aberdeen. What does it produce, what services does it offer? We help our clients in the oil and gas industry to realise the true fiscal value of their produced hydrocarbons by providing them with integrated hydrocarbon accounting solutions, says Alan Spence.
When hydrocarbons from an oil or gas field are transported or processed through shared infrastructure, such as platforms, pipelines and terminals, the resulting mixture has to be allocated between the original contributing fields on a value basis. This generally requires input from a range of disciplines (measurement, analysis, process engineering, IT and commercial) which contribute to the overall hydrocarbon accounting process. Failure to allocate accurately and equitably can result in fields receiving less of the mixture than they should or paying more tax than they need to. Increasingly, we are also seeing clients focusing on the quantities of carbon dioxide and water that they are being allocated as the cost of disposal of these continues to rise with the introduction of legislation aimed at limiting emissions to the environment. To whom does it sell? Our main market is the oil and gas business in the North Sea, but we have undertaken projects in Europe, south-east Asia and East and West Africa.
One of the main drivers for growth in demand for our services is the increasing trend towards deep-water developments. This leads to infrastructure sharing and the requirement for allocation and accurate measurement. What is its turnover? First-year turnover was £1 million and progress to date suggests that by 2013, turnover will be approximately £4m. How many employees? We employ 22 staff with an additional 12 associate consultants.
CASH-IN: Accord Energy Solutions owners Phil Stockton, James Arthur and Alan Spence, have established an incentive plan which will give employees the opportunity to buy shares in the firm. When was it formed? August 2, 2010. Why did you take the plunge? We were aware of the increasing potential market for a specialist consultancy firm to provide technical, commercial and operational support to international oil and gas companies in the area of hydrocarbon accounting.
We believed our experience and knowledge of Aberdeen and the North Sea meant we could be more competitive and responsive to the local market.
After spending most of our careers in traditional businesses, we also wanted to set up a business using a different model, one that rewarded all members of staff for their hard work and loyalty.
After research, we became aware of the employee ownership model and the potential benefits for both our staff and clients. Research has shown employee-owned businesses report increased productivity, between 9-19% higher than traditionally structured similar businesses and better staff retention levels as all members have a stake in the company. We quickly knew this was a business model we were keen to pursue. This process has now been started with the implementation of a share incentive plan which will give employees the opportunity to purchase shares, and to be rewarded for their contribution to the business in a tax-effective manner. We are also planning to set up an employee benefit trust which will ultimately hold at least 51% of the shares.
However, as the employee ownership model is still fairly rare, especially in the oil and gas industry, it takes time.
We have been supported in the transition by Baxi Partnership and Co-operative Development Scotland. What were you doing before you took the plunge? I have spent over 30 years in hydrocarbon accounting operations in the oil and gas industry and latterly was managing director at Smith Rea Energy. At Smith Rea, I worked with Phil and James who are experts in the fields of allocation engineering and allocation system delivery. How did you raise the start-up funding? It was self-funded by Phil and James and myself. What was your biggest break? When we decided to set up on our own we had no prospective clients or staff.
Thankfully, a number of companies we had previously worked for were keen to use our services and we quickly established a strong client base.
The same has been true for staff. Many of them left the security of large companies they had been with for a long time to join us. What was your worst moment? In our first few months as a business, it took three months to get payment from a client for an overseas project. In total, we were waiting for almost £100,000 and while awaiting payment, we still had to pay a sub-contractor that had carried out much of the work.
It can be tough managing cash flow in a small business, particularly during periods of rapid growth, but as the business continues to grow, it becomes less of a challenge. What do you most enjoy about running the business? It’s great having the independence to be flexible and make decisions quickly.
It has been really enjoyable and satisfying to see the business grow and develop and to go down the employee ownership route. What do you least enjoy? The extra pressure as a business owner over issues such as cash flow. There’s nowhere to hide. But the benefits of owning the business definitely outweigh any negatives. What are your ambitions for the firm? In the next five years, we aim to increase our staff to 50 people and for our turnover to reach £5m. We also aim to be 100% employee-owned. This process has already begun with the implementation of the share incentive plan.
The plan will give employees the opportunity to receive free shares and to purchase shares in the business. What are your top priorities? To maintain the high standard of our work; to set up quality systems; to continue growing our client base; to recruit an office manager to look after our core business processes and to establish a graduate recruitment scheme.
There is a shortage of talent in our field and we are keen to encourage young people into the industry. What could the Westminster and/ or the Scottish governments do that would help? Provide additional support for employee ownership.
Deputy Prime Minister Nick Clegg spoke out about the need for a “John Lewis economy” but I think there could be further support of employee ownership as an alternative to traditional business models. Incentives could include the use of Capital Gains Tax relief to reward business owners creating co-owned businesses or selling established businesses to their staff and more clarity around the purpose and operation of employee benefit trusts. What was the most valuable lesson you learned? To focus on, and be experts in, one key area. For us, that is hydrocarbon accounting. As consultants, I think it is essential to concentrate on your core business. How do you relax? I enjoy getting out on the water in my sea kayak. Phil is an avid drummer and James enjoys running and cycling.