A north-east engineering firm will hire additional staff after a six-figure investment in new machinery.
Stonehaven-based Kincardine Manufacturing Services (KMS) are hoping more oil and gas industry projects kick into gear next year after making hefty investments in new kit.
KMS has taken delivery of a new computer numerical control (CNC) machine made by Japanese firm Mazak.
It is the second piece of Mazak machinery that Stonehaven-headquartered KMS has bought this year, at a total cost of £800,000.
The company estimates that the new arrival alone will generate revenues of £400,000 to £500,000 per year.
It will help the KMS make components for wellheads and blowout preventers.
If demand matches expectations, KMS, which has about 45 people on its books, will be looking to hire seven new CNC machinists early in 2021.
Established in 2001, KMS produces and delivers complex components to a range of blue-chip clients in the oil and gas sector, including Schlumberger and Weatherford.
Two years ago, London-listed wellhead technology firm Plexus bought a 49% stake in the company for £735,000.
The deal gave Plexus access to KMS’s machining capability in support of its research and development projects.
KMS founder and director Graham Truscott and his immediate family retained the majority shareholding.
Mr Truscott said KMS had remained open for business throughout the Covid-19 pandemic but that activity had “slowed down” to a crawl in the last three months.
“These last three months have been the quietest I’ve ever seen the oil industry,” he said, adding that the company had put 15 employees on furlough and started operating with one shift.
KMS laid off six people due to the deterioration in market conditions brought on by the pandemic.
Revenues have been cut in half during the three months and are likely to total £4.5 million for the full year, £1m lower than in 2019.
But Mr Truscott expects KMS to breakeven this year, adding 2020 was “not a disaster”.
Uptick expected in 2021
He hopes breakthroughs with vaccines will spark an uptick in project work next year, restoring revenues to 2019 levels.
He said: “I think most oil majors will bring people back to the office in January and when that happens projects will start kicking in.
“It’s very difficult to run an oil company when people are at home. In this industry you need to have people in the office.”
Mr Truscott also said KMS was getting inquiries from companies which had shut down their own machine shops.
Sales manager Grant Adams said the investments in new CNC equipment would position KMS to take advantage of any oil and gas industry revival.
Mr Adams said the equipment would help KMS serve its own clients and those of Plexus, which last month signed a licensing deal with Cameron, a subsidiary of Schlumberger, for its POS-Grip wellhead technology.
Cameron agreed to pay royalties based on wellhead sales and rentals and a £370,000 lump sum.
Mr Adams said: “It is our hope that this transaction will also lead to further manufacturing capacity opportunities for KMS.”