Sumitomo Corporation ("Sumitomo"; President: Motoyuki Oka) executed a strategic partnership agreement with HOWCO Group (Chairman: Malcolm Howat; President: John Ferguson) and acquired a 50% equity stake worth over JPY10 billion.

HOWCO Group is a global supplier to the Oilfield Services Sector focusing on supply chain management activities which include tubular and bar distribution, added value processing and manufacturing.

HOWCO Group's worldwide positioning allows the company to operate in all major oil centers around the globe. Working closely with Sumitomo Corporation, HOWCO will continue to grow in 07 through continuing with proven strategies which will support their "West to East" transition, opening a new manufacturing facility in Dubai in May, and expanding their Singapore operation later in the year.

As a market leader in high performance metals, HOWCO has SCM contracts with major multi national OEM's, providing supply chain management solutions on a global basis. With the increasing demand for energy projected over the next decade and strong oil and metals prices, the high levels of exploration and production in the oil and gas industry are set to continue. Additionally, technological advancement in deepwater intervention and intelligent well systems that encounter hostile environments, create more demand for high nickel products, a part of the market which HOWCO have traditionally specialise in. With continued growth in this area, demand for high value products and manufacturing services is growing rapidly; the market is expected to grow from current 140 billion yen level to 210 billion yen level by 2010.

HOWCO has a leading market share of more than 30% with its advanced systems, technology and customer-oriented supply services. Its sales have tripled from 13 billion yen level to 44 billion yen level over the past five years.

Sumitomo plans to expand from its existing trade and supply of OCTG products to the Oilfield Services Sector and combine its existing tubular products business with HOWCO Group's continued development of Supply Chain Added Value Processes and Technical Advantage in order to provide not only tubular products but also accessories and related services. Sumitomo intends to expand its service capability in order to address "Total Oil Industry Needs" for Enhanced Services.


Market Reaction

This strategic partnership has been welcomed in the wider market by key customers and suppliers alike as a strengthening of the HOWCO - Sumitomo business offering. Through industrial synergies, strategic cooperation and combined knowledge, it is recognised that the company is strongly positioned to capitalise on global opportunities for further growth in-line with customer-driven expansion into new markets.

Background

Howco was formed by Malcolm Howat and John Ferguson in 1982. From the beginning, the company concentrated on top end nickel based products for use in the Oilfield Services Sector, mainly in Downhole Completions and Subsea Wellhead equipment focused on high performance products requiring a combination of specialist metals knowledge and oilfield product knowledge. The group's expertise developed across the production spectrum, from providing OEM's with high strength / high corrosion resistant materials through to manufacture of the finished products.

This diversification to meet customer needs was indicative of Howco's approach of becoming more closely involved with its customers' operations; it moved away from the model of arms-length supply and introduced close working relationships designed to enhance service, reduce costs and provide competitive advantage for its customers. As the Oil & Gas industry moved ever faster, the life cycle of new designs shortened, meaning that products become commodities more quickly, and the group's supply chain management activities grew to include equipment manufacturer as an outsourcing option for its OEM customers. This contributed to HOWCO rapid growth which has allowed the company to grow to over 44 billion yen with further growth projected for 2007.

Company Summary

Name:	HOWCO Group
Locations:	USA; Canada; Singapore; China; Norway; England and Scotland
Business:	Leading Oilfield Services Provider to OEM's
Activities:	Supply Chain Management - Manufacture, Processing and Distribution of Speciality Metals.

Incorporation:	1982
Number of Employees:	650
Ownership by Sumitomo:	50%