Plexus enters Russian market with new licence agreement

Plexus Holdings has entered into a licence agreement with LLC Gusar and CJSC Konar to undertake the rental, manufacture and servicing of Plexus’ jack-up drilling wellhead exploration equipment into the Russian Federation and the other CIS states oil and gas markets.

Gusar and Konar are two independent Russian oil and gas equipment manufacturers.

The licence agreement provides Plexus with low cost access to the territories without the requirement to make significant investment in capital intensive assets such as manufacturing.

Entry into the Russian Federation and other CIS states follows on from the licence agreement between Plexus and Yantai Jereh Oilfield Services Group Co., Ltd, signed in July 2015, to facilitate the rental, sale, and manufacture of Plexus’ wellhead equipment into the major Chinese, wider Asian, Brazilian, Indian and Middle Eastern oil and gas markets.

Licence agreement

Under the licence agreement, which follows a heads of agreement entered into on June 16, 2015, Gusar has been granted an exclusive licence to manufacture, market and supply Plexus’ POS-GRIP Jack-up Rental Wellhead Systems and associated and enabling products, and to utilise certain of Plexus’ trademarks, patents, technology, know-how and other intellectual property and technical services in the territories. Gusar and Konar have also been granted a joint exclusive licence to manufacture, market, supply and service Plexus’ Connectors and to utilise certain of Plexus’ trademarks, patents, technology, know-how and other intellectual property and technical services in the territories.

The licence agreement contains, inter alia, the following condition precedent clauses:

– Subject to the parties obtaining any applicable withholding tax exemptions, Gusar will within six months from the date of the licence agreement make an initial non-refundable, non-offsettable payment of $5 million in return for Plexus granting the Licence Agreement. Plexus may elect to extend the licence fee payment date, subject to certain conditions being met.

– Gusar will also pay to Plexus a further licence fee capital payment calculated as a multiple of EBITDA generated by Gusar’s POS-GRIP business activities during Year 4 after execution of the licence agreement. The further licence fee will be paid by annual instalments equal to 15% of Gusar’s aggregate gross revenue from the supply of Plexus products and relevant services in Year 4 and if necessary each subsequent year until paid in full.

In order to facilitate Gusar’s entry in the Territory for POS-GRIP Wellhead Systems, and to enable Gusar to familiarise itself with the product, Plexus says it will co-operate with Gusar to fast track fulfillment of an initial order for a POS-GRIP Wellhead System.

When Gusar secures an initial order for a POS-GRIP Wellhead System, Gusar will purchase three suitably configured POS-GRIP Wellhead Systems from Plexus at an agreed price, payable in stages, depending on specification.

Both Gusar and Konar will make a quarterly royalty payment to Plexus based on the invoice value on all Plexus products sold, rented or supplied by Gusar and/or Konar.

Subject to future agreement and agreed terms to be agreed in writing between the Parties, Plexus shall grant a licence to Gusar and / or Konar a licence to use the Licensed Rights to enable them to manufacture and sell certain additional Plexus products in the territories.

Plexus’ CEO Ben Van Bilderbeek said, “This important Licencing Agreement further progresses the expansion of Plexus’ best in class wellhead equipment into both the major Russian and the CIS oil and gas markets. This new venture forms part of our strategy to extend our POS-GRIP jack-up exploration wellhead product line and associated services beyond our dominant North Sea high pressure/high temperature (“HP/HT”) market which is currently severely impacted by the low oil price and consequent reduction in drilling activity, into new, larger growth markets around the world.”

Gusar and Konar, Plexus’ licencing agreement partners, said: “We are delighted to announce this exciting new venture with Plexus, which will see both of our oil and gas equipment manufacturing facilities supplying Plexus’ best in class POS-GRIP wellhead technology to be made in Russia.”