Boots & Coots International Well Control, Inc.

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Boots & Coots International Well Control, Inc.

11615 N. Houston-Rosslyn Road
Houston, Texas 77086
U.S.A.
Telephone: (713) 621-7911
Toll Free: (800) 256-9688
Fax: (281) 931-8392
Web site: http://www.bncg.com

Public Company
Incorporated: 1988 as Havenwood Ventures, Inc.
Employees: 66
Sales: $29.5 million (2005)
Stock Exchanges: American
Ticker Symbol: WEL
NAIC: 213112 Support Activities for Oil and Gas Operations

Boots & Coots International Well Control, Inc. serves the oil and gas industry, fighting well fires and blowouts, as well as offering services to prevent such "events." The Houston-based company also contains oil and hazardous materials spills that result from these emergencies and provides restoration services to return oil and gas wells to production. Boots & Coots' WELLSURE program, an alliance with Global Special Risks, a major international Managing General Agent, and Underwriters at Lloyd's of London, offers oil and gas clients an insurance package that includes a full range of prevention, well control, and well restoration services. Boots & Coots is a public company listed on the American Stock Exchange.

"HELLFIGHTING" DATING TO 1913

The history of Boots & Coots encompasses the history of "hellfighting," the dangerous task of extinguishing well fires, and includes the life story of the most famous hellfighter of them all, Red Adair. The well control industry got its start in 1913 when Myron M. Kinley and his father extinguished the first well fire using explosives. Kinley had learned about explosives by shooting wells with his father in the California oilfields. A highly dangerous occupation, shooting a well stimulated production by perforating the rock formations beneath the well. It was accomplished by lowering a torpedo filled with liquid nitroglycerin down the well shaft, then dropping a rock on it. In 1923 Kinley formed the M.M. Kinley Company to specialize in well control and established the basic principles of dealing with a well "blowout." Powerful streams of water were directed at the drilling rig and explosives were used to blow out the wellhead and deprive the blaze of oxygen. Once the fire was out, hellfighters had to move quickly to cap the well before it had a chance to reignite. Anything that might cause a spark was forbidden, and the workers even avoided talking, preferring hand signals, lest the fillings in their teeth create sparks, however minute, that could set the surrounding vapor cloud ablaze with fatal consequences.

Kinley worked out of Houston and in 1941 he first met a young man named Paul Neal Adair. "Red" Adair, as he was known because of his flaming red hair, stood just five-foot-seven but he was a fearless, tough, and athletic man, who as a teenager earned extra money boxing in semiprofessional bouts and never lost. He was born in Houston in 1915, the son of a blacksmith. He quit high school to help with the family finances, holding a number of jobs before going to work for the Southern Pacific Railroad in 1936. Two years later he first became involved with the oil industry, convincing a foreman at Otis Pressure Control Company to give him a chance. One of the jobs performed by Otis was the cleaning and adjusting of the large valves that prevented blowouts at the well head. Adair learned the business and worked sporadically in the oil patch. Then, in Smackover, Arkansas, in December 1940, he made a mark for himself at only his third job for Otis. A gas well his crew was working on blew, causing everyone to scatter, with the exception of Adair, who calmly sized up the situation, realized a flange on the blowout preventer was loose and that the space created allowed the escape of the gas. He also realized that if he did not act quickly and decisively the flange would soon come off, causing sparks and a massive explosion that would vaporize him. He managed to tighten the bagel-sized nuts of the flange and contained the flow of gas. He also created the start of a legend, which would grow a few weeks later when he stopped another blowout singlehandedly. In the spring of 1941 Adair was working with Otis when a well blew out and caught fire. Kinley was called in. He generally worked alone, taking on helpers on a short-term basis. He asked for a volunteer and Adair stepped forward. After two days of hard work they put out the fire and contained the blowout. Kinley would now hire Adair on occasion.

JOINING KINLEY AFTER WORLD WAR II

World War II interrupted Adair's hellfighting career, but he found an equally challenging and dangerous job to bide his time in the service, and one that provided valuable experience: He served in the Army's 139th Bomb Disposal Squadron. After the war in 1946 he went to work for Kinley full-time and became his trusted lieutenant. As if fighting oil well fires did not provide enough danger in his life, Adair also raced boats and automobiles. It was at Houston's Arrowhead Speedway that Adair met Asger "Boots" Hansen, another war veteran and a submarine crew member in the Pacific. In 1957 another man joined the Kinley crew: Edward "Coots" Matthew. He, too, courted danger during the war, serving as a tail gunner on a B17 bomber on 25 missions over Germany and France. After the war the Texas native went to work for Halliburton, and when he lost his job he used family connections to land a position with Kinley.

Boots and Coots were known as hard-drinking rabble rousers and would have likely been fired by Kinley, but they were both fearless and Adair vouched for them with the boss and promised to take responsibility for them. By this time injuries had caught up to Kinley, and it was Adair, assisted by Boots and Coots, who now showed up at a job to put out a well fire. In 1959 Adair decided to strike out on his own and formed the Red Adair Company, taking Boots and Coots with him. He now began to forge an international reputation that would extend far beyond the oil industry. In 1961 Adair tackled one of the world's most spectacular fires, the "Devil's Cigarette Lighter," a gas fire in Algeria that soared some 450 feet in the air. Some experts predicted it would blaze for several years, but Adair and his crew extinguished it in a matter of weeks. Adair received international acclaim for the achievement and made the cover of Life magazine. His story would also attract the attention of Hollywood, and in 1968 a movie called Hellfighters was released with the six-foot-four-inch John Wayne playing the five-foot-seven-inch Red Adair.

COMPANY PERSPECTIVES

Boots & Coots International Well Control, Inc. are the pioneers of oil well fire fighting and the most experienced blowout specialists.

Red Adair now had a monopoly on the well fire business. He was called in to do a job with no price quoted. When the fire was out and the well capped, he submitted a bill for an amount that depended on his whim or need to finance some new toy, and his customers paid willingly because the amount of money they were losing due to a well fire far outweighed whatever Red charged. He did not face serious competition until 1975 when Joe R. Bowden formed Wild Well Control. Then, in December 1977, Adair gained further competition when Boots and Coots left to form their own company. The nature of their break with Adair was uncertain. They claimed that he fired them, while he maintained that they came to him with a set of demands he could not possibly meet and he suspected they already had a company set up. Whatever the circumstances, Adair and his erstwhile crew members began feuding in the press, creating bad blood that sometimes took a comical turn and became friendly badgering. Every December, for example, Boots and Coots sent Adair a telegram thanking him for firing them.

Red Adair Company, Boots & Coots, and Wild Well Control became fierce rivals. Adair's signature touch had been to revel in the color red, and his rivals followed suit with their own signature colors, even when it came to clothes and cars. According to a 1991 People Weekly article, "Red Adair's crew, for example, sport fire engine-red coveralls and drive identical red Cadillacs. That means the boys at Boots and Coots favor white coveralls and drive white Lincoln Continentals and BMWs. Not to be outdone, the team at Wild Well Control affect yellow coveralls with black trim and drive black Mercury Marquis."

There was enough work for all three companies and then some in 1991 after Iraq was expelled from Kuwait during the Persian Gulf War. As Iraqi forces left they set fires to some 700 wells. The three Texas firms were called in, along with Canada's Safety Boss, but the Kuwaiti government wanted faster action and asked for other bids. As a result, four more private companies as well as five government-sponsored crews joined the effort. The daunting task was completed in just nine months. Although Kuwait provided a windfall in profits for Red Adair and Boots & Coots, it also created even more competition, as the companies that put out fires in Kuwait now gained industry acceptance. The days of Red Adair naming his price after the job was done were long gone. To make matters worse for hellfighters, engineering had improved, making blowouts and well fires less common. They certainly could not count on a dictator to sabotage hundreds of oil wells very often.

In January 1994 the 78-year-old Adair sold his business to Global Industries Ltd., an oil-service company. A year earlier, Coots Matthews and Boots Hansen sold their company to employees. Adair's top people—Raymond Henry, Richard Hatteberg, Brian Krause, and Danny Clayton—had attempted to buy out Adair, but failed to reach a deal and went to work for Global. Although they received stock options, they soon chafed under Global's control. According to Forbes, Global's head, William Dore, "got cheap with his crews—no more imported beer and filet mignon and fancy cigars to celebrate after a big job—and he introduced time clocks. In a huff, Adair's four top guns quit and started a competing outfit." They called it International Well Control (IWC).

MERGER OF RIVALS IN 1997

To provide IWC with executive experience, Krause recruited Larry Ramming, a man with an extensive background in real estate, mortgage banking, and the investment banking industries. IWC now looked to expand its service offerings and to consolidate the fragmented well control industry. In 1995 the company took a major step in accomplishing the first end by forging an agreement with Halliburton Energy Services to create WellCall Alliance, which led to the WELLSURE program. As for the second goal, IWC also began talking in 1995 to Boots & Coots about a possible merger. Those talks came to fruition in July 1997 when IWC acquired Boots & Coots, and the company changed its name to Boots & Coots International Well Control, Inc. A month later Ramming took the company public by engineering a reverse merger with a shell company, Havenwood Ventures, Inc., an investment fund that made an initial public offering of stock in 1988.

To some on the outside, bringing together two fierce rivals was a recipe for difficulty, but as Ramming explained to Houston Business Journal, "Everybody forgot that they all learned under Red Adair. It was less a merger and more of a family reunion." The two companies complemented each other in a number of significant ways. For example, Boots & Coots had the equipment in Houston and South America that IWC lacked, while IWC boasted a deep roster of experienced personnel. Moreover, Boots & Coots had in recent years expanded its services to include industrial marine firefighting, in particular offshore drilling rig fires, an area in which IWC was interested.

KEY DATES

1959:: Red Adair launches a well firefighting company.
1977:: Asger "Boots" Hansen and Edward "Coots" Matthews leave Adair to form Boots & Coots.
1994:: Upon Adair's retirement, employees form International Well Control.
1997:: International Well Control merges with Boots & Coots.
2004:: Red Adair dies.

After the merger and going public, Boots & Coots went on an acquisition binge in an attempt to consolidate the industry as well as achieve further diversity. In September 1997 it acquired ITS Environment Services/ASASCO, a Houston manufacturer of rapid-response oil and chemical spill containment products. Next, in January 1998 the company bought ITS Supply Corporation, an equipment, transportation, and logistics company with offices in Houston, South America, the United Kingdom, and the Middle East. A month later Boots & Coots added Code 3, Inc., an emergency response company. Baylor Co., a maker of industrial products for the drilling, marine, and power generation industries, was acquired in July 1998. Finally, in November 1998, Boots & Coots added HAZ-Tech Environmental Services, Inc., a provider of a full range of emergency prevention and response services, including environmental site audits, bio-remediation, and water treatment.

The expansion program did not work out as planned, however. The company ignored signs in 1998 that oil prices were collapsing, a situation that would result in reduced drilling activity and less need for the services Boots & Coots had to offer. Moreover, in order to grow, the company took on a great deal of debt, nearly $50 million. In 1999, sales dipped, the stock price tumbled, and Boots & Coots defaulted on its long-term debt. The company took measures to cut costs, including laying off a large portion of the workforce, but the struggles continued in 2000 when it undertook a restructuring and reached a new agreement with lenders in early 2001.

Difficulties continued for Boots & Coots, however. In June 2002 Ramming resigned, the company was on the verge of being delisted by the American Stock Exchange, and there was talk in the press about the company possibly filing for Chapter 11 bankruptcy protection. The price of Boots & Coots stock began to rebound in 2003 due to the pending war with Iraq and the expectation of many that once again there would be a great deal of oil well fires to extinguish. But the early days of the war were not a repeat of what happened in Kuwait a dozen years earlier, and there was far less work for Boots & Coots than anticipated, and the company continued to teeter on the verge of bankruptcy.

In 2004 Red Adair died at the age of 89 from natural causes, a surprisingly quiet ending for a man who spent decades handling explosives near fires that burned as hot as 2,000 degrees. The company that was the heir to his legacy, in the meantime, continued to barely scrape by. But after losing $300,000 in 2004, business improved in 2005, as Boots & Coots cast off some of its noncore assets and focused on its well control business. The effects of Hurricane Katrina on Gulf of Mexico wells also generated business, and as a result sales increased 22 percent to $29.5 million over the previous year, while the company turned a profit of $2.8 million. Whether this represented the start of a comeback or a transitory spike in business remained to be seen.