VECO International, Inc.

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VECO International, Inc.

813 W. Northern Lights Blvd.
Anchorage, Alaska 99503-2495
(907) 277-5309
Fax: (907) 264-8130

Private Company
Incorporated: 1971
Employees: 1,000
Sales: $700 million
SICs: 1381 Drilling Oil & Gas Wells; 1389 Oil & Gas Field Services, Nec; 1611 Highway & Street Construction; 1623 Water, Sewer & Utility Lines; 1629 Heavy Construction, Nec; 8711 Engineering Services

VECO International, Inc. is the largest oil field services company in Alaska. It modifies oil rigs, supplies support services to drillers, and builds prefabricated modules for oil rigs and mines, in addition to drilling in its own right. It has subsidiaries in three states and has, since the late 1980s, been a major player in the environmental clean-up business.

VECO traces its history to 1968 when William Allen arrived in Alaska. A controversial man with a reputation for his business drive, as well as pro-development activism in politics and public affairs, Allen built VECOs fortunes as the state built its oil revenues. Born in 1937, Allen dropped out of a New Mexico high school at the age of 15. He took a job as a welders assistant in order to help support his seven brothers and sisters, and by the time he was 23, Allen was supervising welding jobs in Los Angeles. In 1968, he moved north with his Alaskan first wife and began working on the Kenai Peninsula, where oil companies would soon exploit the North Slope oil reserves.

Conditions on the North Slope then were very primitive, though that was rapidly changing. Oil companies had paid the state $900 million for the first leasean amount more than three times the entire state budget. It was at this time that executives from ARCO approached Allen and encouraged him to go into business with another ARCO employee, William Veltrie, to provide the specialized support services oil drillers required to operate in the inhospitable climate. Allen and Veltrie agreed to the proposal, and in 1969 formed an oil field services company called V-E Construction. The name was soon changed to VECO and the company did well supporting the rapidly expanding industry.

In 1973, VECO and a British company formed a joint venture and bought a Norwegian company that did platform hookups in the North Sea. A year later, after VECO had received its first major contract on the North Slope, Allen bought out Veltrie and sold his interest in the North Sea venture for $2 million. He then used those profits to build his support operation on the North Slope.

At this time it was still unclear whether the oil reserves in Alaska would be developed. Conservationists were against using the reserves, while business owners had not yet made up their minds to move full speed ahead on development. With the worsening oil crisis in mind, Allen decided to put all his money down on the side of the developers. We bet everything on the North Slope, he later admitted in Alaska Business Monthly.

Though VECO concentrated mainly on supplying oil drillers, Allen began to move the company into actual drilling. With the NANA Regional Corporationa business that pooled the money of Alaskan nativeshe formed a joint venture called United Alaska Drilling, Inc. United Alaska Drilling was profitable, but it was perhaps most notable for the involvement of native peoples who had often been excluded both economically and politically in Alaska. Oil industry watchers credited Allen for drawing native Alaskans into the oil business. Later he sold some of VECOs interest in the drilling business to other native corporations.

At the urging of the companys bankersSeattle First National, Manufacturers Hanover Trust, and Interfirst of DallasVECO also began to diversify. After reincorporating in 1981 as a holding company called VECO International, Inc., Allen formed several new subsidiaries, including VECO Drilling, Inc., which bought oil drilling rigs in Colorado. Another subsidiary, Vemar, was used to purchase a Houston, Texas, business that refit and modified oil rig platforms.

Vemar, though it had plenty of business, was having trouble. The former owners had bid their contracts too low and the company was losing money. Allen was able to renegotiate some of the contracts and persuaded Penrod Drilling Corporation to buy a share of Vemar to keep it going. In the end, Allen got the work done, a fact which did much to solidify his reputation as a man who made good on his word.

By the early 1980s, perhaps because of Vemars problems, VECO had become overextended. Faced with debts to banks and unsecured creditors, Allen chose to pay off the unsecured creditors and pay only interest on VECOs loans. The banks, in turn, panicked and froze working capital. In 1982 VECO International; VECO, Inc.; and a utility subsidiary, Norcon, Inc., were forced into Chapter 11 bankruptcy. The proceedings, reportedly the largest such case handled by the Alaska courts up to that time, deeply marked the company. Allen credited his and his companys survival to the support of employeeswho offered to loan the company moneyand his clients.

VECO emerged from Chapter 11 stronger, if anything, than it had been before. Allen consolidated his business, keeping top management virtually unchanged, and switched to a group of Alaskan banks headed by the National Bank of Alaska. By 1983 VECO had combined revenues of $92 million. In addition, by 1985, VECO had paid off all creditors 100 cents on the dollar except, ironically, for the original banks who settled for a lower rate of payment.

In 1985 the company received a boost from changes in the market. As much of the Alaskan oil industry signed new, higher-cost agreements with labor, VECO and its subsidiaries, with their non-union workforce, were able to move away from service and support, and further into the construction business. In turn, between 1984 and 1987, VECO won the majority of large construction jobs on the North Slope. Among these were ARCOs Lisburne and West Sak projects, Standard Alaskas Endicott job, and Conocos Milne Point endeavor. Also, VECO was awarded the contract for Alaskas Red Dog zinc mine, marking the companys move into mine construction. By 1987 VECO controlled about half of all North Slope construction. Nevertheless, its Alaskan business was less than booming, and the company was relying on its subsidiaries in different areasincluding VECO Drilling in Colorado, Southwest VECO in California, and the Fairbanks utility Norconto bring in profits. These subsidiaries helped the company survive while the overall oil industry foundered.

As VECO grew, the company, and Allen, became a force in state politics, sometimes in controversial ways. In 1986, when the governorship and control of the Alaska state Legislature were at stake, Allen saw an opportunity to further his business aims. Leading a group of oil men who were fighting a proposal for new state taxes on the oil industry, Allen lobbied legislators and made campaign contributions to Republican candidates for the state senate. Eventually, he was caught using an employee check-off scheme to funnel $109,000 to five political candidates. The Alaska Public Offices Commission found VECO had made contributions over the legal limit and fined the company $72,000reduced to $28,000 by the State Supreme Court. Allen had achieved his goal, however. Governor Bill Sheffieldwho had accused Allen of unfair labor practices during the electionwas defeated and several of Allens candidates won. After the election, the legislature passed no new oil industry taxes.

Not all the attention VECO received was negative. In 1988, the company helped rescue three California gray whales trapped by newly-formed ice. The whales plight provoked nationwide concern and many, including then-president Ronald Reagan, mobilized resources to help. VECO donated ice-breaking equipment, including a $3-million-dollar hovercraft which helped break and keep open an escape path for the whales. Afterwards, the story appeared in papers as far away as Florida and in such mass-circulation magazines as People.

Also in 1988, the company landed its first environmental cleanup contract with Cook Inlet Response Organization. This proved to be the beginning of a very lucrative area of business for VECO. It was in March of 1989 that the Exxon Valdez spilled 11 million gallons of crude oil into Alaskas Prince William Sound. Oil covered hundreds of miles of pristine coastline and the urgency of the clean-up made it highly expensive. Within weeks, Exxon named VECO lead contractor in the clean-up.

To fight the spill, VECO rented planes and fishing boats; it bought hundreds of thousands of raincoats, flashlights and garbage bags; and it hired some 10,000 workers at $16 an hour. The effort absorbed nearly the entire companys attention for six months, and in the end, Exxon was billed more than $750 million. VECO earned $32 million for its role in the operation.

Other areas of the business benefitted from the spill as well. The Norcon utility unit experienced a turnaround, with overall sales skyrocketing from $110 million in 1988 to $960 million in 1990. Also, using what he had learned from the clean-up, in addition to the revenues earned, Allen added a new environmentally based subsidiary, VECO Environmental and Professional Services, Inc. In 1990 the new company received contracts to clean up a British Petroleum spill off of Huntington Beach, California. VECO Environmental and Professional Services subsequently advised others on an oil spill off Morocco, prepared oil-spill response plans for California companies, and sought openings for work in Eastern Europe. However, while the spill provided business openings for the company, the disaster also made life tougher for his Alaska businesses. The media questioned the effectiveness of the clean-up and the legislature passed the taxes he and other businesses had fought off in the mid-1980s.

With the oil business under attack again, and finding himself with a huge surplus of funds, Allen purchased The Anchorage Times in order to propound his pro-development views. His rival, The Anchorage Daily News, was considered anti-development, and had published probing investigations of the VECO campaign contributions scandal in 1986. Allen was proud of the Times, however, and explained in Alaska Business Monthly, I could have sold out and went south and could have made quicker money. Instead he chose to sink all VECOs Valdez earnings into the newspaper and his pro-development campaign. Two years and about $50 million later, Allen sold his paper to the Daily News. Though he spent money to upgrade the facilities and pay the staff, he lost his newspaper war by failing to gain circulation or ad rates.

While the 1992 failure of The Anchorage Times marked a defeat for Allen and VECO, it was also the year the company won a Czechoslovakian government contract to clean up an abandoned Soviet military base. In early 1993, the Alaska Journal of Commerce named Bill Allen one of its Top 25 Most Powerful Alaskans, praising him as one of the states best, and best-known, entrepreneurs. The article described him a restless soul and it was wondered what he would do next. It appears clear, however, that VECO is a major player on the Alaska scene, and Allen means to make VECO a significant player in the world environmental business.

Principal Subsidiaries

VECO, Inc.; VECO Drilling, Inc.; VECO Environmental and Professional Services, Inc.; VECO Middle East, Inc.; Norcon, Inc.; Alaska United Drilling, Inc.; Eastwind, Inc.; CEC/VEPS, Inc.

Further Reading

Dont Mess with Bill, Alaska Business Monthly, November 1987; The New Forty-Niners: VECO International, Alaska Business Monthly, October 1990; Hes Ready To Hit the Ground Running, Alaska Journal of Commerce, December 11, 1989; Anchorage Times New Oilmen Owners May Have Purchased Trouble, Chicago Tribune, December 3, 1989; Journalistic Issue In Alaska: Do Oil and Newspapers Mix? The New York Times, December 18, 1989.

Jordan Wankoff