Affixed to the facade of Derrick Equipment's Houston headquarters is a plaque dedicated to the memory of H. William Derrick Jr., the company's founder and earliest visionary. Derrick established the company in 1951 to manufacture aggregate screening equipment for use in mining, industrial and chemical applications, markets in which the company still participates today. Seeing an opportunity to enlist a new type of customer, the company began selling its "green iron" solids-control equipment to the oil and gas industry in the late 1970s.

Known admiringly as "the chief" by those with whom he worked, Derrick held a fundamental conviction that his enterprise's fortunes ultimately would be tied to its ability to help customers succeed.

Says Mitch Derrick, the company's current president, "My grandfather believed strongly that the best way for any company to secure a loyal following was to develop products that solve the problems customers face. We still embrace this philosophy today, which explains why we continually reinvest such a high percentage of revenues into research."

Each year Houston-based EnergyPoint Research Inc. conducts a survey of oil and gas operators to gauge how well the service and supply industry is providing what the E&P sector needs. At a time when the majority of drilling and wellsite suppliers evaluated in the 2007 Drilling/Wellsite Equipment & Materials Survey saw their customer-satisfaction ratings fall due to eroding quality, nagging production delays and deteriorating service, Derrick's scores registered an impressive uptick from already healthy levels two years ago.

Derrick rated high across a number of attributes, but received specific accolades for the initiative and service-oriented nature of its personnel and management. Paraphrasing one survey participant, "Derrick is constantly looking to improve performance and stay ahead of the competition. But it's the field personnel that make the company stand out. They're always there when you need them and are fully supported by upper management."

Derrick's ability to make such a positive impression on customers is no small feat given today's environment. Bottlenecks and performance issues have hampered the entire industry during the last 12 to 18 months. As a result, customer frustrations have been on the rise.

Yet, against this backdrop of tightness in labor and materials, certain suppliers have succeeded in ways customers clearly appreciate. Survey runner-up Smith International Inc. stood out for performing in the most fundamental of ways-by producing excellent products, delivering them on time and providing quality service.

According to Mike Pearce, president of Smith Technologies, maker of Smith's top-rated drillbits, the company's strong service and support ratings are no accident. "We eat, sleep and breathe the philosophy that our customers come first. Buyers rightfully expect a quality product, but how we deal with the problems and issues that inevitably arise is what leaves the most lasting impression on customers."

When it comes to categories of products, respondents were particularly pleased with the performance of tubular-goods providers. The category registered some remarkably strong ratings overall. The upshot is that two pure-play tubular manufacturers, Sumitomo Metal Pipe & Tube and Vallourec & Mannesmann, finished in the top five of the overall rankings.



On time, on budget

A year ago, loose rumors in some corners of the industry claimed suppliers were making use of a seller's market to exact retribution against customers for past hardball sourcing tactics. Today, however, no buyers of oilfield products and services contacted for the survey pointed any such accusatory fingers. While many perceive vendors as taking advantage of the prolonged market strength to continually escalate prices, most agree today's suppliers are duly motivated to do what they can to meet demand.

Notwithstanding the persistent friction surrounding pricing, there is a growing sense between upstream companies and their suppliers that, as one industry participant described it, the two are increasingly "connected at the hip."

As a result, many buyers are re-examining their sourcing methods, developing more robust supplier competency programs, and creating more structured supplier- and contract-management processes. Their ultimate objective is simple: to gain more value from dollars spent while maintaining high levels of safety performance.

It is not only purchasers who are focused on understanding which suppliers are most capable of satisfying customers. Suppliers themselves are beginning to pay greater attention to the issue as well, particularly as steep growth in product demand begins to moderate.

While some still hold to a misguided belief they must lower prices in order to perform well in terms of customer satisfaction, more enlightened providers understand that overall value is what matters most to customers And one of the more fundamental aspects of the value equation for customers is the ability of a supplier to deliver products on time and as specified.

Accordingly, many survey respondents this year saw fit to rate suppliers lower for making delivery commitments they were unable to keep in the end. In the words of one respondent, "Suppliers need to be more honest with customers rather than simply telling us what we want to hear. This is especially the case when it comes to delivery times."

Providers who have avoided over-representing delivery capabilities to buyers during the past couple of years, often at the risk of losing short-term business, have arguably enhanced their long-term relationships with these same companies. Such forthright and far-sighted behavior tends to cause buyers to remain more loyal, and increased customer loyalty is the principal point of striving for higher levels of customer satisfaction in the first place.

For some, meeting customer expectations has become a competitive strategy of its own. For instance, Davis-Lynch has a reputation as a highly reliable manufacturer of downhole cementing equipment and is especially adept at providing innovative solutions for more challenging applications. While known for its manufacturing prowess, the company's success is equally rooted in the way it communicates and interacts with customers.

Frank Cole, vice president of operations for Davis-Lynch, cites an example. "We do not use phone-answering services. When a customer calls our service desk, any time of the day or night, we have someone on the desk who is fully capable of answering their questions, correctly taking their order, and seeing to it the order gets out the door on time and as promised. Providing customers with access to an accountable and empowered professional 24 hours a day is one way we continually meet, and hopefully exceed, expectations."

Davis-Lynch's focus on order fulfillment stands in stark contrast to the large backlogs many suppliers have accumulated today. Admittedly, the creation of some level of backlog can be difficult to avoid in robust markets, especially for long-lead-time items. Backlogs can also help managers more effectively plan for the future. However, in the realm of customer satisfaction, backlogs are just as easily viewed as measures of unmet customer needs. And failure to meet customers' needs, regardless of the reason, can take a toll on a company's reputation over time.



Stakeholders take note

The decision of whether or not to focus on customer satisfaction as a priority should be an easy one for suppliers. Not only do inferior levels of customer satisfaction limit a supplier's options by shrinking the pool of potential clients or customers, they also serve as open invitations to competitors to enter their markets and attempt to pry away disappointed customers.

The ability of a supplier to score highly in terms of customer satisfaction often depends on the perceived competence and commitment of its people. Providers with cultures that stress the need for customers to have positive overall experiences, and that are willing to invest in the training, facilities and systems needed to ensure this occurs, can enjoy competitive advantages.

Chief among these advantages is stronger financial returns. The University of Michigan's Ross School of Business recently examined 10 years of data from the American Customer Satisfaction Index (ASCI) and found that stock portfolios based on customer satisfaction delivered excess returns in both up and down markets-across a range of industries. In fact, in the 24 months following completion of EnergyPoint surveys, stock returns for upstream suppliers with above-average ratings outperformed those with below-average ratings by a remarkable 37.2%.

Clearly, ties between customer satisfaction and investor returns can carry relevance for a number of stakeholders.





Top 15 Service & Equipment Companies

(Ranked by performance of 32 providers)

2007 Rank/No. of

2005 RankCompany/HeadquartersEvaluations*Rating

1/14Derrick Equipment/Houston33

2/5Smith International/Houston66

3/1Davis-Lynch/Pearland, Texas22

4/-Sumitomo Pipe & Tube/Tokyo22

5/2Vallourec & Mannesman/France17

6/6Grant Prideco/Houston64

7/-Frank's Casing Crews/Lafayette, La.53

8/-Newpark Resources/Houston18

9/7MI-Swaco/Houston119

10/12Dril-Quip/Houston33

11/21Scientific Drilling/Houston20

12/11Gardner Denver/Quincy, Ill.16

13/17Hydril/Houston43

14/10Halliburton/Houston280

15/12Wood Group/Aberdeen, Scotland38

* Derived from the average ratings received in the areas of "overall satisfaction" and "willingness to recommend." Companies also were rated by eight other criteria, such as product pricing, performance and reliability, post-sale support, and engineering and design.

Source: 2007 EnergyPoint Research Drilling/Wellsite Equipment & Materials Survey, EnergyPoint Research Inc.





Satisfaction Ratings by Product Category(Evaluations in 2007/Evaluations 2005-07)

Drill Bits

Baker Hughes (112/172)

Grant Prideco (36/60)

Halliburton (94/131)

Smith International (52/90)



Downhole Motors & Steerables

Baker Hughes (101/160)

Halliburton (98/151)

Schlumberger (93/158)

Scientific Drilling (20/32)

Smith International (17/21)

Weatherford International (29/44)



Downhole Drilling materials &

Completion Equipment

Baker Hughes (147/226)

BJ Services (39/76)

Davis-Lynch (21/29)

Halliburton (162/258)

Schlumberger (131/216)

Smith International (28/44)

Weatherford International (101/156)

Wood Group (11/19)

Surface Wellheads, Trees &

Flow Control Equipment*

Aker Kvaerner (8/16)

Cameron International (47/81)

Dril-Quip (13/26)

FMC Technologies (30/57)

National Oilwell Varco (9/20)

Vetco (31/57)

Weatherford International (23/30)

Wood Group (19/40)



Oil Country Tubular Goods

Dril-Quip (10/18)

Frank's (16/16)

Grant Prideco (38/59)

Hydril (11/22)

Smith International (14/18)

Sumitomo Pipe & Tube (19/28)

Tenaris (29/42)

Vallourec & Mannesmann (15/28)

Weatherford International (27/40)

Rig Equipment

Aker Kvaerner (9/9)

Cameron International (32/43)

Caterpillar (52/64)

Derrick Equipment (33/40)

Frank's (15/15)

Gardner Denver (16/24)

Hydril (22/32)

LeTourneau Technologies (17/20)

M-I SWACO (37/37)

National Oilwell Varco (88/107)

Smith International (11/18)

Tesco (22/29)

Weatherford International (33/41)



Muds, Fluids, Chemicals & Proppants

Baker Hughes (73/124)

BJ Services (64/110)

Halliburton (155/236)

M-I SWACO (80/110)

Newpark (18/25)

Schlumberger (100/155)

Weatherford International (24/29)



Subsea BOPs, Wellheads & Trees**

Aker Kvaerner (11)

Cameron International (19)

Dril-Quip (12)

FMC Technologies (17)

Hydril (14)

Vetco (17)





P. Douglas Sheridan is managing director of EnergyPoint Research Inc., Houston. Founded in 2003, EnergyPoint provides independent research regarding the oil and gas industry's satisfaction with the products and services it purchases and uses.

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