BIC June 2014 - KUDU profile

Entire KUDU product package operating in the field.

A Quarter-Century Strong

By Mary Savage

I

f you’ve ever had the opportunity to talk with Ray Mills, chances are you’ve left the conversation feeling a bit more knowledgeable and inspired. It’s also likely that Ray gleaned a bit of insight as well – his sense of curiosity drives him forward to be a better leader and industry front-runner – regardless of who he’s talking to.

As the co-founder and CEO of KUDU Industries Inc., Ray Mills represents half of the ingenuity and driving force behind KUDU. His father, Robert, founder and chairman, is the other half.

Robert and Ray Mills founded the company in 1989 and launched the business from the family garage, but the impetus had been in the works since the late 1970s when Robert first started developing the concept of using progressive cavity pumps (PCP) for down-hole oil wells in Canada.

Today, KUDU has become a formidable, global leader in the oil and gas industry – making them the world’s second largest manufacturer and distributor of PCPs. Sitting in Ray’s office at the manufacturing plant – 25

years after the company was established – he speaks of a passion and blind faith that spurred the father-son team forward. Their unwavering belief in their technology and innovative thinking ultimately led to the creation of a company that stands for excellence in management, manufacturing and innovation.

Having survived Alberta’s boom-bust cycle numerous times and as a privately-owned company, Robert and Ray have witnessed the layers of success and near failure. However, they never gave up.

They have built a business model that has been duplicated and followed by international companies and they are recognized as thought-leaders when it comes to adopting new strategies in LEAN manufacturing practices.

KUDU is also recognized as the ‘technology know-how’ people when it comes to PCPs and artificial lift solutions.

Time and again, they have solved their customers’ problems through innovative thinking and drawing upon decades of experience.

KUDU Industries | 25 Years | 1

“I really believed in the technology that my father had developed, but we needed to get the word out and we needed to sell it.” ~ Ray Mills Ray and his father Robert Mills.

Globally, they operate with 350 employees, KUDU equipment can be found in more than 30 countries worldwide and they have international offices in Russia, Kazakhstan, Romania, Australia, Oman and the U.S. Likewise, they have won numerous export awards over the past 15 years with the most recent one recognizing KUDU as one of Canada’s Top 50 Best Managed Companies in 2014.

So how does a privately-owned company reach such stature – not only in Alberta, but on the global stage? In a word or two, Ray defines it as being “dynamic and sustainable.”

“It’s about continually moving forward and adapting to change. Being ‘dynamic’ brings a certain attitude; an attitude that’s positive,” says Ray. “We’re also building a company that’s sustainable and that starts with our team.

We are building an environment that people enjoy coming to every day and fostering growth.”

Nine years after establishing KUDU, the accolades start to filter in…

• Canada’s Top 50 Best Managed Private Companies 1998 & 1999 • Innovation Insights Award for Manufacturing Practices from the National Research Council of Canada • Calgary Manufacturing Industry’s 2008 Best Employer for Medium Sized Manufacturers • The Alberta Export Award: Oil and Gas Manufacturer 2009 • The Alberta Export Award: Oil and Gas Manufacturer 2011 • The Alberta Export Award: Exporter of the Year 2011 • Canada’s 50 Best Managed Companies 2014

Decades of Innovation, Determination and Listening to the Customer Throughout his career, Robert had always worked for himself and during the 1970s and early ’80s it was no different.

He was in partnership with several men who were all stationed in Lloydminster – working in heavy oil.

“They were servicing a well for the umpteenth time and one of Robert’s colleagues suggested using a PCP to lift the oil.

They had been using the same technology on the surface, but not down hole,” recalls Ray. “The pumps were suited for the well, but one question remained: how do you run power to it?”

Both Robert and Ray spent the better part of the 1980s refining the pump design and technology – producing numerous prototypes – until they felt confident they had the right equipment. “I really believed in the technology that my father had developed, but we needed to get the word out and we needed to sell it,” says Ray. By 1989, Robert and Ray were ready to take their technology to market. “We used Robert’s garage as a shop, I made cold-calls from the house and we found it was very slow going at first, but we were up against two competitors that had been in the market for seven years,” notes Ray. They persevered and Ray landed his first sale. When it came time to install the pump, Ray went to the rig to make sure the product was installed properly – it was key.

“There were a number of large, established manufacturers that were trying to get into the business with perfectly good pumps, but because they were not installed properly, they failed and the customer thought is was because of an inferior product,” recalls Ray. “After the first order of KUDU pumps were installed, the customers came back to us – extolling the virtues of their efficiencies – and that’s because they had been installed correctly,” he continues.

KUDU Industries | 25 Years | 2

CNC MaChiNiNg | DesigN for MaNUfaCtUriNg CoMpUter-aiDeD DesigN & MaNUfaCtUriNg (CaD/CaM)

Congratulations, KUDU, on 25 years of excellence.

Bring us your problem.

We’ll manufacture your solution.

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Congratulations KUDU Industries on many years of success.

We are proud to have been a part of your success from the very beginning and look forward to continuing on this journey with you for many more years to come.

Phone: 403-723-3008 • Fax: (403) 723-3011 www.PremiumALS.com • jhaverko@premiumals.com

KUDU Industries | 25 Years | 3

Industrial Components & Services

Oil & Gas Solutions

Kudu Industries 25th Anniversary!

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As Robert and Ray were also the manufacturers of the pumps, it was not uncommon for the customers to bring up other problems. “We were standing beside our customers – seeing these problems at the well head, and the next step was being able to innovate our products and provide solutions,” adds Ray. “We understood the challenges that our customers were having and we quickly earned the reputation of being the ‘problem solvers’ because we would go to the well,” he notes.

Subsequently and in the weeks that followed, KUDU’s mantra became: ‘Go to the Well.’

About 18 months into their new venture, KUDU hit a turning point that proved to be extremely important. “We were working with Renaissance Energy and one of their engineers decided to try one of our pumps,” says Ray. “In its day, Renaissance was a bit of a maverick and they discovered the most efficient way to recover oil from a well was to pump as hard you could – a departure from the conservative approach.

Their mentality led us to develop a higher horsepower pump and systems that could achieve those results.”

Over time, KUDU replaced all of Renaissance’s pumps and KUDU experienced rapid growth. “We grew faster than we had anticipated and we grew beyond our ability to manage the company. We realized there were some problems associated with growth and we thought they would go away, but they didn’t – they came back to haunt us,” says Ray. During the first decade, KUDU’s vertical integration was all encompassing and the major players in the industry were starting to notice – because KUDU was gaining greater market share.

“Our competitors recognized that we had the right business model: we were vertically integrated,” adds Ray. “We provided everything under one roof, so when the customer talked to us, he was talking to the guy who sold the product, designed it and manufactured it. We also looked after the distribution and installation.”

And then the price of oil dropped in 1998. “Industry experts thought it was just a dip in the market and prices would recover, but a year later that hadn’t happened,” says Ray. By now the company had grown to 110 employees with 10 field offices. They had started to expand overseas, initially into Kazakhstan and then Colombia followed by Australia. As well, they had grown their product offerings, but the market had yet to recover.

As Ray observed, all the growing pains they had experienced over the last decade had come home to roost when the price of oil dropped.

“When the price dropped, we were literally moments away from being insolvent and the bank stopped by to let us know … and we had to correct the problem by cutting our overhead,” reflects Ray. “We also received an 11th-hour offer to buy the company, but they wanted to conduct their due diligence, so that bought us a few days. We knew there was going to be one of two outcomes: either the business was going to be sold or we were going to save the company,” he adds.

KUDU Industries | 25 Years | 4 WIC-EN-PUB-BUSINESS-IN-FOCUS.indd 1

2014-03-28 11:23:47

Congratulations to KUDU Industries and their 25 years of extraordinary success.

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Evolution Oil Tools would like to congratulate KUDU Industries on 25 years of success!

We look forward to our future of working together.

#3, 1820 – 30th Avenue NE Calgary, Alberta T2E 7M5 Toll Free: 1-800-265-8665 (TOOL) • Main: 403-243-1442 • Fax: 403-258-2614 www.eotools.com

From 25 years of revolutionizing the pump systems industry to exceptional global expansion—that’s the kind of dedication, innovation and vision that KUDU Industries is known for. At Grant Thornton LLP, we celebrate KUDU's passion for growth and are proud to be a part of their continued success.

KUDU Industries | 25 Years | 5

Robert and Ray Mills on the floor of KUDU’s manufacturing plant in Calgary, Alberta.

Solutions at a Glance Over the years, KUDU has expanded their product and service lines to provide the perfect fit for any environment. Their PCP systems are engineered to handle the demands of heavy, medium or light oil, coal bed methane and dewatering applications.

Identifying well conditions can be challenging and often call for unique solutions, and it is through decades of ‘going to the well’ and working alongside their customers that KUDU has developed these solutions.

Driveheads are available in various combinations of torque, speed, hydraulic or electric options. PC Pumps are energy efficient and offered in chrome or KUDU’s very own Tough Coat™. A range of elastomers and PC Pump solutions are available for the following application types: • Heavy, Medium or Light Oil • Dewatering Gas Wells • Coal Bed Methane • High Water Cuts • Highly Corrosive Wells • Thermal Applications • Steam Assisted Gravity Drainage SAGD • Cyclic Steam Simulation CSS • Horizontal, Slant and Directional Wells

And on the morning when everything came to a head, Robert and Ray opted not to sell the company. Instead, they had secured new financing and returned to the KUDU office, rolled up their sleeves and went back to work.

It was also during this time when they adopted the LEAN Manufacturing principles and although they still had to cut their operation in half, their long-term goal was to never find themselves in this position again.

“When we adopted the LEAN principles, it was through Chuck Harrison, a contact that Robert had made with the National Research Council (NRC). The NRC offered a program that dovetailed very nicely into our existing mantra of going to where the problem existed. In our case, it was at the well,” notes Ray. “Given our existing business model, we didn’t realize the strength of our operation – it was simply how we ran the business. It wasn’t until years later that we realized the importance of our business model and how important our communication with our customers had become.”

Integrating the LEAN principles also proved to be a significant turning point for the company and that too was all encompassing – from management to manufacturing.

“Implementing the LEAN philosophies has allowed us to build a sustainable and successful company,” remarks Ray. In 1998, the company was insolvent, carrying huge debt and dealing with inventory issues. By 2003, they went from

KUDU Industries | 25 Years | 6

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Congratulations on 25 years!

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Congratulations to KUDU on great success, continual growth and forward-thinking leadership.

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Congrats KUDU Industries on your 25th Anniversary!

We wish you many years of continued success!

JAS Industrial Service & Repair Ltd. 6140 – 44 Street SE Ph: 403-279-7460 • Fax: 403-279-7668 www.jasindustrial.com KUDU Industries | 25 Years | 7

“Greater efficiency means you need less people, but LEAN teaches you about insourcing opportunities that allow you to retrain your employees – not lay them off.” ~ Ray Mills

John Wilson (left) and Darren Oberg (right)

having 250 stock outs to only five stocks with two-thirds less inventory.

“Greater efficiency means you need less people, but LEAN teaches you about in-sourcing opportunities that allow you to retrain your employees – not lay them off,” he adds. “… and in Alberta, businesses compete globally – Alberta is not an island. Alberta is one of the most expensive places to do business, so you need a well-run operation if you’re going to make a buck.”

KUDU also continued to focus on their customer service – providing quality solutions that incorporated LEAN strategies. The outcome saw the rise of more field stores located close to customer activity, improved technical knowledge of service personnel and delivering greater value to the customer cycle.

In 2007, KUDU went through more significant changes as Robert retired, the company experienced changes at the executive level and the following year, the recession hit.

By now, Robert had moved to Barbados and was enjoy-

ing retirement until the call came: Ray needed helped and ironically, Robert needed a challenge, so he returned to the business.

“Ninety per cent of success is how we work every day: it’s understanding the importance of what we do and how we do it. It’s also a moving target,” comments Ray. “The manufacturing process makes up about 10 per cent of the overall process.”

In the last four years, KUDU has worked hard internally to renew their LEAN longevity and it appears to be affecting change among the employees once again. “As a leader, there’s only so much change you can affect, but if everyone knows where they should go and what they are doing, collectively we can affect significant change,” observes Ray. “We compete against companies that have 10 times the number of employees that we do – our competitors are massive, but we have noticed that when we change the way we do something, they often change their model as well.”

KUDU Industries | 25 Years | 8

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~ Ray Mills

Congratulations KUDU Industries on your 25th Anniversary!

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Providing High Quality Industrial Packaging Congratulations, KUDU Industries!

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Congratulations to KUDU Industries on your anniversary!

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Proud Of Our Association.

(403) 236-6511 or 1-800-225-8247 www.praxair.ca Praxair is proud to support

KUDU Congratulations on your 25th Anniversary!

Phone - 403 313 3889 | Fax - 403 276 6331

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Industrial & Specialty Gases

KUDU Industries | 25 Years | 9

Welding & Cutting Equipment

Quality ProStar products

Technical Expertise

KUDU driveheads operating in the field.

Looking forward, Ray talks about automation, expanding their artificial lift products and continued global expansion. “It’s building the core products but also expanding the core of our products,” he adds. “It’s about becoming a better managed company and proving our understanding of those LEAN management principals. It’s

also about creating a momentum and critical mass.”

As KUDU celebrates their 25th anniversary, they pause from the workday to extend a sincere note of thanks to all of their customers, business partners, employees and suppliers that have played a role in helping them achieve this milestone. •

1 403 279 5838 | www.kudupump.com KUDU Industries | 25 Years | 10