Varel International (“Varel”), headquartered in Dallas, Texas, designs and manufactures both roller cone and polycrystalline diamond compact (“PDC”) fixed cutter drill bits used for oil and gas exploration, and is the world’s fifth largest bit manufacturer for the oil and gas industry. The Company also designs and manufactures roller cone bits used in mining applications where it has significant market share. All of Varel’s roller cone bits are manufactured at the Company’s Matamoros, Mexico facility. In addition, the company manufactures tungsten carbide inserts for its roller cone bits at its Dallas facility (at a 30%–40% discount to third party suppliers), making Varel one of two in the industry with in-house tungsten carbide insert manufacturing capabilities. The combination of lean manufacturing initiatives in the Matamoros, Mexico plant and in-house tungsten carbide insert manufacturing gives Varel a significant production cost advantage relative to its much larger U.S.-based competitors.
Date of Realization: November 2007
Industry Sector: Energy Services/Infrastructure