Company executives have been forced to make tough decisions and use some creativity to stay in business
It was something owners of oil service companies didn’t want to hear: an oil exec saying the industry would be in a better position if the providers lowered their prices.
In November, Latigo Petroleum CEO Kirk Edwards suggested in an article that service providers should lower their prices to help improve the industry’s health. Those comments were unwelcome news to service providers who are already doing everything they can to stay afloat as oil companies slash their budgets in response to lower oil prices.
Dennis Michael Rodriguez, owner of New Age Environmental Services, a full-service industrial recycling firm focused on the oil and gas industries, has seen his business headquartered in El Paso, Texas, turned upside down since oil prices took their drastic fall.
“We’ve definitely seen a market change. We do industrial recycling with oil and gas companies and everyone has cut back,” he says. “We are usually hired to go out and pick up the poly lines after they are done using them, and now the companies are just letting them sit out there. They won’t even hire someone to supervise me and my guys as we pick up the stuff.”
Michael Romines, president of Acme Oil Service Repair in Tyler, Texas, says customers who scheduled regular maintenance service every six months now tell him to call back in a year or 18 months.
“I try to educate them that preventive maintenance will reduce more costly repairs down the road, but that’s a hard sell,” he says. “They’re just looking at what’s happening now and looking for ways to save money.”
Acme Oil Services has four divisions – preventive maintenance and repair, oilfield construction, fabrication and refurbishing, and equipment sales – and each one has been affected by the lower oil prices, Romines says.
VZ Environmental of Fort Worth, Texas, has also seen business decrease, but principal Carol Jones says the company is taking proactive steps to make it through the decline. She says employees haven’t been replaced when they left and that technology is being used to streamline some operations, including in human resources, so she has fewer employees today than a year ago.
“We have ADT do our payroll and we bought an HR package that has taken on things so our employees don’t have to tend to them,” Jones says. “We haven’t had mass layoffs or had to cut anyone’s pay or hours, but we all know that could be a possibility. The good news is that we’re already one year into this downturn and we’re still here.”
Kevin Covey, business development manager for Canyon Environmental, says the Mansfield, Pennsylvania-based company adjusted to the slowdown by entering new markets and industries.
“We started getting more into hydroexcavation and utility work to help fill in the gaps between the oil and gas jobs,” he says. “Our goal is to keep a core group of workers involved with the company so when the industry comes back, we’ll be ready.”
Canyon Environmental laid off some workers, which is always hard, Covey says. “We’re using our strengths, such as our safety training from working in the oil and gas industry, as a way to help get jobs in the new areas like with municipalities.”
Romines says he knew 2015 would be a tough year based on how 2014 ended, so he made the conscious decision to add customers. A business development manager was hired and Romines made a goal of adding one new customer a week. As of late November, Acme hasn’t quite yet hit that goal, but Romines says the company added 30 to 35 new customers.
That initiative combined with cross-training employees so they can do multiple jobs has made it easier to ride out the low oil prices, Romines says. He also hasn’t replaced employees when they’ve left.
“We’re a lot more efficient than we were a year ago,” Romines says. “We’re doing about the same amount of work as we did last year, but with about half the people. We’ve focused a lot on cross-training”
Rodriguez says he’s scrambling to find material that his company can process and sell to his clients in Australia and Thailand.
“We’re trying to diversify where we’re getting stuff from and I’m having to be resourceful,” he says. “I don’t know how long it will be this way. We’re definitely feeling the lower oil prices and I’m just a small piece of the big puzzle.”
VZ Environmental is using its marketing dollars more strategically, Jones says. “We’re doing fewer trade shows, but trying to be present in the communities where we work, showing up at chili dinners, Habitat for Humanity builds and the like. We’ve found involvement to be a more meaningful way to connect.”
The company is also moving some of its equipment to new areas so that when oil prices increase, the secondary spill containment service provider will have a larger footprint. “We’re also committed to keeping our equipment in the best possible shape,” Jones says. “We want to be prepared for future growth. I will say the downturn has given us an opportunity to look at everything we do and look at ways to do what we do better.”
Romines hopes the efforts to diversify his customer base and cross-train employees to do several jobs will pay off once oil prices go back up.
“We should be in a good position. We’ll have more customers and we’re leaner now,” he says.