The oilfield boom continues to positively impact companies that are leasing and renting trailers.
“I'd have to say that demand is still strong,” says Ralph Nappi Jr, president of Matawan, New Jersey-based Transport Resources Inc. “We don't participate in all aspects of the oilfield market. We offer no crude trailers, but demand for stainless steel and acid trailers remains strong in that energy sector. I think I said last year that it would be three to five years, and I'll stick to that. Barring some kind of government intrusion, I don't know why the outlook would change. I think the demand will be strong.
“Our (US) strategic plan is to wean ourselves from OPEC and other countries that might not have our interests at heart. We're trying to become self-sufficient in energy. Barring any reversal of that mindset, I guess even a three- to five-year projection in demand for that equipment is modest. This is the new normal. Love this new normal.”
Nappi did some research and came up with some startling numbers:
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The percentage of Transport Resources customers involved in oilfield services increased from 1.8% in 2007 to 10.3% in 2012.
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The percentage of total lease revenues from customers in oilfield services increased from 2.9% in 2007 to 19.2% in 2012.
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The company experienced a 993% increase in sales revenue from oilfield service customers in those five years.
Among shale formations producing crude oil, the Bakken formation certainly is one of the most exciting. It covers not only North Dakota, but a total of 200,000 square miles including Montana and Saskatchewan. It is currently the largest known reserve of light sweet crude in North America. Oil was first discovered there in 1951, but technical limitations meant that a significant amount of oil was not recovered until recently. Hydraulic fracturing, or “fracking,” has had the most significant impact.
Production went from 3,000 barrels a day in 2005 to 225,000 in 2010, according to the Energy Information Administration (EIA), which believes 350,000 barrels a day is likely by 2035 — an estimate most analysts believe is far too low.
In 2011, Continental Resources — one of the main drilling players in the Bakken — said that it could be one of the largest discoveries of the last 30-40 years. Continental developed a technology that allows the drilling rigs themselves to move hundreds of yards under their own power, increasing the rate of well drilling. Company president Harold Hamm said the Bakken could produce one million barrels a day by 2020.
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Nationwide, there are several shale oil fields that could contain as much as 17 billion barrels of oil — more than the country's largest oilfield, Alaska's Prudhoe Bay — according to a recent study from IHS CERA.
“Certainly we have customers in the Dakotas and Wyoming,” Nappi says. “We have a tank or two in Montana. I remember last year, I was expressing my surprise at how the map had opened up for us with this new opportunity. All of that equipment is still out there, and customers and others I talk to seem to be very confident that business is here and will remain steady.”
Spencer Kraft, president of Kansas City-based Kraft Tank, says demand has been met for frac tanks.
“Crude oil has picked up,” he says. “Our numbers are down because we invested quite a bit in sand tanks and DOT-series tanks and other products for that market. To be honest with you, I'd say it's probably some of regulations that came, and the price of the barrel. With a lot of our customers, a couple of months before election, they kind of put things on hold. They weren't going to do anything until they knew which way it was going, and now they're not doing anything until they know what the regulations are going to be. In the last three or four weeks, we've seen signs of people realizing they're getting over it and are doing business as normal. But it definitely slowed things down.
“Otherwise, our other markets are fine. They don't have the big spikes like the oil fields do. They're steadier. I wouldn't say they're any higher or lower. They're just on an even keel. I have the most hope for crude oil and petroleum trailers. They seem to be pretty much in demand because operators initially put a lot of used petroleum trailers into crude service and beat them up. It took that inventory out of the market.”
Stuart Tank Sales Corp, Elkhorn, Wisconsin, was another beneficiary of the oilfield demand for leased tank trailers over the past few years. The company also sold significant numbers for new and used tank trailers to oilfield service providers.
“Oilfield activity, especially in North Dakota's Bakken region, lifted us out of the recession,” says Phil Klein, vice-president of sales at Stuart Tank Sales. “We had almost all of the business we could handle. We sold and installed a lot of parts on equipment going into the oilfield. Operators brought equipment from the Dakotas to us for service. While we have seen some softening of that market, we believe opportunities still exist.”
Oilfield demand for leased and purchased tank trailers also has tapered off for Grace Trailer Service LLC, West Memphis, Arkansas. “For several years, the oilfield generated quite a bit of business for us,” says Allen Floring with Grace Trailer Service. Oilfield customers were taking anything they could get. The oilfield business has cooled down somewhat, but we are still selling and leasing some trailers to that sector.”