Julie Anderson
During this seemingly long season of uncertainty, those in most every facet of the oil industry have been forced to analyze practices to determine whether or not what worked during prosperity will still work during scarcity. Changes have been made on all levels, from scaled-down activity to shrinking inventory to reduction of personnel.
However, one practice has experienced continuity—and even an uptick in some cases—thanks to its two key benefits: expediency and efficiency.
Why Auctioneering Worked Before
The oil and gas industry uses auctions as a way to buy and sell equipment and trucks quickly and efficiently, said Jim Barr, group president of Ritchie Bros. Auctioneers Emerging Businesses, Brand Innovation, and Technology. Companies sell for a wide variety of reasons.
“Most often they’re selling to upgrade or modify their fleet; a project may be ending and a new one beginning, so they need different types of equipment,” Barr explained. Companies will also expand and contract their fleet based upon the amount of work available.
Ritchie Bros., headquartered in Vancouver, B.C., Canada, conducts live, unreserved public auctions with both on-site and online bidding (https://www.rbauction.com) and online-only auctions at http://www.EquipmentOne.com.
Equipment that may be seen in an oil and gas auction ranges from work trucks, pickup trucks, tanks, construction equipment, heavy equipment such as backhoes, crawler tractors, forklifts, lowboy trailers, motor graders, and water trucks, all the way to general office items such as desks, office machinery, etc., according to Jeff Martin, president and CEO of Jeff Martin Auctioneers, Inc., based out of Brooklyn, Miss. Jeff Martin Auctioneers conducts absolute and public auctions including live and online bidding at http://www.jeffmartinauctioneers.com/.
“The auction industry serves as a medium between the oilfield industry and individuals, helping to liquidate assets and provide cash flow for purchasing new inventory,” Martin said.
Online auctions allow for a greater target area to be reached for potential or new customers, and allows for bidding in the comfort of a buyer’s home or workplace without the necessity of being on-site, Martin said. Online auctions also allow a seller to keep up-to-date with current prices and items. However, traditional auctions are still alive and well, Martin noted. At Jeff Martin Auctioneers, traditional auctions are being combined with online auctions to allow the structure that best suits each buyer.
“Traditional auctions offer the opportunity to create a personal relationship with buyers, and also offer an exciting atmosphere that is appealing to a lot of buyers,” he said. Traditional auctions also offer the convenience of an auction without the need for technological understanding that an online auction requires. With that said, Jeff Martin Auctioneers provides support staff for online bidders who are always available to walk them through the process, from registration to bidding to closing out the sale.
For sellers, the benefit of online auctions is being able to reach buyers from far and wide, not just people who have the time, interest, and ability to come to a physical auction site, Barr maintained.
“For buyers, the biggest benefit of online auctions is that you can bid on equipment from the comfort of your office or home without traveling to an auction site,” Barr said.
“However, if you’re buying sight-unseen, you have to make sure you’re being given enough information to buy with confidence—including photos, reference documents, etc.—especially with expensive used heavy equipment,” he indicated.
Barr defined two types of online auctions: live auctions with the option of bidding online; and online-only auctions that take place over days or weeks, with bidding ending at a specific time. Ritchie Bros. conducts both types of online auctions: 1) live unreserved auctions at 44 permanent auction sites, with the option of bidding online in real time at rbauction.com, and 2) online-only auctions at EquipmentOne.com.
“With our live unreserved auctions, all the equipment is in one location so customers can research the equipment on our website and then visit our site to inspect, test, and compare with other like items in the auction,” Barr said. “Then, if they don’t want to spend the whole day at the auction site, they can still bid online from their home or office. We are actually seeing this happen more and more. Interested bidders will come see the equipment in person or send an inspector before bidding online. It’s the best of both worlds.”
Equipment selling on EquipmentOne.com is usually stored on the owners’ property; sellers can provide detailed information, documents, and unlimited photos with their listings to help interested buyers make informed decisions. Ritchie Bros. uses a secure escrow process to protect the buyer and seller on EquipmentOne, and helps manage any disputes in the case of material misrepresentations.
Why Auctioneering Still Works Now
Online bidding allows for buyers to bid from anywhere in the world in real time, allowing for a larger market reach to potential buyers, Martin re-emphasized. It also allows for auctions to be hosted from a wider variety of locations due to the lower impact an online-only auction has to the auction site.
“We have seen more and more buyers opt for online bidding for the convenience it offers, and the opportunity to bid from home or work rather than on-site,” he continued. “Sellers are also opting for online-only auctions, cutting costs for both the auction company and the seller.”
Cutting costs is one reason auctioneering has not been caught up in the downturn, but rather eased the discomfort for some in the oil industry.
In fact, Equify Auctions has experienced tremendous growth this year, which has allowed industry partners to expose their products or have access to products that have not been as affected by oil price decline.
Equify Auctions has completed construction on two new facilities, with one located on Interstate 20 in Cisco and the other on Interstate 10 in Sealy; Equify is also building a new facility at Wills Point, according to C.E. Vaughan, president of Equify Auctions, LLC, home-based in Fort Worth, http://equifyllc.com/. Each of these locations is strategically located near oil production regions of the state but also near to metropolitan areas that supply a broader range of end users of all types of equipment.
“Auctioning also allows participants to place items in a marketing area that is removed from an area seeing declining prices,” Vaughan offered.
“With the decline of oil prices, our locations allow the sellers to move their items at a lesser freight cost to an arena not in the area that is experiencing reduced equipment prices,” Vaughan said. “The Internet bidding gives added impetus to the final sales price whether the final bidding winner is on-site or online. It also allows the interested purchaser to buy without the expense of travel and time spent to attend in person.”
Prices for crude sitting at or below $40/bbl and natural gas prices below $2/mcf make it very tough for everyone in the industry, acknowledged Chris Atherton, president of EnergyNet, Inc., based out of Amarillo, www.energynet.com. EnergyNet facilitates the sale of producing working interests (operated and non-operated), overrides, royalties, mineral interests, and non-producing leaseholds, all using an internet platform.
“EnergyNet offers companies that are struggling financially a way to quickly and easily monetize non-core oil and gas assets for cash,” Atherton stated. “Our business has remained resilient in the face of the downturn.”
Jeff Martin Auctioneers also noted its company’s role “as a resource for businesses in the oil and gas industry that may be facing financial challenges to liquidate assets quickly and efficiently at a fair and reasonable price.”
One facet of the oil and gas industry that has not declined has been the use of mobile devices, allowing for efficient dispensation of business; auctioneers have kept up the pace, as well.
Buyers and sellers can conduct due diligence and bid on assets anywhere they have an internet connection, asserted Atherton. Some buyers bid using their smart devices.
“This is simply a convenience of the world we now live in,” Atherton said. “We buy gifts from Amazon.com, and watch movies or TV shows using Netflix, and many of us conduct our banking online. EnergyNet utilizes the flexibility and convenience of the Internet to create a liquid market for the buying and selling of oil and gas interests and assets.”
More and more users are accessing the Internet via mobile, “so that has to be a key focus for every auction company going forward—optimizing your website for mobile, developing apps,” Barr emphasized. Users want access to information and equipment whenever and wherever they go, he continued. They want to find and buy equipment on their laptop or mobile device; they’re researching companies and products on their phones and then sharing their opinions on various social networks.
“Just like any other business, industrial auctioneers have to adapt and embrace new technologies,” Barr said. “If you’re not keeping up, if you’re not part of the conversation, you’ll go the way of the dinosaurs.”
During a downturn, access to the most current data set facilitates quick and cost-effective decision-making.
“One of the biggest benefits of the world moving more online is the amount of data now available,” Barr declared. “Data helps us better understand our customers’ needs, preferences, and behavior, and enables us to provide the most relevant information and content to them.”
Multitasking is made easier as auctions can be followed and bids made on desktop, tablet, or mobile devices. In fact, Ritchie Bros. expects to have an online bidding app customized for Apple and Android phones in the near future, Barr indicated.
Apps are available for auctioneers that allow bidding to be completed through iPhones, iPads, laptops, personal computers, tablets, smart phones, and Android devices, thereby increasing the convenience and accessibility of online auctions, Martin said.
EnergyNet leverages the internet and growing technology to accomplish important goals, Atherton stated, noting these objectives that are vitally important during both prosperity and scarcity:
Attaining the highest value for oil and gas properties in a timely manner.
Exposing assets to a wide market.
Creating a competitive environment.
Allowing the seller to control parameters of a sale.
Actively communicating with sellers and prospective buyers.
Ensuring a successful close.
The Do-It-Yourself Option
Many people attempt to buy and sell their own properties—with an initial intent to save money, Atherton observed.
“It’s kind of like giving yourself your own haircut,” he said. “You can do it, but it may not turn out as well as you planned.”
Of course, there is a cost associated with utilizing an auction service. The commission allotted to the auctioneer company along with any associated fees is dependent upon the scope of services, size of the item, and other factors. Both buyer and seller can assess this cost before committing to the auction process.
Auctioneers at live auctions are licensed by the Texas Department of Licensing and Regulation (TDLR), which includes an enforcement division. An auctioneer must meet the following qualifications:
- is at least 18 years of age;
- is a citizen of the United States or a legal alien;
- either:
- passes a written or oral examination demonstrating knowledge of the auction business and of the laws of this state relating to the auction business; or
- shows proof of employment by a licensed auctioneer for at least two years and participation in at least 10 auctions during that employment;
- holds a high school diploma or a high school equivalency certificate;
- has not been convicted of a felony during the five years preceding the date of application; and
- has completed at least 80 hours of classroom instruction at an auction school with a curriculum approved by the department in accordance with the standards and procedures established by rule adopted under this chapter (Chapter 1802, Texas Occupations Code [Auctioneers Law]).
Each auctioneer is required to complete six hours of continuing education to renew his/her annual license, including two hours of instruction covering the laws and rules that regulate conduct. All persons licensed by TDLR can be located in TDLR’s licensing database.
Most auctioneering companies are also bonded and insured in the interest of providing safe and reliable transactions. Buyers and sellers can verify this information prior to committing.
The 84th Texas Legislature passed House Bill 2481, which made several changes to the Auctioneers Law. For more information including a list of Frequently Asked Questions, go to https://www.tdlr.texas.gov/auc/aucfaq.htm#new.
Navigating the Ups and Downs
When it comes to riding out seasons of uncertainty, the intrinsic values of auctioneering take on added meaning, as all can be related to cost savings:
- Many auctioneers offer a full range of services including transportation of items, repairs, cleaning and detailing, etc. As Vaughan stated, in some cases, “just a good steam cleaning” will make an item more attractive.
- Auctioneering companies are able to conduct comprehensive marketing efforts, including global digital media campaigns and the use of email blasts to place properties or equipment into a global marketplace. On a related note, auctioneer companies and services prioritize matching buyers and sellers. Companies collect information from both parties and put the right assets or equipment in front of interested buyers.
- Auctioneers can ensure that the buyers are “qualified buyers.” On the buying side, first-time buyers may be required to provide a deposit or a bank letter of guarantee for either a personal or company check. Cashier’s checks may also require verification. These regulations provide comfort to the seller when it comes to payment processing.
- Sellers may be able to set a minimum price and have final say on a sale.
- Many auction companies have the resources and technology to connect live audiences with global audiences via an internet platform, offering a truly competitive setting in a particular time frame. Oftentimes, in a private sale a buyer later learns his particular asset was worth much more than he thought. Or, the seller may set an unrealistic price and waste time waiting for buyers who never emerge.
With the fluctuations in the oil and gas markets being what they are, quick decisions need to be made as to the needs of current and future projects, Martin maintained, “and this is where auctions really are the only option in many cases.” An auction can be scheduled and completed within a matter of weeks instead of months.
“We are always getting an auction ready and at times can add your equipment to a current auction,” Martin added. “This would allow you to liquidate your items in a matter of days.”
In a downturn, a day just may make all the difference.
Julie Anderson, based in Odessa, is editor of County Progress Magazine, and is well known to many readers of PBOG as the former editor of this magazine.