Bumper stickers touting “If you have it, a truck brought it” have never been more on point than during a worldwide lockdown. This is always true in the oilfield, where tons of pipe and machinery share lanes with millions of barrels of water, drilling mud, and other supplies every hour of every day.
As drilling rigs stack up and pumps slow down, it might seem that truck trips would reverse their recent growth curves. For at least two Basin firms, customer loyalty and some belt-tightening are keeping the rubber meeting the road—for now.
PDQ America is a Texas-based trucking company and freight brokerage with significant oil and gas business. Michael Clements, Jr., is the company’s president. “On the trucking end, we have stayed somewhat steady with our oil and gas, which is probably 80 percent of our business,” he said. “We have had to pivot some of our trucks to working off of load boards, which is kind of a last resort for work.” Load boards are used for load brokerage, where loads are matched with available trucks rather than being under contract to a single trucking company.
The company’s main oilfield cargo consists of processing machinery and other surface equipment such as tanks and pressure vessels. Most existing orders for those jobs are continuing, although Clements said some jobs have been put on hold indefinitely. “We do some shipping between cities in the Permian for a few of our customers, and those loads are generally done through our freight brokerage.”
Clements noted that technology improvements in areas such as logistics took on greater importance during the last downturn (2014-16), and are becoming even more necessary in 2020, as a seeming flock of black swans have descended on society as a whole, not just oil and gas. “Transportation is a huge part of the oil and gas industry, and has been since the beginning of it all,” he said. The move to technology for PDQ came in the form of telling customers that there were other, more efficient means of shipping than simply contracting with a single trucking company for everything. They then began providing those brokerage services themselves while also working with other brokers.
He sees oil companies and industry in general getting more cost conscious. “I think they’ve gotten smart in the way they lean on freight brokerages now versus just leaning on internal dispatching trying to work directly with trucking companies,” he said. “As a rule, a freight broker’s going to get a better rate than you are going to direct.”
He cited the variety of loads a broker can help with, finding companies that may specialize in anything from large oversize loads to smaller ones, as needs change.
In the last few weeks PDQ has seen rates in the Permian drop by as much as 30-40 percent compared to February 2020. “That tells me there’s a lot of capacity and a lot of trucks looking for work out there,” he said, predicting even lower numbers as the downturn deepens. “I don’t know how long companies will be able to survive doing that if this goes on longer than 30-60 days,” he observed.
Reduced diesel prices don’t offset the drop in income. “I would rather see a little bit higher diesel prices right now than less work.”
On the opposite side, some trucking companies they work with are shutting down until things improve, saying they can’t afford to drop prices enough to maintain business until things turn around.
The crash has not affected what the company hauls as much as the direction. More rental equipment is headed back to yards than is going out, he noted.
Social distancing does apply to trucks, as most locations require the driver to stay in the cab while site personnel load or unload the cargo. Clements sees that as necessary but no less dehumanizing.
“We’re getting really close in some of these scenarios where we’re not treating the driver even like a human being. I thank that’s very unfortunate because these guys haven’t done anything wrong, they’re just out there trying to keep the country moving.”
Flatbed trucks can haul a lot of different things, and when asked if there are alternative markets to be looked at, Clements acknowledged that certain spot markets are indeed hotter than they were before quarantining began. “If you’re in the drive-in industry right now and you’re hauling goods that can go to grocery stores or hauling essential goods that are necessary during this time, you’re really in a good situation,” he said. Anyone already in that niche or who could pivot that direction early on is in a good position.
Water Hauling Changes Directions
For Stride Oilfield Services Vice President Jason Ward, years of honest business practices have engendered customer loyalty that’s keeping the company going with, so far, a minimal slowdown. Serving the oilfield exclusively, Stride tankers haul haul water—fresh, brine, or produced, but the mix and destinations have changed in recent weeks.
Previously hauling copious amounts of fresh and brine water to rigs for use in drilling, they now mostly haul produced water to saltwater disposal wells—and they’re charging less for those services.
“When it first started trending downward, I told everybody to drop our prices, Ward said. “To all of our salespeople, I said let’s drop our prices as low as they can go to make ends meet—because it’s going to be better to keep these customers and solidify the market. Because when it all comes back, and it will because it always does, then we will have our place in the market.”
At this writing, Ward said all the company’s trucks were working, although the truck count was down some from its peak. In the Delaware Basin in particular, some of the larger independents with significant cash reserves are among the last producers still drilling.
Stride was already among the lower priced haulers, partly because, he said, they don’t pad their trip count as some competitors do. Truck trip counts are hard for customers to oversee because it would involve more personnel at the site than producers can afford, so some haulers take advantage.
On the other hand, Ward has seen competitors drop prices to numbers that can’t keep the doors open for very long, and he is not interested in running the company out of business.
Along with price cuts on the income side, Stride has had a few layoffs and some salary cuts among those still on the payroll, including executives. Some has been voluntary. “We’ve even had some people just freak out and say, ‘I’m done,’ and leave.
“We haven’t really done anything special, we’ve just been smart,” Ward continued.
They are also avoiding working for clients known for slow payment schedules—although a few of even the best payers have slowed a bit. Fortunately, most Stride customers are still paying on schedule.
To stay abreast of the shifting financial climate, Ward said they now run profit-and-loss accounting weekly instead of monthly, as it used to be done, “just to keep up with it.”
Their own vendors, such as disposal wells, are billing Stride immediately after providing the service instead of every month. “You did $15,000 worth of disposal charges yesterday, we need it tomorrow,” he said, with only a faint chuckle.
Making it Through
Those that come out the other side of this will look very different, and should be making plans now for that eventuality—and that new look should involve being a better version of the company that entered the lockdown said Clements. He noted that most large nationwide brokerages are laying off people, while PDQ is hiring. “It’s an interesting time for small businesses, it’s an interesting time for developing professionals,” Clements said. “You can really use this as an opportunity versus looking at it as doom and gloom.”
It currently is hard to tell whether future will be bright, because it may be cloudy for quite a while.
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By Paul Wiseman