Gauges, tanks, and rods: these are just a few of the region’s made-in-the-U.S.A. goods that are keeping the Permian Basin’s energy sector humming.
By Lana Cunningham
Record numbers in rig count, houses sold, building permits issued, and civilian labor force. All these statistics reflect a booming economy in West Texas pumped up by the petroleum industry. Behind the scenes resides another number that figures into the economy: manufacturing. That number keeps flowing upward as more companies start up to produce items needed in the industry or as older companies adapt to new technology.
Advance Fabrication and Measurement LLC in Odessa is one of those new companies that opened its doors a few years ago to meet a demand: natural gas meter runs. Palmer of Texas has been producing tanks since its doors opened in 34 years ago in Andrews. Although Superod in Big Spring officially began manufacturing its unique type of sucker rod in 2012, the founder has pioneered sucker rods since 1978.
Kyle Phillips, vice president of Advance Fabrication and Measurement, said the company was started in March 2008 primarily to manufacture natural gas meter runs, and that is still their focus. A year ago, they absorbed another company and its product: code vessels. A variety of other products can come off those two, he noted.
The gas meter is a small computer that measures the amount of gas flowing through the pipe and gives a printout. “There are three or four other manufacturers in this area,” he noted. “For West Texas, we are the major supplier. I’ll put my guys against anyone else. We are good at building things quickly.”
Phillips said Advance Fabrication emphasizes safety and “we have a clean track record. In our shop our guys are doing some work that is pressurized and involves a level of risk.”
For the code vessels, “We’re still getting our feet wet. We have some people from the existing company that made similar items. We also have trained other people.”
When Advance Fabrication and Measurement opened its doors five years ago, the price of oil was rising above $100/barrel. That summer, the price plummeted. “We thought, what did we get ourselves into? It got pretty skinny there for about a year. Then after the first of 2009, business began to kick back up,” Phillips said.
Two years ago, the company was employing 30 people. Today, 80 employees are on the roster, he said.
Palmer of Texas started in 1966 as a farm implement manufacturing company in Garden City, Kan. It then was purchased by Cecil O’Brate and the firm moved into production of tanks. His son, Steve O’Brate, opened a manufacturing facility in Andrews in 1979 and the company has continued in that field since then. In August 2012, the company was acquired by Synalloy Corporation and is part of the Synalloy Metals division.
Kenny Scudder, vice president of Palmer’s sales, said Palmer first manufactured fiberglass tanks and then added steel tanks in 1993. Today, the company’s mix is 60 percent steel and 40 percent fiberglass. “The fiberglass industry realized in 1979 that the material could be used in the oilfield. Palmer was the first to try it in West Texas,” he said.
Today, Palmer is “one of the top five manufacturers in Texas for oilfield tanks.”
The plant is advertised as a 125,000-square-foot facility on 20 acres that not only manufactures tanks, but also paints, tests, and coats them to the customer’s specifications. Palmer can produce tanks ranging from 50 to 2,000 barrels and, with its fleet of seven trucks, will deliver to the job site and set them up. The company uses an arc welding process for steel fabrication, a de-coiler machine to unroll the steel coils, and a sub-arc welding process in the steel shop.
“We deliver all over the nation, from coast to coast,” Scudder said, noting Palmer’s tanks are located in California and Virginia and numerous states in between. Many of the tanks can be seen throughout the Permian Basin, Eagle Ford, Barnett Shale, and Southeast New Mexico. “Ninety percent of our business is oilfield related,” he added.
Among the larger clients are Sandridge Energy, EOG Resources, COG Operating, Energen, Chevron, Bopco, and Anadarko.
With 125 employees, the company is looking at plans to expand in the near future, according to Scudder. “We are trying to keep up with the demand,” he said. And the demand is not expected to decrease.
Nor is demand expected to decrease in the Big Spring headquarters of another Permian Basin manufacturer, a company known as Superod.
Superod’s business is sucker rod. Fiberglass sucker rod. They’re the long, slender rods that, once they’re joined together and run down the tubing on a completed well, comprise a long downhole “string” that is lifted up and down by a pumping unit in the process known “rod pumping.”
Until recent decades, all sucker rods were steel. But Superod’s founder, Russ Rutledge, was instrumental in the development of the fiberglass sucker rod, an implement that weighs a fraction of what a steel rod weighs.
“They’re an engineered product, relative to steel,” Rutledge said, and by that he meant that sucker rod can be designed and manufactured according to specified strengths and other specs that are precision-formulated for an individual well.
“Steel has been around so long, and you have application guides that pretty much tell you how to run ‘em,” Rutledge said. “With fiberglass it works a little different. We have a computer program that custom designs rod strings for every well. We’ll take well data from our producers and run it through our program and give you an optimum design for what you are trying to accomplish in a given well.”
Rutledge launched Superod in 2012, but he was active in the fiberglass sucker rod business for many years prior to that.
“Actually, this whole thing started back in 1978,” Rutledge said. “We built—that is, we started—a company that was called Fiberflex. And that was really the first semi-successful fiberglass rod to ever hit the market.”
Later came Fiberod, another product (and another company) that Rutledge founded. Fiberod marked an improvement over Fiberflex. In 2008 Rutledge sold Fiberod to the Smith Group out of London, England, whose operational arm in North and South America was a subsidiary called John Crane. Rutledge signed a three-year non-compete contract with them, one that expired at the end of 2011. For those three years Rutledge stayed out the of the fiberglass sucker rod business, but in January 2012 he and his associates opened the doors of the firm known as Superod. The product Superod sells is “similar to” the older Fiberod product, but is an improvement on it, Rutledge avers.
“Over the last 30 years we have learned a lot, and of course refined some of the problems that were in the product, and now we have built a product that nothing else out there will compare to,” Rutledge said. “It uses less energy than a steel rod, it doesn’t break from corrosion, and because of the elasticity of the rod string, with the fiberglass in it, you can actually take a surface stroke on a pumpjack of, say, 100 inches, and with the right design create a longer pumpstroke at the pump. You might create 120 or 130 inches at the pumpstroke, which gives you 20 or 30 percent more than you have at the surface. You produce more fluid with a product that is lighter and consumes less energy to drive it. And then it doesn’t break or corrode. So that is a mouthful, if you can combine all three of those things.”
Asked what refinements made Superod a superior product offering, Rutledge didn’t hesitate: “When you are building a fiberglass rod, you use metal end-fittings, and then you couple those with a sucker rod that has a fiberglass body. The way you couple the end fitting to the rod body [is a step that] involves a number of physics principles. What you are trying to do is join the metal end fitting with the fiberglass rod and reach the optimum or ultimate strength of both so that when you hybridize those two materials it basically becomes one. We did that, and now we have a patent pending on it. The ultimate objective, of course, is to build a product that will take the stress and last longer, and that is basically what we have done.”
The question that arises in most people’s minds, when considering the merits of a fiberglass sucker rod, is the question of strength. Steel has a centuries-old reputation for strength, and so the idea of fiberglass being in any way competitive with steel, where strength is concerned, seems a daunting proposition. But fiberglass has tremendous tensile strength—a one-inch rod will have over 100,000 psi (per square inch) lifting strength. And yet fiberglass is significantly lighter than steel. As Rutledge noted, a one-inch steel rod weighs 2.9 pounds per foot, whereas a 1-inch fiberglass rod weighs .848 pounds per foot.
Because of fiberglass’ significantly lower weight, the load that it must lift is considerably less. Much of the weight that’s being lifted in a rod pumping action is the weight of the rod string itself.
Said Rutledge: “When you’ve got the pumpjack going ten strokes a minute, per day, you are looking at 14-15,000 cycles per day, and that sucker rod string is dead weight. Whatever electrical consumption you put into that is basically lost.” (In other words, non-productive. The idea is to lift oil, not a rod string, so work that is exerted in lifting a rod string is just a cost of doing business. A steel rod string, being more than twice as heavy as a fiberglass rod string, amounts to a lot of electrical power that is essentially “lost,” as Rutledge puts it.)
“What you are trying to do is put all your energy into lifting that oil to the surface,” he continued. “So by reducing the weight of the rod string, you are using less electricity, and [meanwhile] you are moving more fluid, and doing so with a product that doesn’t break—well, it is a win-win situation all around.
As for matters of longevity, Rutledge said that the two most expensive things in the life of a pumping well are (1) electrical consumption, what it takes to drive that unit, over the period of life of that well, and (2) the replacement of sucker rods from corrosion and breakage. As for the latter, he said, “Superod has never had a corrosion failure in the history of this product.”
Where price is concerned, Rutledge’s wares once were more costly than those of his steel-based competition. In the early 1980s, for instance, a Fiberflex rod cost twice as much as a comparable steel rod. But today, his company’s Superod product “is actually less expensive than steel,” he said. Steel has gone up while fiberglass has held steady.
In its first year of operation—2012—Superod “did a little north of $20 million” in business, Rutledge said. And the company is on track in 2013 “to do somewhere between $40 and $50 million.” As for 2014, Superod “is anticipating somewhere in the range of $70 million.”
That’s a lot of wherewithal for a business based in Big Spring, a town with about 25,000 residents. But the place is growing. “They’re expecting a growth rate of about 5,000 per year with this new Cline Shale, over the next five to ten years,” Rutledge said. “We are presently employing somewhere between 200 and 220 people. I would expect that by the end of this year, we will be approaching the 300 mark and that that will probably just continue to go up as the company grows.”
So is Superod a major employer in Big Spring?
“Every time we sign payroll [laughs], yeah, I feel like we are a major employer,” he said.
Major enough, at any rate, to be the Permian Basin’s biggest supplier of fiberglass sucker rods.
“Now, when you compare us to steel sucker rods, you are looking at an industry that is roughly a billion dollars a year, worldwide. You can run the numbers and see where we are at, there… We are serving somewhere between four and six percent of that market now. There is no reason we can’t reach 50 percent or more of that market, given time to grow and develop.”
In past years, in its past configurations—Fiberflex, Fiberod—Rutledge’s businesses shipped rods everywhere from Asia to Europe to North and South America—essentially all over the world. “Our present market that we are focusing on is the Canadian market and the U.S. market,” he said. “And of course those are always the most profitable markets. When you go into South America and different places around the world, you run into cultural differences and price points that are a little different. Also the technological base is different there.”
In the United States—and mainly the Permian Basin, which is Superod’s home territory—business for Superod has been mainly a matter of staying up with fresh orders. “Right now, we’re basically just chasing drilling rigs and putting rods in new wells–newly drilled wells. In the Permian Basin, there are 230-240,000 wells existing already, and that, of course, is a market as well. We’re just taking care of the high spots, with the drilling industry, because they are drilling them fast. But we will focus on the existing wells and putting rods in those wells at some point in time. Right now, we are barely keeping up with building as many rods as the market is requiring, so we’re not trying to build inventory, we’re just trying to keep up with the drilling industry. We are expanding. We started out with a 110,000 foot plant, in January of ‘12, and we are doing about a 30 or 40,000 foot add-on already, trying to increase that capacity.”
Asked if he had any advice to offer other manufacturing firms in the Permian, Rutledge was reticent to say a lot, the subject being so broad. “It’s hard to say, without getting specific to some particular industry,” he said. “But the more automation you can put into the manufacturing, the easier it is going to be, because right now the biggest problem you find in the oil industry is [lack of] people. We have a big influx of people coming in from all over the country, but a number of those people are not trained and they are not well schooled in the oil industry. So you do a lot of training and [still] you have a big turnover, with everybody competing on price relative to what everyone else pays people.”
In manufacturing, as elsewhere, employees sometimes get poached by competing firms once those employees have received sufficient training to have improved their stock on the open market. Such is life during boom times.
Rutledge acknowledged a shortage of work force at Superod. “Any [manufacturing] effort that is very labor intensive and requires a lot of people—you are really looking at it to see if there is some way to automate it,” he said.
At Superod, as at Advance Fabrication and Measurement and at Palmer of Texas, the manufacturing biz is buzzing in high gear. And at each of these, as well as at scores of other manufacturers across the region, projections are healthy, optimism runs high, and management is in an expansive mood. If the price of oil and gas holds, the business of building things can only get better.