As Houston-based SEC Energy Products & Services puts the finishing touches on a flurry of expansion activities that will double both its natural gas compression manufacturing and workforce in 2014, new President Tommy Stone sees the effort in fairly simple terms.
“SEC expansion is about being a one-stop shop,” Stone said. “We saw this coming.”
What he and others at SEC Energy “saw coming” was growing demand within the energy sector that has led the company to increase its inventory three times since his arrival in June. This, while broadening its footprint to include a network of warehouse operations throughout U.S. natural gas-producing basins.
While the shale boom certainly accounts for some of the activity, Stone, who brings more than 30 years of natural gas industry experience to the job, said their need to get bigger is more broadly based.
“This (business) was growing even without shale,” he said. “This entire industry requires compression to work. Does shale enhance business, though? Yes.”
That SEC Energy was bought four years ago by burgeoning Energy Transfer Partners (ETP) fits in nicely with the expansion efforts as business is booming for the parent company as well, though SEC Energy does the majority of its business outside of the ETP umbrella. BHP Billiton has been a big customer recently, for example.
Nonetheless, ETP operates about 43,000 miles of gathering and transportation pipelines, treating and processing assets, and storage facilities in the United States. Among its holdings are the entirety of ETP Holdco Corporation – owner of Sunoco – and 70% interest in Lone Star NGL, which operates natural gas liquids storage, fractionation and transportation assets.
In addition, ETP owns the general partner and 100% of incentive distribution rights of Sunoco Logistics Partners, which operates a geographically diverse portfolio of crude oil and refined products pipelines.
While SEC Energy’s bread and butter has been providing natural gas compression equipment – it is the only company in the industry to offer gas, electric and dual-drive compressors – as well as parts and services throughout the industry, its services don’t end there. The company also offers turnkey engineering services on compressor stations, liquid-handling facilities, amine-treating plants and cryogenic facilities. That includes site design work, construction, procurement and project management.
The Houston expansion entails adding seven new buildings of about 212,000 square feet to the 46-acre yard. The new facilities double assembly space to 12 bays and include a skid and vessel fabrication shop, an overhaul and revamp shop, expanded warehouse space and an office building.
“Once we get in the office, we’re done,” Stone said, of the two-story structure, expected to be in use in February.
When fully operational, the $25 million expansion that began in 2012 with the conversion of 30 acres of swamp land acquired a few years ago, will allow for assembly of 500,000 hp of compression equipment annually and require the hiring of 100 new employees over the next 18 months, bringing the total to 350.
Stone said finding enough workers has not been a problem because “other packagers have been cutting back.” Also, when it comes to needing more highly skilled employees like engineers “everybody (within the industry, locally) knows each other” and is already aware of who is about to become available.
“What drives the business is vendor supply, and business is good,” said Stone, who most recently served as senior vice president of operations for ETP and chairman of the board of directors of Citrus Corp., owner of the Florida Gas Transmission pipeline system. “We are fully committed for all of our bays.”
Business is so good, in fact, that SEC Energy expects to nearly double its 2013 revenues of $260 million from now to the end of the year. The company also foresees paying for the $25 million expansion in one year with $30 million earnings before interest, depreciation and amortization (EBIDA) – another unusually good sign.
“Lots of what came to us from third parties will be produced here going forward,” said facilities manager Dale Shows, “Most everything we build is natural gas-driven. Our specialty is the 3600 compressor, but we have built bigger.”
That means as a one-stop shop the company will improve its position by becoming less dependent on shipments from outside companies to complete orders.
Shows said that at the moment many of SEC Energy’s orders are going to New Mexico, though the company delivers to locations from California to the Northeast.
Among the production equipment produced at the expanded facility: separators, dehydrators, fuel gas conditioners, stabilizers and filtration units.
In addition to expanding its gas and oil industry range of products and services, SEC Energy plans to broaden its geographic footprint to include a network of warehouse operations to provide parts and materials in locations that are among the most active natural gas-producing basins throughout the United States, such as Texas, California and Colorado, with locations in Oklahoma, Louisiana, Arkansas, Ohio and Pennsylvania coming soon.
“Floor space is valuable, right now,” Shows said.
Technical solutions offered by SEC Energy include a state-of-the-art overhaul and revamping facility with original equipment manufacturer-qualified service technicians; specializing in the Caterpillar 3600; routine operations; maintenance and field support.
Overhauls, upgrades and conversions will be simplified by the presence of a DL6K engine-testing Dynamometer in the 63,000-square-foot assembly building, making the company that rare service provider able to test power onsite before shipment to the field.
Additionally, SEC Energy is ramping up efforts to expand lines of business, which will include offering gas production and processing equipment, as well as portable generators.
“Testing an engine at our facility instead of in the field means our customers will be able to get their operations up and running more quickly,” said Stone, who holds a civil engineering degree from Tennessee Technological University. “Nothing is more frustrating than having assets without parts and people.”
Founded in 2003 by former Hanover management team members, SEC Partners moved to its current location in northwest Houston the next year on what was then a 16-acre site in a heavily industrialized area that services the oil and gas business. The company first grew with the Barnett, Woodford, Fayetteville, Haynesville and Marcellus dry shale plays before moving into the rich plays of Eagle Ford, Utica and Permian.
The company expects to have packaged 260,000 hp of equipment in 2013 and reach 500,000 hp in 2014.