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Surviving The South Texas Pipeline Boom -- Profitably
There’s a pipeline installation boom under way in South Texas, yet despite the promising outlook for steady work, contractors are still struggling with challenges -- many of which are situations they’ve faced before.
The recent influx of new pipeline jobs -- most notably within the Eagle Ford Shale region -- has brought about an increase in upstart pipeline installation contractors, many with limited experience in effectively bidding jobs that will actually yield profit.
“Profitability is being trumped by ‘let’s just get the work,’” says Luke Duncan, vice president of operations for Advanced Pipeline Services (APS), a midstream construction and maintenance services contractor headquartered in Sinton, TX. “With the boom cycle we are in right now, a lot of new contractors are getting into the pipeline installation business. Additional competition in the market place isn’t a problem; the problem is the willingness of many competitors to underbid the jobs simply to get the work. It’s tough to compete when there are so many willing to cut their own throats. In the short-term it makes it more difficult for those who understand the business to get profitable work.”
According to Duncan, the increase in competition -- with many contractors falling into the trap of underestimating costs in hopes of securing additional work -- is only part of the equation. Having so many new contractors come onto the scene has also made it difficult for more tenured contractors to source and secure competent subcontractors and qualified labor and supervision, adding yet another challenging component to the bidding process. “This type of work has been going on in Texas for the last 50 years,” says Duncan. “It isn’t anything new to us; just some of the conditions make things a little tougher. As a general rule, contractors who consistently underbid jobs will likely not be in it for the long haul. That practice has a way of catching up with a company’s bottom line.”
Path to profitability
Despite the changing oil and gas pipeline installation landscape, Duncan is happy and modestly proud to report that APS, the small, Texas-based company he recently joined in 2012, is enjoying a busy, steady and profitable year. APS works with oil and gas exploration and production companies, in addition to natural gas transportation entities, to maintain and install pipeline and field processing infrastructure, mainly in the states of Texas, Louisiana and Oklahoma. During its 20-year history, APS has gained an outstanding quality and safety record, and a reputation as one of the leading services companies in South Texas.