Off to the races
As a well-capitalized provider of products and services to the drilling industry, Stallion Oilfield Services is off and running
November 11, 2005
Stallion Oilfield Services founder Craig Johnson is a workhorse with black gold in his bloodline.
Johnson, the third generation in his family to prosper from oil and gas, learned how to tap underserved market segments from his father, who started Petroleum Equipment Tools Co., and grandfather, who began M-I Drilling Fluids.
He used those lessons as the basis for Stallion, which provides drilling contractors and oil and gas operators with "everything but the rig." For example, the company offers housing accommodations, rental equipment and solids control to drilling companies.
Johnson says success has come from knowing the industry and relying on a streamlined management team to swiftly acquire and integrate companies. He and Stallion's chief financial officer, David Schorlemer, have worked together in the industry since 1997, introducing Stallion to the market in 2002.
Since its inception, Stallion has completed nine acquisitions and spent $29 million on capital investments. Expansion gained speed this year when Stallion acquired seven service, rental and transportation companies. Johnson and Schorlemer are projecting $80 million in 2005 revenue for the 350-employee company. By the end of 2006, revenue should hit $200 million.
"What we're finding is that this segment of the oil service industry is not one that has seen a lot of investment and professionalism," Schorlemer says. "We are providing a more comprehensive service offering to our customer. There is a very significant issue in the oilfield today which is people, and being able to have adequate resources to service the locations and to support the increased drilling activity. There's a housing issue related to that."
Indeed, Stallion provides eight different housing models for customers at rig sites. The options range from a change house -- basically a traveling locker room -- to the company man's quarters, complete with two bedrooms, two bathrooms, satellite capabilities and a George Foreman grill.
Stallion also handles transportation to and from oil and gas rigs, as well as services at the rig including water, sewer and intercom systems. The company also provides equipment -- from forklifts to generators and compressors -- and can deliver solids control equipment from shakers to mud conditioners. Stallion handles everything from removing waste at a rig site to getting a foreman a fluffier pillow.
The company has grown by responding to trends in the industry. More than 1,400 rigs currently operate in the United States, with more slated to be built in 2006. Stallion is primed to provide rig workers with housing and a variety of other needs.
In addition, Stallion's management team closely monitors changes in the industry, paying attention to the horizontal drilling trends, particularly in the Fort Worth Basin. New drilling techniques require companies to have additional expertise on location, Schorlemer says. Stallion understands that, and can accommodate them.
"When you talk to a man who spends half his life a year on a very remote drilling location and you ask him what service means to him, it's important to have quality pieces of equipment and quality housing on an as-needed, proactive basis," Schorlemer says.
He says the company sets itself apart from competitors by a willingness to make capital investments that are warranted by client demand. In fact, Schorlemer says Stallion has logged $20 million in capital spending so far this year, excluding acquisitions.
"They maintain a core strategy that works," says Ed Jacob, senior vice president for domestic operations at Grey Wolf Drilling, who uses Stallion Oilfield Services for approximately 70 percent of his crews' housing needs on 110 rigs from Louisiana to Florida. "They provide a good product and good service at a competitive price."
Not horsing around
Johnson secured financing for Stallion from Carlyle/Riverstone Holdings in New York and a bank group led by Houston-based Amegy Bank. Johnson believes his family's reputation and his experience at Q Services helped attract the heavyweight investors.
Meanwhile, Stallion's toughest times have related to shifts in the industry.
"When we started Q services, there were 850 rigs; and in 1999 that number went down to 450," Johnson says. "That's something you won't forget."
But these days, Stallion is ready to ride out economic cycles, Johnson says, with plans to diversify into other sectors of the market.
By the end of 2005, Johnson plans to have the orange and black Stallion logo on every piece of equipment in the field -- building name recognition with existing customers such as ExxonMobil Corp., Shell Oil Co. and BP and earning business from new ones.
He also plans to maintain a lean corporate structure so that decisions can be made in the field quickly.
Fewer than 20 employees work in Stallion's Houston headquarters, but as the company continues with acquisitions, Johnson expects that number to grow. And as expansion persists from Southern Louisiana through North Dakota, Johnson and Schorlemer will have farther to travel to visit job sites -- a monthly routine Johnson says is key to growing the business.
"You cannot know what's going on with your business if you stay in your office in Houston," he says. "You must get out and visit employees and the management. That gives you a full color picture of what's going on."
© 2005 American City Business Journals Inc.