Read the full episode transcript
00:00:03 Speaker 1
Welcome to the Energy Pipeline Podcast with your host, KC Yost. Tune in each week to learn more about industry issues, tools, and resources to streamline and modernize the future of the industry. Whether you work in oil and gas or bring a unique perspective, this podcast is your Knowledge Transfer hub. Welcome to the Energy Pipeline.
00:00:26 KC Yost
Hello everyone, and welcome to this episode of the Energy Pipeline Podcast. Now I've got to tell you, I've been looking forward to this conversation for quite a while, so just get right into it. Today we'll be discussing the challenges of oil field material and equipment supply with Gary Bowers, president of PSC, that's Producers Supply Company, one of the industry's leading oil field supply companies. Welcome to the Energy Pipeline Podcast, Gary.
00:00:51 Gary Bowers
Thanks, KC, I appreciate you having me on today. Look forward to our conversation, and want to just also thank Caterpillar Oil and Gas for hosting this episode.
00:01:03 KC Yost
Excellent, excellent. Well, we're very excited to have you here. You are calling in from Waynesburg, right?
00:01:08 Gary Bowers
I'm actually in Canonsburg, Pennsylvania. So-
00:01:11 KC Yost
Canonsburg?
00:01:12 Gary Bowers
...it's a little bit north of Waynesburg, where our roots are at and our branch, but we've recently opened, I guess, a headquarters in South Point, which is just a little bit south of Pittsburgh, Canonsburg, Pennsylvania.
00:01:29 KC Yost
Sure. So anyone that's in any other part of the country, just say south of Pittsburgh and they get the general idea. Those listeners probably know I grew up in Clarksburg, West Virginia, went to school in Morgantown, so it's good to talk with someone from Western Pennsylvania. It's good to have you on. Like I said, I've been looking forward to this for quite a while.
00:01:52 Gary Bowers
You're missing the pepperoni rolls.
00:01:55 KC Yost
I am. I am, terribly, terribly missing the pepperoni rolls. In fact, I came close to placing an order with Tamara's last week after we visited.
00:02:03 Gary Bowers
I don't know inaudible
00:02:04 KC Yost
May do that this week.
00:02:08 Gary Bowers
inaudible
00:02:07 KC Yost
Tamara's. Tamara's. So anyway, getting off the track there a little bit, but this is going to be a great conversation. I've really been looking forward to it, like I said. So before we start talking about getting material and equipment to remote job sites, take a few minutes and tell us about your background please.
00:02:29 Gary Bowers
Yeah, so I grew up in small town Southwestern PA, Mount Morris, right on the Pennsylvania/ West Virginia border just north of Morgantown where you said you went to school. Town of maybe six or 800 people. Only child, grew up in a single wide mobile home, didn't come from a family of business or any accolades of such. My daddy ran a bulldozer most of his adult career. My mom was a teller at the local bank. Barely graduated high school. Went to technical trade school, 1987, I guess, it would've been. Fall of 87. Came back from Daytona Beach, Florida, worked at a Honda dealership in Pittsburgh for a total of four days and decided that wasn't my cup of tea. So was looking for employment and there was a small privately held, single location, glorified hardware store, if you will, Producers Supply Company, in Waynesburg, PA. I applied for the position as a warehouse helper, $ 6 and 25 cents an hour, I believe it was. Number two employee. And as they say, the rest is history. So 34 years later, here we are.
00:03:58 KC Yost
Oh, great. What a great story. What a great story. And you were able to keep that small town feeling going, I'm sure.
00:04:08 Gary Bowers
Well, in the early days, KC, there wasn't much oil and gas specific industry in Southwestern PA. There was oil and gas work, but most of that was driven by the coal industry. So there's a lot of deep coal, North Central, West Virginia, Southwestern PA where the long, long mining takes place. So in our early days of chasing the rig, if you will, that was stimulated by the coal industry, and the oil and gas producing areas at that time, in the early 90s, was further South, Buckhannon, West Virginia, south of Clarksburg, if you will, and then Indiana, PA to the northeast of where we were at. So we grew up quasi oil and gas, and then that quickly morphed into chasing the rig to Eastern Kentucky to the Finger Lakes and New York and such. So that's kind of where it began, I guess.
00:05:15 KC Yost
Yeah. So PSC's got this rich history that you're talking about. You started in Appalachia and as you were talking about, now you've expanded geographically, haven't you? I mean really quite significant growth.
00:05:30 Gary Bowers
Yeah. So from those beginnings in 1989 or 90, we had the single location on First Street there in Waynesburg, maybe it was, I don't know, maybe 7,500 square feet or something. We were in that location until May of 2010. We relocated to the current Waynesburg branch facility, which is just off of the interstate there. That then became, not just one building, but two or three different facilities totaling, I think, there's about 65 or 70,000 square feet total there in Waynesburg, and then five seven acre pipe yard or such. And we were there from 2010 through 2017. Late 17 we had some customer request and/or sponsorship, if you will, not financially, but just from a business relationship, commercially to go to mid-continent. So in late 17, we opened up a branch in Oklahoma City. We operated there full year 18 and 19. There was 150 rigs in a scoop and the stack when we went. And ultimately the almighty COVID came along in early 20 and Rig Count, it went to, I think, ultimately single digits, and we were able to get out while the getting was good. So brought our signs and our trucks home and went back to work with just a single location in Waynesburg through 2020 and 21, which actually Covid was pretty good to us. We were competing with the big boys, and a lot of those competitors were going to remote work and laying people off, and supply chain was a huge hurdle as we all experienced and think back about today. But we actually grew our business about 40% market share through Covid. I guess it was late 21, I was 53 years old at the time, a couple daughters, one who had just graduated business school up in Cleveland, Ohio, John Carroll University. Lily was trying to figure out what her career path was and Riley was at, or she's at Duquesne in nursing. So it was like, "What's the succession plan look like and what's the next steps of this solely owned, private, independent, single location supply store?" At the time doing tens of millions of dollars a year with 40 employees, I think, probably at the time. And again, we had that same desire from our customer base, and our manufacturers as well, they wanted more of what we had built over the last 25 or 30 years there in Waynesburg. So we made a very strategic business decision to look for a financial partner that would allow us growth capital to be able to have a geographic footprint of expansion in these other operating basins. So we closed the transaction with those folks in July of 22, and then subsequently we're managing 10 locations across the lower 48 today. So yeah, it was pretty significant over the last 18 months from one location to 10, and 30 or 40 people to sub 200 I guess. So yeah, it's been quite ride.
00:09:37 KC Yost
It's the proverbial hockey stick, that they talk about in business school, where things start out slow and then all of a sudden they just take off through the roof, and looks like a hockey stick. Sounds like you guys are really moving pretty strong.
00:09:52 Gary Bowers
Well, as I said, we grew up with dirt bikes and Motorsports is in our background, so we don't refer to it as the hockey stick, we refer to it as WFO.
00:10:03 KC Yost
Well, there you go. All right, fair enough. Fair enough. Fair enough. I used to love watching the Pens up at the Igloo years and years ago. So anyway, story for another time. So anyway, so you've moved to these different geographic locations, are you finding that there is a different client frame of mind, if you will, in the Eagle Ford and the Permian and the Bakken, versus what you've run into in Pennsylvania and West Virginia and Ohio?
00:10:34 Gary Bowers
Well, I guess the first thing, we grew up 1200 miles from Houston or from 29th Street, Oklahoma. So being in southwestern PA in the supply store distribution business, we didn't have the ability to run across town and pick something up from National, Well, or a camera or whoever it is for that matter. We couldn't run and get a Kemper Hammer union down the street or whatever. So we had to understand our market, KC, and we had to know what our customer needs were. So we've always embraced a level of inventory in our location that was strategic to the customer base or the market trends or otherwise. So we've adapted that same model into Midcon, into the Bakken and the Permian. We're not in south Texas yet. We're looking at that, and that's probably out there on the horizon. But I guess when you're in the distribution business and you have inventory and you know the customer base, there's really not much difference in how we're doing business. And that's why we've had these customers come to us and say, "Hey, would you ever look at going to the Rockies or would you look at going to the Permian?" It's 2000 miles from where I sit today to Carlsbad, New Mexico, but it's really much the same. So if you can breed that culture and you execute on that business model, it's really not too much difference. And the customers that we're really focused on, those folks are national type operators or service providers or otherwise, so they kind of do the same thing in whatever region. There's a little bit of climate difference, whether it's cold weather or warm weather. But other than that, it's pretty relevant.
00:12:45 KC Yost
What do you think the biggest service is that your clients want? Is it quick turnaround time? Is it being able to get something off the shelf? Is it both? Is it neither? What is the big service that you have to provide to your client inaudible customers?
00:13:08 Gary Bowers
I guess we still get excited about driving down the road at night and looking over on the hill and seeing the drilling rig. And that in itself almost tells a story. It's a 24/7/365 industry. The rig doesn't stop. The well doesn't stop producing because it's Saturday afternoon or a holiday or otherwise. So for us, I think it's that value add through. We've got a very deep tenure staff within the organization, so the skillset, that personal attention, the localized inventory, knowing what the customer needs are and then just really executing on that. As I said in the introduction, this will be almost 35 years that we've been doing this. We've been the same brand, the same color, the same email, the same phone number, and a lot of the same people. And we think that we're second to none when it comes to some of those key points from a value add perspective. Of course we got to be competitive with the price point or otherwise, but I think services is number one, because just the nature of the business, it just doesn't stop, and we're accustomed to that. That's how we grew up.
00:14:44 KC Yost
Yeah. I typically worked on larger projects where we would typically go straight to the vendor to buy our pipe and material and that type of thing, but we always... I remember specifically a job we were doing out in Pecos, out in the frigging middle of nowhere.
00:15:06 Gary Bowers
We've got a store.
00:15:07 KC Yost
And we had some kind of design change made and we needed to have a specific flange. I think we were going from an ANSI 300 to an ANSI 600 flange because of some alteration that had been made. And I tell you what, the client made a telephone call to the supply house, don't know which one, maybe it could very well have been you guys, PSC. But anyway, the next day we had that valve and that kept that project going and kept moving ahead. And having you guys there, it just adds a lot of value, at least from my perspective, based on that experience of being able to keep the project going, keep the project moving, because at the end of the day, time is money and money is money, and you've got to get the project, got to get the well online in order to generate any kind of revenue at all. So anytime you can avoid that delay. So you guys working 24/7, and like you said, driving late at night to get something to the field, is a pretty nice safety net for guys like me to have when we're stuck out in Pecos.
00:16:20 Gary Bowers
Well, I guess the other thing to that point, KC, our model today is rig to refinery, and we're short on the long end of that from a refinery perspective. But we think we're real good and we're one of maybe a couple, if there's even that embraces that, that breadth of the upstream oil and gas world, whereas when we got here and we shove a stake in the ground and we want to build a road and put a piece of culvert in and start moving dirt to when we drill conductor or some form of top hole or whatever it is, when we move the rig in, we want to be part of that. Then the rig's done, we get to a point of now we're going to complete this well and go to flow back, and turn in line and then well pad construction or tank battery construction, we offer that complete suite of diverse inventory. And that's been a real good model for us. We've seen a lot of the others out there that they've been more focused on specifically PVF to cater to the midstream or the pipeline contractor, or just to the rig contractor with MRO or consumables or expendables, or someplace in the middle with the E&P from a production perspective. But growing up, again, I keep rolling back to our roots, we didn't have the ability to just chase pieces or parts on the other side of town, so we've always carried that breadth of inventory, and we still embrace that today after 30 plus years. So whether you're a dirt contractor, drilling contractor, oil field service provider, E&P company, midstream, facility or otherwise, it's pretty likely that we can take care of your needs.
00:18:37 KC Yost
Yeah. So two questions come to mind right off the bat. I don't know which one to ask first. Let's start with the convenience perspective. You guys actually have a way of bringing, I'll use the term warehouse, that's not the right term, but you actually load up an 18 wheeler and take it out to a job site, and then if a contractor needs a part that hasn't already been ordered, you sell it to them right there on the spot. Is that what I'm reading out of your email? Or do they order a bunch of parts, you bring a bunch of spares as well, you have a materials clerk that that will give it to them as they need it, and then if they need it spares you have it? How does that, if you will, warehouse on steroids at the job site work?
00:19:31 Gary Bowers
Well, there's some iterations of that. The first being for the drilling contractor, we do have consignment, inventory, boxes, if you will, on location that are strategically placed, from an inventory perspective, specific to that particular rig, or that contractor, or that operator. So as we said, this is a 24/7/ 365 industry, so to be able to keep downtime at a minimum for our customers, we can put that material out there. Then we've got dedicated personnel, that vendor managed inventory, if you will, that goes and counts the box, replenishes on a milk run twice a week or otherwise. Therefore, the rig manager gets a call from the dairy can at midnight, or the company man sees something not going just exactly right during the weekend, they don't have to rely on the supply company to go to the store and load something up and drive two hours, whatever. They've got the inventory on a location. The opposite of that is on the E&P side of our business, from a tank battery perspective or well pack construction, there is, more often than not, a design build bill of material where we've got 48 to 53 foot built specific inventory trailers that we can put two, three, $ 400,000 worth of inventory in. And we will haul that out to the location based on the customer's schedule of turn in line requirements. And they'll either buy that upfront, we'll go back and pick it up at the end of the project, whatever's in new, resellable condition, we'll count back and give them credit accordingly. And/ or the opposite of that would be we would consign that material to them, they would use from that store room, if you will, on wheels. And then we come back, we count it, and then we bill them accordingly. So there's a couple of different iterations there. And then I mentioned VMI. We also have quite a few vendor managed inventory from a plant perspective or shop perspective, whereas we might have a fabrication shop that goes through a lot of 3M abrasives or such things, where we've got people that manage those VMIs and they're consistently going in there, and that's a value add to our customer. And we like that stickiness to where it's not easy for somebody else to come replace. So, yeah we work hard every day.
00:22:28 KC Yost
So basically, these are ways that you're making the quick turnaround because the material or equipment is right there on site, and you give them the service because your guy is there to give them the material. So it's killing the, if you will, the two birds with one stone, and providing them with that extra service. Pretty cool. Pretty cool.
00:22:47 Gary Bowers
And that's not to say that we're not making deliveries every day either, and we don't... That all encompasses, right?
00:22:55 KC Yost
I gotcha. I gotcha. Yeah. So let's talk about stock. I looked at your website, and I'm totally overwhelmed by the number of vendors that you get supplies from, and what you supply and what you keep in stock, chains and ropes, geo textile materials, production equipment, safety equipment, valves, KF valves, for example, I noticed right off the bat. I used to use those quite a bit out in Salt Creek Field out near Post Texas and West Texas. Anyway, so how do you know what to keep in stock? Just the fact that you've been in the business for 30 some odd plus years or longer, that you know what you need to have. How do you determine what you keep?
00:23:45 Gary Bowers
To quantify, Balon would be our go-to valve today, so we probably need to look at that. But yeah, I think it's the tenure and the skillset and the depth of the relationships. We like to align ourself with those blue chip manufacturers. As a distributor, without those folks, we're out of business. We got to have product to sell, and we don't want to be a bottom feeder. It's not a race to be the cheapest guy out there. QA, QC is very high priority for us to be aligned with. And then our customers, we've got constant interaction and dialogue, communication, from our sales folks that are out there engaged, whether it's in the offices, city sales, on the rig location or someplace in between. Communication is our single biggest failure every day in business. We've tried to breed a culture over the years that we got to communicate. And when we do that effectively, then we know what the inventory is, and we can use our systems. We've got tens of millions of dollars invested in robust ERP platform. We use those tools every moment of every day to track and manage inventory turns and lead times. The last thing that we want to tell one of our customers is, "Yeah, we can get that for you." Just the opposite. We want to say, "Yeah, we have that. We understand what your needs are. We'll have it on the truck this afternoon or tomorrow morning, or we'll add it to the VMI or to the consignment box or otherwise." So I think the driver there is just robust communication, and that comes through a tenured staff within this organization that we're very proud of.
00:25:48 KC Yost
Good, good, good. It sounds like you've got the relationship, both from the suppliers and to your customers, so excellent, excellent. So let's talk about the industry for a bit. What trends do you see in the industry regarding oil field supply, and what the customers are looking for, what do you see there?
00:26:15 Gary Bowers
I guess there's a couple things that come to mind. First, the driver from our perspective is and always has been rig count. Without a rig out here drilling a hole in the ground in some formation, whether it's liquids or gas or dry or wet or otherwise, none of this matters to us. So it's rig count. And we have to remember the first horizontal Marcellus was drilled in 2005 in Washington County, PA. And that well was into Marcellus 7,000 foot kickoff, 1200 foot of lateral, and I think Phoenix Rig-9, it was, with a couple PZ7 pumps. They were 99 days on bit to drill less than nine grand total measure depth. Today, we've got customers in the Northeast, in the Rockies, in the Permian or otherwise drawing 10, 12,000 feet, 24 hours. So ultimately, our efficiency through technology has lessened our rig count to, 2014, I think we had 1800 rigs, 1700 rigs or something like that. Today we're sub 600. But we're drilling the same amount of production, if you will. So inherently, rig count is probably a third today of what it was at the height of unconventional shale or resource development in my career. So that's changed somewhat from the number of buckets of plate dope or tong dies or whatever it is on the rig side of our business. But on the E&P side of our business, we're producing more natural resource today than what we ever were. So it's hard to pinpoint that. And maybe I got off there just a little bit, but technology has driven efficiency to where maybe from the supply side of things, it's lessened our customer base.
00:28:34 KC Yost
Lessened your customer base. Okay. Yeah.
00:28:38 Gary Bowers
Yeah. Because there's just less rigs out there.
00:28:41 KC Yost
Sure, sure. No, I get it. I get it. I get it. So you talked about technology from the production standpoint. Let's talk a little bit about e-commerce as a technology from your perspective. To me, e-commerce is probably more efficient. The next generation... Again, I'm a 70-year-old guy, so I like the face-to-face, look the guy in the eye type attitude and relationship, but I've got daughters and granddaughters that do everything via email. My wife is very good at ordering things online and that type of thing. So I see the e-commerce coming up more and more. Are you seeing it in your industry as well?
00:29:30 Gary Bowers
Well, it's funny you say that. We're deep into that project, and we will be rolling that out in our platform. I think mid-July is what the target date is today. And I'd love to be able to tell you, "Hey, we're going to check the box and we're going to take it to market with this brand or this name, or we're going to call it this," but we've got an internal fight, what we're going to call it. But absolutely, I'm with you from the I want to talk to somebody. I want to set across the table. I want to be out there on the location with them, but that's not today. And we all have an app on our mobile device or something, and somehow the material shows up at the doorstep the next morning or sometimes even the same day, I guess, depending on geographically where you're at. So we're embracing that. That's where the future is. And on the rig side of our business that has been highly successful in what we see today, whereas these rig managers or tool pushers, as you and I grew up calling them, they might be on a inaudible job all night and sleeping all day the next day, and they have a need list. Well, our commercial hours are seven to five, Monday through Friday, so they might be sleeping during that time, but they wake up at 10 o'clock at night, whatever, and they've got a need list to keep the rig running. So for them to be able to jump onto some platform, if you will, with their supplier of choice and go through a shopping cart or a basket or otherwise, it's very efficient for them. That's a piece of our business that we're probably a little bit behind on, but we think we've got the foundation in place today, and we've got a team within the organization as well as some third party that's helping us. So we're looking forward to rolling that into the market. But yes, it's a big piece of our business. I think the rig side has embraced it a little more than the E&P side or the PVF side, where maybe it's not as routine, if you will. It's more project driven, so there's larger bills of materials that we've got to scour through. But yeah, it's definitely how we're going to do business going forward, and we're excited about that as well.
00:32:21 KC Yost
Good, good, good. Well, here, we've talked over time. So anyway, let me just open up the floor to you, Gary, anything else you'd like to add to what we've talked about? Anything you want to pass on to our listeners?
00:32:37 Gary Bowers
Well, I guess from my career path, I guess we struggle with recruiting and retention just like all of our peers out there today. But I would say that there's been nothing like this career path for myself. Once you're in the oil and gas industry, there's no other out there. And not to say it politically incorrect, but it's a needle in the arm, if you will, and you can't get away from it. I love it today just like I did 30 plus years ago, and we've been able to put a lot of milk and bread on the tables for a lot of families, and we've got just a lot of good people, and this industry to me is second to none. So we look forward to what the rest of 24 brings, 2025 and beyond. We're fully committed. We like to think of ourself as the keep goings, if you will. There's not many that have the tenure that we do, and we're not going away. We want to continue a path of growth, controlled growth, geographically or otherwise, but we want to be in a position to be able to walk into any one of our customers, got operations around the US no matter where it's at, and be able to say, "Yeah, we can service your needs. And we can do that with localized inventory through a platform of tenured individuals that create value add." So we're excited about the future.
00:34:21 KC Yost
Super, super, super. Well, thanks very much for taking the time to visit with us, Gary. It's been a great conversation. Like I said, I've really been looking forward to this, and also putting in the plug again for tomorrow's pepperoni rolls. Next time you're in Houston, be sure to bring me a half dozen, would you please?
00:34:40 Gary Bowers
Well, I'm not sure how they ship, but we might look into that.
00:34:43 KC Yost
Well, I just need to make sure my cardiologist doesn't know about it. Okay. So anyway, thanks for taking the time to visit with us today. If anyone wants to learn more about PSC and what they do, you can find them on the web at psc.com. That's psc.com. So thanks to all of you for tuning into this episode of the Energy Pipeline Podcast, sponsored by Caterpillar Oil and Gas. If you have any questions, comments, or ideas for podcast topics, feel free to email me at kc.yost@oggn.com. I also want to thank my producer, Anastasia Willison-Duff, and everyone at the Oil and Gas Global Network for making this podcast possible. Find out more about other OGGN podcasts at oggn.com. This is KC Yost saying goodbye now. Have a great week, you keep that energy flowing through the pipeline.
00:35:42 Speaker 4
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