Buys Low, Sells High
By Bilal Hydrie
President, Inclusive Energy Ltd. & Centurion Investment Ltd.
Even Alberta’s traditional boom and bust cycle is affected by the current downturn. Instead of the typical upswing that sees the energy industry return to “normal” after a stretch in the trenches, the coming recovery is expected to be “gradual and uneven,” says the Royal Bank of Canada’s provincial outlook for Alberta, published in March.
It’s proof positive that when the market changes, you must change with it or you will be left behind. And in a resource-based business, it’s even more important to ride out the cyclical nature or you will be flat-out crushed. I started Inclusive Energy — my company that specializes in the manufacturing, sales and rental of oilfield equipment, as well as chemical storage and distribution — with $50,000 in 2009. Western Canada Select (WCS) ranged from $30 to $65 (U.S.) that year.
The market came back online and things were great for a while. But then it wasn’t. OPEC flooded the market and oil prices bottomed out. The phones weren’t ringing and companies weren’t buying. We had to change our strategy while remaining true to our core value of exceptional customer service.
By stockpiling surplus and distressed equipment, I’m buying low with the intent to sell high (even if it’s only a bit higher) when the energy industry recovers. Inclusive now boasts the most tank solutions, production equipment, and surface equipment for the upstream sector in Canada. Why? Right now, cash is king. Liquidity — at this point in the market — is more important than profit. That challenge for oilfield companies — a surplus on their books that is a liability in terms of maintenance and insurance costs — is an opportunity for my company. The owners don’t expect a full return on their investment, but they do want cash.
But you can’t just adapt in one area or as a one-time trial. At Inclusive, we’re evolving our rent-to-own options and are partnering with promising businesses. Some are joint ventures; some deals involve royalties as payment. We’re building those relationships. It’s a long-term play, one that involves lower returns in a steady revenue stream, but it’s tailored to the reality of today’s market. We’ve instituted our own financing to better meet the needs of our clients. It also gives us the flexibility to make deals that more conservative banks might not sign. We’ve even signed agreements with clients that lets them have a year of no-interest payments to get them out and earning. That works for them, and in the long run, it works for my company.
Granted, the decision to stockpile can be challenging some days. Most our stock is brand new, so that is a lot of cash sitting on the lot. Sometimes we do deals at cost, just to move inventory. You must take the emotions and the ego out of it, though. This is the reality in 2017. For a business to survive, it needs to constantly assess its strategy and respond to what’s happening in the marketplace.
The long-term prospect for the energy industry in Alberta is nothing short of amazing, in my view. And things are starting to trend upward. That RBC report shows “a pickup in drilling activity in the province since the start of winter, and a 2.3% rise in capital investment intentions in the oil and gas extraction industry in 2017.”
The next two years are going to be challenging, though, to say the least. Part of that is due to the shift in the American administration. No one knows what U.S. President Donald Trump is going to do, policy-wise. That uncertainty isn’t good for business, even if pipelines are approved. But at Inclusive Energy, we are betting on the turnaround and Alberta’s energy industry, even if that recovery takes a different path than ones in the past. We’re prepared.
Bilal Hydrie is president of Inclusive Energy Ltd., a Calgary-based company specializing in the sales and rental of oilfield equipment, as well as chemical storage and distribution. He is also president of the private equity firm Centurion Investments Ltd. and the director of North American operations for the Habib Group of Companies. A graduate of SAIT’s Chemical Engineering and Power Engineering program, Bilal lives in Calgary with his family.
#Alberta #Oil #OPEC #Oilfield #Pipelines #Roughneck
