Tony Cercy started in the sales and parts department at Power Service Inc. in 1982. Or, as Scott Sissman, the company’s former owner, puts it, “the lowest entry-level job.”

Cercy, now the company’s president, recently completed the sale of the Casper equipment maker to NOW Inc., a publicly traded company worth $1.79 billion.

Terms of the deal were not disclosed. But the size of the transaction can be measured by another metric: Enough money will change hands that a U.S. Department of Justice review is required.

The sale culminates a decade of rapid growth for Power Service and follows months of speculation over the company’s future.

The oilfield service firm had 32 employees when Cercy took over in 2003. In 2014, at the height of the boom, it employed more than 500 people. Annual revenues surged from $16 million to $270 million over that time.

But the deal also comes amid the worst oil and gas downturn in decades, raising fears Power Service’s new owners could slash jobs or uproot its new Casper operations.

“The upside is that the owners have really deep pockets. If they see it as advantageous to keep the business in Casper, they can,” Sissman said. “The downside is these are the big boys. Tony has dedication to the workforce and community the new owner won’t have. If it isn’t in their best interest to be in Casper someday, they’re gone.”

Cercy, for his part, is betting the move will be a boon for Wyoming’s Oil City. A decade of investment in new buildings, high-tech robotics and a trained workforce all help to make Power Service’s Casper operations economically competitive, he said.

Wyoming is also centrally located between North Dakota’s Bakken and oilfields to the south in Colorado, Oklahoma and Texas.

And there is this: Cercy himself is staying.

“I’m going to stay on in my current capacity, except I won’t own the place. I am going to run the Power Service division,” Cercy said.

Power Service will keep its name and clenched fist logo, operating as a NOW subsidiary.

The challenges and opportunities of the NOW deal were on display during the Houston firm’s first-quarter earnings call Wednesday.

NOW CEO Robert Workman termed the dramatic decrease in drilling activity the most challenging operating environment many at the company have ever seen.

NOW has cut 1,650 employees, or 30 percent of its workforce, since the boom reached its apex in late 2014. Some 425 positions have been cut in the first three months of this year alone and, Workman noted, “We have more work to do shrinking our balance sheet in this market environment.”

But he also highlighted the growth opportunities Power Service provides. The Casper company is, in many respects, like an oilfield general contractor.

Typically after a well is drilled and fracked, teams of contractors are hired to build a well pad. One company pours concrete, another builds the tanks, another is hired to deliver pipes, valves, equipment and so on.

Power Service prefabricates well pads, including all the different elements on a modular unit that can be installed soon after a well is completed.

Workman explained the benefits like this: “You can drastically expedite the amount of time the customer can get oil and gas in the pipeline and start making money.”

He added later, “I’ve only seen one company that does what Power Service does, and the quality isn’t as high, and they aren’t nearly as successful in the space. I think they really stand out right now in the market. They’ve almost invented this particular solution on their own.”

NOW sees Power Service as a growth opportunity, he said.

A Casper company

Power Service was established when Clyde Sissman and his son, Clyde Jr., bought a floundering oilfield engine company and set up shop on Ash Street in Casper in 1954.

The oilfield equipment was not connected to the electric grid as it is today. Many pump jacks were run by motors, which the father-and-son team specialized in repairing.

Theirs was a small operation. When Cercy came on board in 1982, the company employed 11 people.

Scott Sissman, who later assumed the reins at Power Service from his father, took a conservative approach to business. He maintained a small workforce and took few risks.

“Tony was the opposite. I have nothing but admiration for him, to see opportunity, take risks and succeed,” Sissman said, describing his former employee as a “born salesman.”

Cercy’s acquisition of Power Service also came at a fortuitous time. Natural gas production in the Pinedale Anticline was near its peak and the country was on the precipice of the so-called “shale revolution,” which would unlock troves of previously inaccessible oil and gas.

Power Service’s modular well pads were soon being used throughout the Rocky Mountain region and in North Dakota’s Bakken formation. The company’s Casper footprint grew from 4 acres to 40, its collection of blue metal-sided buildings forming a campus on Casper’s west side.

No intention to sell

Cercy had no plans to sell his thriving business. He is 54 and his three children had started a subsidiary, Power Transportation LLC. The benefits of ownership, in other words, were great.

But the company’s rapid growth had attracted national attention.

Private equity groups, publicly traded companies and individuals began asking if Cercy was interested in selling. Sometimes company executives would fly to Casper without an appointment to try and persuade the Power Service president on the virtues of a deal.

Cercy held off the offers until last year. Five companies were pursuing an acquisition, including two private equity firms, two publicly traded companies and a private individual.

“I decided all of a sudden, what the heck. Let’s put together a financial package, send it out to them and see what they have to offer,” Cercy said. “We were able to narrow it down. Then I became excited.”

The deal with NOW is under review by the Justice Department, which is required to evaluate transactions in which a party has annual sales of more than $151 million or assets of more than $15.2 million.

NOW was spun off from National Oilwell Varco in 2014 as a distribution firm. The company has spent the two ensuing years snapping up equipment manufacturers to add diversity to its supply chain.

The Houston firm’s national network of suppliers and customers will help Power Service access new markets, Cercy said. He predicted Power Service could double its 400-person workforce if the market turns around.

“I saw what was happening in the market and I thought this company will be able to take Power Service and to continue to grow it faster and better than I can because of their resources and their footprint,” Cercy said.

Still, a turnaround remains in the future. Few companies are expected to begin putting rigs to work with crude priced for less than $50 a barrel, said Workman, the NOW CEO.

The decrease in rig activity has taken its toll on NOW’s balance sheet. The company recorded a $63 million loss in the first quarter of 2016, as revenues slumped from $863 million to $548 million.

Power Service has been similarly affected. The company’s revenues are 40 percent off 2013 through 2015 levels, prompting the equipment maker to lay off 50 employees in Casper in March.

The vast majority, or 330 of Power Service’s 400-person workforce, are located in Casper and Green River.

Cercy, ever the salesman, is undaunted. He framed the NOW deal as a “good thing” for Casper, noting, “Sometimes the economy dictates some bad things, some layoffs and whatnot.”

“Ultimately, we’ve been a mainstay in Casper for 62 years,” he said. “And like I said, as soon as this market turns around a little bit, like it always does, then what this opportunity gives us is the ability to ramp up fast, get ready for the market turnaround, hire locally and fill those jobs.”

Follow energy reporter Benjamin Storrow on Twitter @bstorrow.

0
0
0
0
0

Load comments