ADF, Loenbro thrive despite oil price drop
While a pair of Choteau-area assembly yards for oil field components halted production due to plummeting oil prices, two Great Falls fabrication plants with plans to do related oil and gas development have thrived.
How come?
The two Great Falls fabrication plants, ADF International and Loenbro Inc., have different business models, but each benefited from being diverse in the types of work they do and flexible in shifting into new areas, said Great Falls Development Authority President Brett Doney.
Promising Choteau-area work halts due to low oil prices
The two companies that built yards to assemble oil field modules near Bynum in northern Teton County, Lauren Engineers and Constructors of Texas and Yates Construction of Mississippi, are both large, Southern companies that specialize in industrial construction, Doney said. Each wanted to get its foot in the door of the promising oil tar sands development in northern Alberta. To improve their competitiveness, they built outdoor assembly yards in 2012 and 2013 near U.S. Highway 89, a high, wide corridor on which super loads of equipment could be trucked to Canada.
“But even when oil and gas development was going strong in Canada and the Bakken region of North Dakota and eastern Montana, bidding for such projects was very competitive,” Doney said. “I assume that Lauren and Yates either didn’t win many contracts to supply equipment modules or put those orders on hold after oil prices plummeted.”
Neither company hired many workers at their Bynum plants, and both suspended operations until oil prices rise enough to relaunch oil field development.
“In contrast, Loenbro and ADF have pursued very different strategies from the start and have prospered in Montana,” Doney said.
Loenbro is a locally owned and grown company by Sun River Valley brothers Paul and Jon Leach that specializes in different aspects of pipeline fabrication, serving various aspects of the midstream petroleum component, which involves transporting and storage of oil and gas, he said.
“Loenbro has done very well during the fall in oil prices because they’re focused on midstream problem-solving and efficiency,” Doney said. “With their Montana farming and ranching mentality, they’re known in the industry for finding ways to get things done more efficiently, which is a key concern for businesses when prices are down.”
Loenbro fabricates pipes by cutting and bending pipe to size and adding valves and other modifications for use in pipelines and refineries. It also installs and inspects pipelines on site and does industrial construction, chief business development officer Lee Haven said. The company recently added an industrial insulation division, which fireproofs materials that insulate pipelines and builds spill containment equipment.
“We like to create diversity in what we do, which gives us more shots at winning contracts,” he said. “If we don’t win the contract to install a pipeline, we might insulate or inspect it.”
Although exploration and production of oil dropped off after oil prices fell, he said, the midstream transportation and storage of oil that Loenbro focuses on is still strong, Haven said, adding that pipelines are a cheaper and safer way to transport oil and gas than by trucks and trains.
Loenbro, which was incorporated in 2001, grew to more than 400 employees in 2013. It has about 700 employees now, spread around Montana and surrounding states, with about 150 to 200 in Great Falls, Haven said. The company has spent more than $10 million on buildings and equipment in Great Falls, including a 30,000-square-foot pipeline fabrication facility and a 30,000-square-foot office building.
When Quebec, Canada-based ADF Group chose Great Falls as its site for a state-of-the-art facility to do complex structural steel fabrication, the proximity to oil and gas development in Canada and the Bakken region of North Dakota and eastern Montana was part of the company’s strategy, since Great Falls had a larger population of potential workers than northern Alberta, Doney said. But ADF International has “not put all of its eggs in one basket,” and has grown its local workforce and won contracts to fabricate structural steel for a variety of other projects.
ADF’s $40 million fabrication plant is “a flexible manufacturing facility” whose skilled welders and fitters can weld, shape and augment complex structural steel with mechanical components to meet exacting specifications of industrial and commercial customers, said plant general manager Dan Rooney, and ADF’s industrial paint shop craftsmen blast steel surfaces with anticorrosive materials and then paint them.
While ADF still has the potential to assemble and fabricate steel modules for the oil and gas industry, it has concentrated on other non-energy related industrial and commercial projects since oil prices fell, Rooney said.
Its Great Falls fabrication plant opened in early 2014 with 35 employees. ADF expects to grow from 200 to 250 employees next year. It has provided complex structural steel components for bridges, industrial and commercial buildings, including a potash fertilizer plant in Saskatoon, Saskatchewan, and a large shopping complex in California ADF, which has spent about $50 million in buildings, cranes and other specialized equipment, is completing modules for a large amusement park in New Jersey and has plans to provide structural steel for a retail building project surrounding a Miami transportation hub.
Loenbro and ADF have good relations with each other and do not complete directly against each other for business, officials at both companies said.
“We’re not involved with structural steel welding, as ADF is, and ADF does not concentrate on pipe fabrication and welding as we do,” Haven said. “We’re always looking for opportunities to cooperate with ADF on projects,” Haven said.
“We have a good relationship with Loenbro and expect there will be times when we can do business together,” Rooney said. An example could be Loenbro subcontracting with ADF to provide anticorrosive coating and paint on some of the pipelines it fabricates.
ADF and Loenbro each has supported efforts to improve Great Falls College Montana State University and increase the number of welding and fitter training slots and midcareer training opportunities the school provides, but neither company feels it competes against the other for hiring.
“Great Falls can’t train all the employees we need,” Haven said. “We recruit experienced pipeline welders and recent welding graduates from around the country, not just here.”
“ADF doesn’t just compete with Loenbro for welders and fitters, but with any regional businesses that pay good wages and benefits,” Rooney said.