Bone-chilling winters and sweltering summers have been a rite of passage for truck operators servicing North Dakota’s Bakken oil reserve.
Over the last year and a half, however, extreme temperatures and working conditions have been their least concern. Plummeting oil prices have seriously deflated resource activity in this northern prairie state, sending operators and service companies scurrying for other business.
“Last winter was really slow but we made it through,” said Joel Rychard, who manages Riverbend Machinery’s store in Hazen, a town of 2,500 people on the eastern fringe of the Bakken.
More than a year ago, when oil prices were peaking, the shop had one service truck and one lube truck covering several hundred miles.
“The lube truck was really busy, especially in the winter,” Rychard said. “People didn’t want to change their oil, so we’d go out and do it for them.”
That truck’s gone, now. “It sat all last winter,” Rychard said. “We sold it to a guy in Georgia.”
Oil-related business drops significantly
The service truck, meanwhile, is down to a few calls a week.
Two years ago, oil made up 80 percent of Colorado-based Riverbend’s customer base in Hazen. Now it’s closer to 20 percent.
Fortunately, there’s much more to the Riverbend shop than its service truck. The business supplies parts and sells and leases a wide range of industrial equipment and heavy machinery to multiple sectors.
In fact, this past summer business was brisk.
“There’s a lot of home building going on here,” Rychard said. “That’s been pretty hot right now.”
That begs the question, then — with oil down so sharply why are so many new homes being built? Other sectors, it turns out, are thriving or at least doing well enough.
“There’s several coal mines here and the gas plant is building a new urea plant, so we’re renting a lot to them,” Rychard said. “That’s keeping us busy.”
However, times are changing. Riverbend used to travel to the oil fields to service wells and other equipment on-site. Now, activity is becoming increasingly sales- and rental-oriented.
That’s because the oil operations were small and lacked the size and scale to do their own mechanical work. The mines and gas plant are much bigger and have their own machines and mechanics, Rychard said.
In Alexander, a town of just over 200 people in western North Dakota, Youngquist Brothers North Oil and Gas ND Inc. services oilfield wellheads and has weathered the downturn thus far with its modest fleet of two mechanics trucks and one lube truck.
Office manager Charles Reynolds says Youngquist uses its one-ton Chevy trucks outfitted with small cranes to service its own machinery.
“Whenever there’s a maintenance issue we’ll send out a service truck with all the tools and lifting capacity needed to change out generators, pumps, and hydraulics,” Reynolds said.
Business has slowed considerably, but Reynolds said there’s still plenty of work. “It’s dropped off 50 to 60 percent,” he said. “We have as many rigs going as we can — it all depends on the bigger oil companies wanting to complete or repair their wells.”
While oil often undergoes boom-bust cycles, Reynolds isn’t entirely sure when to expect a turnaround. He’s confident things will eventually improve, but that hasn’t stopped some belt-tightening.
“You slim down, cut prices, cut wages,” he said, adding that his employees number about 180 when all systems are running, and the company is now down to about 20 people.
Sometimes, a smaller operator will close shop, leaving a few customers behind, and Youngquist will recall some of its laid-off workforce, Reynolds said.
“That’s kind of how we’re surviving,” he said. “The really small companies or the ones that are in bad debt situations that just can’t survive anymore, they’ll go away and then we’ll pick up the work as it comes in. We’re just sitting tight. It’s a long-term proposition.”
Manufacturers also feeling the effects
Service truck makers and component suppliers are noticing a ripple effect. Steve Coffee, national sales manager with Houston, Texas-based Liftmoore Inc., said oil has accounted for about one-third of the company’s business.
“Business is off some from what it was prior to oil going to a lesser level. However, it’s probably been more limited by chassis availability than the price of oil,” said Coffee, whose company manufactures cranes for service trucks.
“Some people are busy, some people are not,” Coffee added. “It kind of depends on where you are and exactly who you’re involved with. A lot of our cranes in the oil part of the industry are on the service side of the business, not the drilling side.”
Other oil-producing areas are also affected besides North Dakota, of course. “Western Texas is off, but not off as much as south-central Texas,” Coffee said. “The wells that are running still have to be maintained.”
Truck manufacturers are also seeing evidence from the slump. “Our business with the oil and gas industry is down but we’ve made it up in other areas,” said Eric McNally, sales vice-president with Reading Truck Body in Reading, Pa.
“We have distributors that have relied very heavily on the oil and gas industry, and we’ve seen 2015 numbers about 35 to 40 percent off sales to our distributors who play in the oil and gas market,” McNally said.
While oil and gas are particularly prominent in the Dakotas, Colorado, Montana, and Texas, those regions have other activity sustaining truck sales, McNally said. “Some of our distributors play very heavily in the oil and gas sector, but others don’t,” he said.
That, and Reading’s large user base in sectors ranging from telecom to construction have kept the manufacturer busy.
At Bert’s Truck Equipment across the Red River from North Dakota in East Grand Forks, Minnesota, owner Riley Gregoire expressed optimism for the future of the company his great grandfather founded in 1939.
“He started out servicing farm tractors,” Gregoire said. “He would go out to their farm, fix their tractors, and for payment he’d ask for gas money to fill up his tank to get back home.”
Business back then was mainly in the agriculture sector, and with oil’s downturn leading to a 25 percent decline in business this past year, agriculture, logging and construction are picking up the slack, Gregoire said.
Have boom-and-bust cycles ended?
At Wallwork Truck Center in Fargo, general manager Mike Lausch keeps watch on assorted truck markets across the Dakotas and beyond.
“A number of operators have hundreds of trucks, and business has gotten so slow that if a truck has an issue they just park it and take another one,” Lausch said. “They’re not fixing them.”
Lausch points to an increasingly complicated geopolitical context and expresses uncertainty. “The dynamics of past boom-and-bust cycles don’t really apply anymore,” Lausch said, factoring in consolidation of drilling activities on more compact sites, and pipelines that carry commodities such as oil.
“It’s reducing the need for equipment and infrastructure … and that’s changing trucking,” Lausch said.
In the energy sector right now, customers, vendors and dealers are just planning to wait out another long winter, he said.
“We’ll know a lot more when spring hits, because if you don’t see any sort of a rebound by then you’ll see a whole bunch more people getting out,” Lausch said. “Right now they’re just trying to hang on.”
Saul Chernos
Service Truck Magazine