Joe Patterson, vice president of marketing for TEI Rock Drills in Montrose, Colo., was kind enough to spend some time offering his thoughts on a variety of drilling-related topics recently, and here we’ll share some of the insights he provided.
Tell us how your firm has been holding up over these past couple years.
“Our machine sales have remained level through all of this – and level is pretty good these days – and that’s normally how we sell hammers – with the machines. But I’d imagine that for the people who are out there bringing hammers out to job sites, their sales would be down. It’s a tough market; every time you go to a trade show, there’s always a couple new companies marketing down-hole hammers.
“Our export market is up, primarily because of U.S. manufacturers. The dollar is so low now; we’re selling like crazy – especially in Europe.
“As far as different markets go, our distribution has stayed pretty much the same. Between mining and construction and geothermal and fencing and all that, the percentages have remained consistent for a long time. For example, fencing represents about 6 percent of our business, and it’s been between 6 percent and 7 percent for as long as I can remember.”
The geothermal market has been garnering a lot of attention lately. What’s your take on that at the present time?
“The people who have been in that market are managing to fill up their workloads, but I haven’t seen a lot of people jumping in for the first time. A lot of people still are waiting on the sidelines, waiting to see if they want to get into it.”
TEI started a geothermal drilling school last year.
“Yes, and I see the geothermal market paralleling what happened when we got into the hollow-bar market. How we got into the hollow bars and that market was we took our existing customers and trained them on it. We started the hollow-bar school that we do every year. We’re doing the same with geothermal; we started the geothermal school last year. We decided to do it like we do everything else that we’ve been successful at – we take our existing customers, and show them a business opportunity. It took a couple years for us to get the hollow bar thing going, and I expect the same with the geothermal. We’ll be selling geothermal rigs at a reasonable clip fairly soon – and with that comes the down-hole hammers. We’re not mud-rotary guys; we’re air guys, and that’s what the construction guys understand. The guys who have been really successful in construction – they know mobilization, they know how to get out there and really nail the job – they can take that expertise and put it into geothermal, and get some nice commercial jobs. It’s an old adage: The best customers are the ones you already have.”
What’s the competitive situation among the hammer manufacturers?
“We’re an American manufacturer, so we’re always pushing quality. We tend to stick with the bigger, established brands. I see a lot more of the Asian hammers out there. Their quality is not as good, but in construction, if you’re doing a 30-foot tieback, who cares? It’s not like you’re tripping out of a 300-foot well.
“Future improvements in hammers will be driven by the technical capabilities of the manufacturers. The heat-treating process is so important to the hammer. You need to control the heat-treating and the metallurgy in there. You have to reject steel that’s not up to standard. Rather than make hammers that aren’t any good, you’re just not going to sell them. And that’s a tough pill to swallow, but that’s what it takes so people will say, ‘I want that hammer because I know it’s always going to work right.’ But again, it depends on what you’re going to be doing.”
With regard to pricing, how bad is the low-balling situation these days?
“Because there’s so much competition, nobody’s been able to raise their prices. If you weren’t already established, it’s a real hard market to get into because there always is somebody coming in selling for less money. You have to have established your quality mark coming in; otherwise, you have to come in low-balling. And in the down-hole hammer market, low-balling is pretty tough because the prices already are so low.
“There always will be bottom-feeders – both in manufacturing and contracting. A quality manufacturer is charging enough to be able to provide service to go along with its products, and it’s the same way with contractors. We specifically look for those types of contractors who have that mindset. They don’t go out and low-bid a job. Their bid reflects the quality that they’ve established; if there’s a problem with a job, they’ll be able to fix it. Those are the people we want to do business with.”
Do you see any signs that the economic situation easing up any yet?
“We’re in the middle of it right now. There are a lot of people out there just hanging on. There are manufacturers here in the U.S. that have been purchased or are looking to be purchased. On the contracting side, some companies are bidding on jobs, and just making enough to keep the doors open but not enough to maintain their equipment and things like that. In those situations, it takes about a year to destroy everything. The credit soon stops and they finally go under. That leaves the companies that were stronger to begin with, and they’ll be able to bid reasonable rates again. I think by the spring, we’ll begin to see more reasonable bids.