Regina 鈥� 听Few companies in the oilpatch have been buying heavy equipment since the downturn hit in 2014. Eventually, they鈥檙e going to have to recapitalize their iron. How are equipment dealers dealing with this? Jeff Foster, operations manager, Regina, for SMS Equipment Inc., responded to our questions via email on Sept. 22.
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Pipeline News: Over the past three years of the downturn, Pipeline News has observed that next to no new equipment has been bought and deployed in the Saskatchewan oilfield, from drilling rigs to semis to excavators. At some point, companies are going to have to resume their replacement cycles as things begin to wear out. How is SMS addressing this scenario?
Jeff Foster: There is no secret that the heavy equipment market in Saskatchewan, as well as other parts of Canada, has been experiencing a downturn. SMS Equipment as a company has听remained optimistic for 2017 and is now starting to see slight increases within the industry. While other companies have downsized to match the demand, SMS Equipment has been focusing on growing its capacity. In Saskatchewan, we have worked to hire on additional parts personnel as well as trained heavy equipment technicians. This is so we can be ready to serve our customers needs when they begin replacing their heavy equipment fleets. We are certain that our team of skilled, trained, and knowledgeable people will be available to support their business when the times comes. One of the key elements for our organizational success is to increase our after-sales support, whether parts or service, in order to ensure our customers鈥� investment is productive and profitable.
P.N.: Is there a pent up demand for heavy equipment? Is it just waiting for the money to become available?
Foster:Due to the slowed activity being experienced since late 2014, we have noticed that customers were focusing on service and maintenance of their equipment rather than fleet replacement. We are now just starting to see a point where industry sales are increasing. I don鈥檛 believe it鈥檚 about waiting for money to become available, but leaning more towards that customers are facing economic uncertainty in today鈥檚 lucrative environment. At SMS Equipment, we understand that a new piece of equipment is a sizable investment and that it requires proper planning in order for companies to forecast their return on investment.
P.N.: Do you expect, when the money is available, that there will be a flurry of orders from the oilpatch at some time? If so, will there be inventory out there to accommodate this, or will there be long waits?
Foster: SMS Equipment has worked very hard to forecast and manage the supply chain of equipment. We work with our OEM manufacturers on a daily basis to ensure that we are in a good place to support our customers in all regions. Should there be a sudden increase in oilfield activity, we are confident we will be able to meet the demand.
P.N.: How have your sales been impacted during this downturn? Have you started to see signs of recovery?
Foster: Overall, heavy equipment sales activity in the province is starting to increase, but far from where it was five years ago. As of current market reports, the total number of machines has substantially declined from a high in 2012, but is lately showing signs that the market is starting to rebound. For the first time since the downturn, we are seeing increased business activity over the previous year, in all sectors of the construction industry.
P.N.: Has your emphasis been on service during this time?
Foster: Service is always a high priority, but when we see a downturn like this, it becomes even more paramount. The limited number of projects being completed in the oilfield, requires our customers to be that much more profitable on every job. They can鈥檛 afford any down-time or waiting for technicians and parts to arrive. Our customers need to be able to complete their projects on time and on budget. To decrease any down-time SMS Equipment ensures that our service branches and field technicians are equipped with the latest technologies and problem-solving skills that helps our customers increase their profit margins.
P.N.: We鈥檙e hearing that it鈥檚 pretty tough out there to get financing and capital if you鈥檙e in oilfield services, especially if you are interested in buying used equipment. Is there anything SMS is doing to help out clients on the finance side?
Foster: With regards to outright sales, SMS Equipment currently has very good financing rates, as low as zero per cent interest in some cases. But, what we have seen as a far more popular option, is rental purchase. It allows our customers to take possession of a new machine without having to commit to a long-term agreement. If all goes well and they decide to buy it, we simply roll the rental equity into the price of the machine as a down payment. This option offers great flexibility and saves the need to come up with a large sum for a down payment up front. In addition to our finance programs, we also have a department dedicated to helping our customers with financing solutions.
P.N.: Is there anything you would like to add?
Foster: SMS Equipment was here for the good times and has endured these hard times along with everyone in the oilfield. Our existing, new and prospective customers can be assured that we鈥檙e not going anywhere and that we look forward to creating lasting partnerships and taking care of all their heavy equipment needs.
