... June 2016 Editor's Message — Witnessing a Rebound - North American Energy Pipelines

June 2016 Editor’s Message — Witnessing a Rebound

As a Cleveland Cavaliers fan, watching the 2016 NBA Finals has been a nerve-racking experience. As of this writing, the team has lost its first two games to the seemingly insurmountable Golden State Warriors, newly minted holders of the best regular season record in NBA history.

If the Cavs are going to win it all and give Cleveland its first major league sports championship in 52 years, the team is going to have to rebound from its woeful start of this seven-game series. By the time you read this, you’ll likely know whether we Cleveland fans got to “witness greatness” or if we can add another notch to the Cleveland sports misery bedpost.

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Speaking of rebounds. In thinking of all this, it occurs to me that we are witnessing a rebound in the oil and gas pipeline industry.

The precipitous drop in oil prices since the record highs in the summer of 2014 have led to a number of projects being delayed or canceled, while sparking an increase in layoffs, asset selloffs, corporate mergers and some bankruptcies.

Since bottoming out at $27 per barrel in January, however, oil prices have begun a slow and steady climb back to $50 per barrel for the first time since July 2015.

Over the last couple months, there has been a noticeable increase in the number of companies conducting open seasons to solicit support for new projects, and the number of construction contracts being awarded appears to be on the upswing as summer has approached. As a shining example of this trend, Primoris Services Corp. has announced a series of pipeline and distribution projects valued at $220 million so far this year, while posting first quarter earnings 10 percent higher than during the same period last year.

As our cover story focus, Primoris has shown the ability to “weather the storm” through a balanced business approach and serving diverse infrastructure markets. In so doing, the company eclipsed the $2 billion mark for the first time in 2014 and reported revenues of more than $1.9 billion in 2015.

While oil pipeline work has declined, gas midstream and distribution projects have bolstered the company’s bottom line, according to Scott Summers, president of Primoris subsidiary ARB Inc. While pipeline construction accounts for about half of the company’s overall business, Summers estimates that less than 3 percent of that is related to oil pipelines. However, pipeline work appears to be on the rise.

“Given the anticipated start dates for our large midstream projects,” Summers says, “my sense is that the pipeline construction market will remain quiet in the first half of 2016 and will pick up in the last two quarters of 2016, resulting in a decent year for our pipeline crews.”

Check out our story about Primoris on page 20. I hope you will find inspiration in the company’s ability to maintain its leadership position amid industry turmoil. Perhaps that’s also a lesson the Cavs can learn too. There is plenty of work to be done.

UPDATED 6/21/2016: The Cavs did it!