Many young companies strive for what could be called a resume-building moment – that one high-profile project that expands their expertise, boosts their reputation in an industry and opens doors to more business. For suburban Houston-based Sprint Pipeline Services LP, that time to shine occurred in the fall of 2007, when construction of an underground gas-storage facility in Bay City, Texas, fell behind schedule.
“When a project like that gets to a certain point, the company building the facility establishes dates with customers for when it will start storing gas, and penalties are assessed if they don’t meet those deadlines,” says Kyle Lenamond, company president.
“In this situation, some of those contracts were coming due, and the company was way behind – in a real bind.
“Nothing could happen until the interconnects were in place. We came in with 75 to 100 people and worked 24 hours a day, seven days a week, to get the interconnects on line and start pushing gas. It pushed us pretty good.”
The project posed several challenges, Lenamond points out. “For starters, imagine you have to go to work immediately to 24/7 shifts in what’s basically a cow pasture, with no infrastructure at all,” he says. Some crews had to quickly adapt to working at night, which required light towers and additional safety personnel. Sprint also had to factor in lower productivity due to cold, fatigue and darker working conditions.
“Even with lighting, on-site light is limited,” Lenamond says. “It takes a little more planning, too, because no stores are open at night. You need to plan for all contingencies because if you run out of something at 3 a.m., there’s nowhere to turn.”
In the end, Sprint met its end-of-December deadline to finish the project – and burnished its resume in the process. “There’s a small niche group of people in the industry, so word travels fast,” Lenamond says. “After that project, we could walk in and say we know what it’s like to do six interconnects. And because of our performance there, we were able to sit down and negotiate our next project. That’s unusual for a $50 million project. Typically they bid it out.”
OPPORTUNITY KNOCKS
While those kinds of projects add some sizzle to Sprint’s resume, the company’s meat-and-potatoes business remains pipeline maintenance. That’s been the primary focus since its inception in 2004, when founders Jon Johnson and Robert Grimes saw an opportunity in the burgeoning natural-gas pipeline boom.
Lenamond says those maintenance services include virtually anything that has to do with pipelines, from mowing right-of-ways to painting to installing up to several miles of mainline. About 80 percent of the company’s business volume comes from natural-gas clients, with the balance stemming from the oil industry, and the majority of Sprint’s customers are in Texas.
Initially, the company got on bid lists by relying on a strong network of contacts that Johnson and Grimes had developed during many years in the industry. Sprint also purchased a small maintenance company in the Houston area that provided a limited but instant business base.
“That company already had two or three contracts, which helped us get on more bid lists,” Lenamond says. “And as customers get more comfortable with you, they let you bid on bigger and bigger contracts.”
Sprint competes against two different markets, with about 10 to 15 competitors in each market. For maintenance contracts, most of the competitors are smaller, mom-and-mop operations. For small pipeline installations (two to four miles or less) and hydrotesting services, Sprint competes against medium-size companies, he says.
SAFETY MATTERS
Given the nature of working with pipelines that carry explosive gas, one of Sprint’s core concerns is employee safety. Lenamond says one of the ways Sprint tries to differentiate itself from competitors is through a stellar safety record.
“Our main focus is safety,” he says. “We work very hard to keep our employees and the public safe while we’re working. That’s the number one way we differentiate.”
The company’s Safe and Smart safety program includes daily meetings on job sites to talk about various issues that pop up and quarterly company-wide meetings to review the safety performance and address topical issues.
To motivate employees, the company awards each employee a $100 cash bonus if the company meets its annual safety objectives. Each employee also can earn another $100 for every quarter they do not log a recordable personal or vehicular injury, for a potential total annual bonus of $500. Employees also must participate in the daily safety meetings to qualify.
Employees also receive smaller rewards – jackets, shirts and the like – that promote the Safe and Smart program and remind them of the importance of workplace safety, Lenamond says. In addition, Sprint uses physical and written assessments to determine operators’ ability to perform nearly two-dozen critical, riskier tasks.
The program is producing solid results. The company’s Total Recordable Injury Rate (TRIR) for 2010 was .51, well below the industry average of 1.0. In addition, its Emergency Modification Rate (EMR) – a statistic that helps the insurance industry determine workers’ compensation insurance premiums by comparing the value and number of a company’s claims to other companies in the same industry over a three-year period – is .49. Anything less than 1.0 is below the industry average.
CONTROLLED GROWTH
One of Sprint’s chief challenges is maintaining a reasonable rate of growth –especially in terms of its workforce and equipment purchases – that allows the company to remain competitive and profitable. Historically, pipeline construction companies grow rapidly during profitable times and may purchase more equipment, hire more employees and build new facilities.
“Then when things get bad, they start cutting budgets to make payroll or minimum payments on equipment,” Lenamond says of some competitors in the industry. Then the price undercutting begins.
“For example, say it costs $100 a foot to lay a pipeline and pay for people, equipment and make a profit,” he continues. “If someone comes in and says they’ll do it for $70 just to make their payroll, it starts dragging everybody down. We combat that by monitoring our workforce – keeping ourselves lean. You make sure that when times are good you’re profitable … and let your reputation precede you.”
To control the cost of equipment purchases, Sprint’s strategy centers on buying equipment that’s used regularly and renting more specialized machines, such as side booms, that would be used only for certain large projects. The company owns about $5 million worth of equipment, including a half-dozen Peterbilt haul trucks, nine Caterpillar 420 backhoes, five Caterpillar 330 trackhoes and a GapVax Inc. HV-56 industrial vacuum loading truck built on a 2007 Volvo chassis.
On larger out-of-state projects, Sprint hires temporary workers who live near the project or local tradesmen who are willing to travel, such as welders and equipment operators. To attract and retain permanent employees, the company offers profit sharing and an annual, performance-based bonus program.
“We have a good reputation for looking after our employees,” Lenamond says. “We create a family atmosphere – it’s part of our culture. I emphasize treating people with respect and dignity. Our business is only as good as our people. If we don’t treat them well, they won’t take care of business and therefore won’t take care of our clients.”
BRANCHING OUT
In terms of business diversification, Lenamond believes in focusing on core competencies – pipeline maintenance, in Sprint’s case – and branching out when it makes sense. For example, the company is expanding into hydrotesting, which involves testing the integrity of gas pipelines by filling them with water for a specific time period to determine their ability to maintain a specified pressure per square inch. Sprint does the testing either on its own for customers or by working as a subcontractor for other companies.
But overall, Sprint – which generated roughly $76 million in sales during 2010 – plans to continue to emphasize maintenance work while supplementing its resume with special projects that fit its core capabilities. Lenamond says that strategy is critical to withstanding the boom-and-bust cycles in the oil and gas industries.
“I’m very into our core business,” he explains. “When pipelines were booming, a lot of companies inverted their business and focused on pipelines and got away from maintenance. But we see it as our bread and butter. We’ve maintained those customer relationships. It’s kind of like dancing with the one that brought you. Maintenance got our foot in the door, so we stick with it. There’s always going to be a need for maintenance.”
