Calgary 鈥� Hard times in the oilpatch are proving to be good times for Energy Auctions Inc., a growing online auction and brokerage business based in Calgary.
Capital spending cuts by producers due to low world oil prices have increased buyer demand for used or so-called field run oil and gas production process equipment that Energy Auctions specializes in.
鈥淭hey鈥檙e buying just due to the economy,鈥� said Marlon Ellerby. president of the Energy Auctions that is co-owned with his wife Janet with Marlon being the spokesperson.
鈥淭hey鈥檙e looking for field-run used stuff because it鈥檚 cheaper right now than buying new so they鈥檙e trying to shop to get the best bang for their buck,鈥� he said.
鈥淚 do also have manufacturers that I sell for that have new surplus 鈥� if they have too many tanks in stock or too many separators or whatever.
鈥淭hey will phone me and I will sell that as if it鈥檚 new, but the bulk of my equipment that I sell is field run.鈥�
Oil and gas separators, tanks, pumpjacks and treaters are selling quickly mainly to producers who are focused on cost efficiencies.
鈥淚 think probably the biggest thing is the amount of wells still. It鈥檚 so much more cost-effective to maintain production to keep producing, than it is to buy production by drilling new wells,鈥� said Ellerby.
鈥淎nything that鈥檚 out there that鈥檚 producing, they need to keep it going.鈥�
Over 75 per cent of Ellerby鈥檚 customers are brokers who buy the equipment online and resell it knowing they can still make a profit after he takes a set fee.
鈥淚 broker quite a bit more than I auction,鈥� said Ellerby.
鈥淚 think the big thing is, that way that I deal with my customers is, we find a fair market value for their product and I take a set fee.
鈥淭hat way when the broker comes along and buys it off our auction, he鈥檒l know that there鈥檚 a little bit of meat left on the bone when he sells it.
鈥淚 think the auction is a good way to go for a producer or anybody with surplus because I can go in there, and between me and the seller, we can set a set price.鈥�
Ellerby relies on formulas to determine fair market value off of new prices and broker knowledge of the market to set prices.
鈥淭hey鈥檙e the ones out there just like I am. We have a very good idea of where the market鈥檚 at. That鈥檚 the name of the game. It鈥檚 all economics,鈥� he said.
Energy Auctions sells oil and gas production process equipment to buyers from around the world who register for free to bid on his online auction website.
It鈥檚 up to the buyer to pick up their purchase, but Ellerby handles everything from listing, cataloguing and photographing equipment to writing product descriptions.
In Western Canada, most of his business is targets clients in Alberta and Saskatchewan with growth coming from Manitoba and North Dakota and beyond.
鈥淚 sell a lot of jacks, kind of thirty party, down into Wyoming, Colorado and Texas,鈥� said Ellerby.
Energy Auctions is linked to anyone in the world with an Internet connection including customers in China who invited him to speak at a shale gas summit in China in the fall.
When contacted on June 9, Ellerby was preparing to speak with his Chinese contacts at the Global Petroleum show in Calgary the following day.
鈥淚鈥檝e been approached to expand a bit more into China with the auction service part of it. I am looking at translating my website to Chinese,鈥� he said.
鈥淓ven within their own provinces, they can use our services.鈥�
Ellerby gives credit to his Calgary based IT provider, Gratisies Inc. for creating a software platform the provides many ways to market and auction equipment online internationally.
鈥淲e can take a tank that鈥檚 sitting in Minot, North Dakota and we can sell that tank tomorrow morning in two hours,鈥� said Ellerby.
鈥淚 can set it up for tomorrow morning for two hours and everybody in the world can get online and bid on that tank.鈥�
Aside from online auctions, Energy Auctions has a third part shop where customers can design, build or refurbish a variety of oil and gas products.
The company also offers contracted licensed realty services for complete commercial and business listings.
Ellerby鈥檚 office is his truck that he drove to the Saskatchewan Oil & Show held in Weyburn June 3-4 to proactively market his business to producers and service companies.
鈥淔or the most part it was good. I can鈥檛 say it was positive but it was good,鈥� he said about the mood with low oil prices slowing oilfield activity.
鈥淕uys are continuing on just like here (Calgary). In Lloyd, it鈥檚 all the same and everywhere else around the world, it鈥檚 slowed down considerably,鈥� he said.
While in Weyburn he touched base with some of his best clients.
鈥淚鈥檝e done some pretty big business with Enerplus down in that area, so we took those guys out to one night for supper and sat around and visited with their operators and everything. It was good.
鈥淭hey鈥檙e talking about doing a little bit more here come June and July.鈥�
The downturn has been good for Energy Auctions just as it was in 鈥�08 when he launched a concept business model as the pipeline coatings company he worked went broke.
With his background auctioning cattle online, he set up an online auction site to liquate the company鈥檚 oilfield equipment and then set out on his own with steady sales.
鈥淭hat鈥檚 the unfortunate part of this thing. There鈥檚 good and bad. We鈥檙e busy,鈥� he said somewhat apologetically.
鈥淥ne of the reasons why I do well in southern Saskatchewan with Enerplus is the convenience of it. It鈥檚 set up for the juniors and the intermediates.
鈥淭hey don鈥檛 have to do anything. They just tell me it鈥檚 for sale.
鈥淚 do a ton of the business with the big guys as far as selling their equipment, but I don鈥檛 sell very often to the big guys. The juniors and the intermediates are the companies that I target.
鈥淭hat鈥檚 the niche that I fit into.鈥�
As for comparing the downturns of 鈥�08 and this year, Ellerby thinks this one is worse.
鈥淚 think the biggest thing is that this thing hit almost within 24 hours,鈥� he said.
鈥淛ust boom 鈥� it hit before Christmas or whenever that was and the whole world just kind of stopped. Then look at how fast the price dropped, so it took a lot of guys off guard.
鈥淚t shocked a lot of guys and put a lot of companies into a bad position with a lot of stock.鈥�
Ellerby noted that the online auction market is not strong for all types of oilfield equipment as companies try to hold out for better returns.
鈥淚 think everybody鈥檚 hanging off liquidating everything or anything because they don鈥檛 want to give it away,鈥� he said.
鈥淭hey鈥檙e just waiting to see what this thing鈥檚 going to do now that the breakup is over and everybody鈥檚 going to start to do a few projects.
鈥淚 know there鈥檚 a few drilling rigs out starting to pick back up again. There鈥檚 a lot of equipment out there right now.
鈥淏uying at an auction is different than just buying it because of course, you have to be so diligent in what you鈥檙e buying like with pressures and sizes and everything.
鈥淚 tell them to go and inspect it or send an inspector for $500. They can save you a pile of money.鈥�
Ellerby said what he calls 鈥渃ommodity stuff鈥� like pumpjacks and tanks sell well online because every well site needs that equipment while pressure vessels are tough to auction.
As for why companies do business with him Ellerby puts it down to building honest relationships with his customers and fair pricing in booms and busts.
鈥淭hey can trust me. They can set a starting price. It has to be within the market though. If a tank鈥檚 worth $10,000 they can鈥檛 tell me they need $25,000 out of it.鈥�
Equipment is sold during timed auctions similar to eBay with short auctions for one-off items and monthly one day sales with multiple lots and bidders.
Convenience is probably the biggest advantage for sellers who come to Energy Auctions that markets itself as a one stop shop.
鈥淚 think the biggest thing is 鈥榮old as is, where it is鈥� so there鈥檚 no freight involved. There鈥檚 no logistics set up to get the thing to my yard or whatever. There鈥檚 none of that,鈥� said Ellerby.
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