FITTING RECOVERY
MRC Global marks centennial more with relief than revelry as energy industry rebounds
After grappling through one of its most difficult years in memory, Houston-based MRC Global, the world’s largest distributor of pipe, valves and fittings (PVF) to the energy industry by revenue, looks to approach its centennial with both a new chief executive officer and a renewed sense of optimism.
“We’re seeing that recent improvements in the oil prices and activity in the oil fields suggests that business could be better as we move through 2021,” said Rob Saltiel, who succeeded the retiring Andrew Lane as the company’s CEO on March 15. “We feel good about the fact that the worst is behind us and the future is looking better.”
Despite its long history, few things prepared the company for last year’s dual shocks of Saudi Arabia’s price war with Russia followed almost immediately by the global pandemic and resulting pullback in global spending. As a result, oil prices plummeted, briefly, into negative territory, from about $65 a barrel at the beginning of last year and have only recently rebounded.
As a result, after projecting 2020 revenue of between $3.2 billion and $3.7 billion, the company generated $2.56 billion in revenue last year, down 30 percent from a year earlier. It also took a $298 million loss, compared to net profit of $15 million a year earlier. MRC Global, which is listed on the Nasdaq, is nevertheless trading near its 52-week high of $10 a share and is up about 6.5 percent year to date.
Additionally, the company had to tweak its operations to address COVID risks. Within the past year, MRC Global had anywhere from 75 percent to all of its office workers work remotely, depending on the stage of the pandemic waves (about 40 percent of workers were back in the office as of earlier this month). The company also “flexed” its warehouse operations to allow workers to work different shifts to reduce contact while enforcing daily temperature checks, according to Lane, who estimated that the company at one time had 20 active COVID cases and 40 people under quarantine, but said those numbers have since dropped.
“It’s the worst year I’ve ever had in my 40 years in the oil and gas business. But we’re a critical supplier to the refineries and plants, so we stayed open,” said Lane, noting that the company shrunk its global workforce last year to 2,600 from 3,200 through a combination of retirements and layoffs. “We didn’t do any layoffs for the first three months due to the pandemic, but then it was clear that the customers were going to spend a lot less money.”
Finally, MRC Global and its multinational energy customers weren’t immune to the impacts of the tariffs imposed during the Trump administration, said Andrew Laird, a recently retired group enterprise category manager at Shell International Petroleum Co. Ltd. who estimated spending as much as $300 million a year with MRC Global.
“Your ex-president was imposing tariffs left, right and center,” Laird, based in London, added. “MRC stepped in there and helped us re-source millions and
“We feel good about the fact that the worst is behind us and the future is looking better.”
MRC Global CEO Rob Saltiel
millions of dollars of pipe that kept our projects on schedule.”
Thepandemic marks the most recent swing in the 100-year history of a company that established its oil-well supplies and services business in Charleston, W.Va., to service the shallow oil wells of Appalachia just as the automobile’s emergence as the primary form of American transportation started driving up oil demand. Founded in 1921 by Jerry McJunkin and brother-inlaw Bernard Wehrle just as the country was emerging from the ravages of the Spanish flu pandemic, the former McJunkin Supply Co. grew its operations to $1 million in annual revenue (about $17 million in today’s dollars) within a decade before experiencing its first bust period during the Great Depression.
By the late 1950s, the company was grossing $26 million annually while expanding to Ohio, Kentucky and Georgia, and by the late 1970s, McJunkin’s annual revenue approached $75 million while future affiliate Red Man Pipe & Supply was founded by Lew Ketchum in Oklahoma.
MRC Global underwent much of its evolution into its current form during the five-year span from 2007 to 2012. During that period McJunkin merged with Tulsa, Okla.-based Red Man Pipe and Supply Co. and rebilled itself as McJunkin Red Man Corp. before shortening it to MRC Global; it acquired St. Louisbased LaBarge Pipe & Steel Co. and European valve-maker Transmark; and it tapped Lane – the former chief operating officer at Halliburton – as its CEO; moved its headquarters to Houston, where about 400 of its global workers are based; and went public.
“When I joined the company, I said that the customer and supplier hub was Houston, and this is where we needed to be. It helped us recruit,” said Lane. “We’re active in food drives, cancer-fundraising drives and American Heart Association walks, but we don’t necessarily have the (local) presence of a Halliburton, Baker (Hughes) or Schlumberger.”
Such a flurry of activity set MRC Global up for worldwide growth that boosted its annual revenue to a peak of $5.93 billion in 2014, when oil prices last topped $100 a barrel and the company had edged its way up to #448 on the Fortune 500 list.
“We were founded about 32 years ago, and we’ve done business with them that whole time, but we’ve been a strategic partner and core vendor for the past 10 to 15 years,” said Marc Herzstein, founder and CEO of Houston-based pipe-, fittings- and valve-maker Allied Group.
Referring to MRC Global as one of its largest customers, Herzstein added that its willingness to pitch Allied Group’s quality, service and ability to control the flow of product delivery to most efficiency suit energy companies as they either build or upgrade their plants.
“The customer can’t weld everything at one time,” he said. “A lot of companies only want to know the price, but there are times in business when you’re selling complicated jobs with a lot of other factors involved where you can create value for your customer. (MRC) will make the case for value.”
MRC Global’s growth, specifically internationally, also made it a go-to supplier for energy giants such as Chevron Corp., Royal Dutch Shell, Exxon Mobil and BP, which are tasked upkeeping plants with typical three- to four-year maintenance cycles.
“Everybody talks about bigticket items, but what goes under the radar is the Lego set – all these little bits, and some aren’t very expensive, but if one Lego set is missing, your complete item won’t work,” added Laird. “They always performed well, and gave me the confidence that somebody had our back. That was great for me when I was managing nearly $2.5 billion in annual expenditures on highvalue equipment.”
Moving forward, both Lane and Saltiel, who most recently served as CEO of Key Energy Services and previously held titles with Atwood Oceanics, Transocean, Nabors Industries and Enron, recognized that the company will need to address the twin challenges of rebounding from the pandemic and evolving quickly enough to remain relevant as more governments push renewable-energy sources such as wind and solar. While Lane estimated that about 2 percent of MRC Global’s revenue stems from alternative energy plants, Saltiel suggested that that figure will rise.
“We’re now the leader in pipes, valves and fittings globally, and we’ll look to maintain that position, but everybody knows the energy sector is in the early stages of transformation, transition and decarbonization,” said Saltiel. “We need to align MRC with new clients as they look to invest in alternative-energy infrastructure. Because of the strong energy position we’ve got, we think we’re in an excellent position to take advantage of this market as it evolves.”