President of Burrow Global, John Lionberger joins us to talk about producing petrochemical solutions.
Please excuse any typos in this hasty transcript.
Matt Register: Welcome back, Texas Business Radio. Texasbusinessradio.com is the website, 844-814-8144 is the 24-hour call-in line to get your calls in. Can call in now, call in later, call in at 3:00 in the morning. I don’t really have an opinion on it. We’re going to get the experts in here to get those questions answered.
Matt Register: We’re going to talk for a few minutes about the oil industry in Texas. We have an interesting company in here that, they’re the folks that get the call when somebody needs to process some oil, process some chemicals. They’re the ones that design it. They get it built. They handle all that construction, a very good barometer on how the oil industry is doing in Texas. We’re going to pick his brain a little bit.
Matt Register: I’m your host, Matt Register. Jay Curry is normally sitting over there in the cohost chair. He had to step out for a minute, but he’s going to join us here shortly. John Lionberger is president of Burrow Global Services. John, welcome to the show.
John Lionberger: Hey. Well, it’s great to be here. Really appreciate the opportunity.
Matt Register: Tell me about Burrow Global. What do you do, and who do you do it to?
John Lionberger: Okay. Well, we’re an engineering, procurement, and construction company, and we say we’re EPC Plus Plus, but we do everything from conceptual process studies all the way through construction, commissioning, and start up of basically any type of oil and gas unit or chemical unit that you need.
Matt Register: Well, arguably, this is just above my head, but from what I could gather during the break when we talked, you guys process chemicals, process oil, process gas. People call you. You do the engineering. You’re the general contractor as they build some facility to process stuff. Is that accurate?
John Lionberger: Well, all of our clients process stuff.
Matt Register: Okay.
John Lionberger: Yeah. We’re the people behind it to build it so they can process it.
Matt Register: Talk to me a little bit about the last year or so, right, with an uptick in oil and an uptick in drilling. We’ve talked to drillers. We’ve talked to pipeline guys. Talk to us a little bit about that because I would imagine you guys are quite busy right now.
John Lionberger: We are very busy. In fact, we’re seeing a significant growth just across all of our markets. We’re involved in oil, gas, petrochemical, so with oil prices high and gas prices low, it’s really the perfect storm.
Matt Register: People are poking a lot of holes in the ground, right?
John Lionberger: Yeah, yeah. They’re back-
Matt Register: And they’re pulling a lot of product out, and all that product needs to process. Are you guys building because people are running out of capacity or are you building because there’s something different about what’s being pulled out that needs some adjustments to how they process it?
John Lionberger: Well, it’s a mixture of both. There’s a lot of exploration in west Texas. People want to get it to Corpus Christi or Houston so they can export it. But at the same time, the crude that we’re processing now is a lot different than what most of the plants were redesigned to do several years ago.
Matt Register: Okay.
John Lionberger: A lot of the imports were more heavy sour crude, and we’re back to [crosstalk 00:03:25].
Matt Register: Using our own, right?
John Lionberger: Yeah, using our own, so it’s light sweet. Plus, it has a lot of natural gas liquids and also a lot of natural gas associated with it too, so feedstocks have changed significantly. You have to change the process units in plants to make up for that, so that-
Matt Register: All that’s good for business, right?
John Lionberger: It’s the perfect storm for us, absolutely.
Matt Register: On the engineering side, you guys have a significant amount of engineers on hand ready to do this, right?
John Lionberger: Yeah, we sure do. Of our staff of 700, most of those are engineers, but we have a lot of people in planning, project controls, those types of positions.
Matt Register: Interesting. Where is it that these projects are coming from? Because there’s some changes coming. Some of them being in Corpus Christi. They’re doing some work on the port. They’re doing some dredging so they can get bigger ships in there. How does that affect your business and, essentially, the oil industry in Texas, right, by extension?
John Lionberger: It’s really great with the changes in the export laws for oil. The Port of Corpus Christi is wanting to deepen their channel, or their port so that they can take in the VLCCs, the very large crude-carrying cargo ships and import Arthur, [inaudible 00:04:41] districts doing the same thing. So they have huge projects associated with placing the pipelines deeper that run across the port so that they can dredge it to meet the new depth requirements. So a lot of work associated with that and then a lot of work, of course, associated with just building the pipelines to get them to the ports.
Matt Register: Yeah. It sounds like a massive project. Now, with the ability to get bigger ships in, that means bigger volume of product moving through those places.
John Lionberger: Absolutely.
Matt Register: Is that accurate? And so more needs, so capacity needs to increase to be able to account for the increased volumes?
John Lionberger: Yep, you’re correct. A lot of the big pipeline projects you’ll see now are going towards Corpus Christi, Houston or Port Arthur. There’s just not enough capacity in the pipelines to get everything from west Texas and the other large crude producing areas to export terminals.
Matt Register: Now, how sensitive is your company to directly tied to the price of crude?
John Lionberger: You know, the projects that are very sensitive to the price of crude, slight change and the economics could go away and the projects could be canceled. But right now, the economics are great and so we see a lot of pent up demand and a lot of projects over the next several years that will be taking place. Not to mention even the mega projects like the Exxon Mobil plant at Corpus Christi.
Matt Register: Sure. Well, and a lot of the stuff you do is middle market projects right?
John Lionberger: It is.
Matt Register: So the Exxon stuff may not be yours, but there’s a lot of work to be done in the vicinity of that Exxon project, correct?
John Lionberger: Oh absolutely. Everybody needs to increase capacity. We look at a lot of projects that are de-bottle necking so wherever there’s a choke point in a process unit, we’ll look at that and how we can remove that. A lot of pre-processing of the NGLs that come out from west Texas exploration. So we get a lot of the smaller to medium size projects but that’s our market.
Matt Register: And the beauty of fixing a bottle neck is it just exposes the next one right?
John Lionberger: It keeps going on down the line, you’re absolutely correct.
Matt Register: Yeah, that’s interesting stuff. Now talk to me a little bit about what all you do outside of the Gulf Coast. Because I know the majority, you’re not exclusive Gulf Coast, you’re heavy Gulf Coast. Where else are you doing these projects?
John Lionberger: You know, we’re heavy Gulf Coast but we have refinery projects in El Paso, in New Mexico, Oklahoma. We work with a lot of the smaller to medium size refiners and they have a lot of work going on. So they’re all expanding. So really just Texas, Louisiana, Oklahoma, New Mexico, Arkansas.
Matt Register: Now, I’ve listened to a lot of economists and they all have something different to see. What is your company’s bet on how long this is going to last? Because anybody that’s been in the oil industry in Texas knows that it goes up and it goes down, right? So it’s up right now. Everybody knows it’s not going to stay there forever. What is it you guys are betting on? How long are you anticipating this is going to last?
John Lionberger: You know, the boom, everybody knows that when there is bust there is a boom. And we are definitely at a boom time. The amount of work that we see and what the prices of crude is at and gas is at, I mean the next five, six years will be really good. And it should, it may start tapering off after that. But if you look at a lot of the refineries that were built and are converted from light sweet to heavy sour can now go back to light sweet. But there’s a lot of work associated with that. It’s not something you just do overnight.
Matt Register: Now how much of this is, you mentioned pent up demand, pent up maintenance and deferred maintenance and things like that, right, when times are down people aren’t spending the money. And some of this is make up work from stuff they probably should’ve been doing prior. How much of your customer base is operating that way? How much of this is stuff that otherwise would’ve been done a couple years ago?
John Lionberger: That’s a double edged sword because when things were down they didn’t have the money to do the maintenance projects. Now things are really, really good so you don’t want to [crosstalk 00:09:14].
Matt Register: And they need it done yesterday right?
John Lionberger: Yeah, except you don’t want to shut a plant down necessarily to do those types of projects. So in some ways they’re pushing the plants a little bit farther and a little bit harder than they probably should. But we are seeing a lot of pent up demand because of that.
Matt Register: Interesting. All right, interesting company. Booming right now with oil. God bless America right? John Lionberger, president of Burrow Global Services. Thank you very much for joining us.
John Lionberger: Thank you for having me.
Matt Register: So if somebody wants to learn more about Burrow Global, what is the easiest way for them to do that?
John Lionberger: Www.burrowglobal.com.
Matt Register: Burrowglobal.com. Interesting company. You are processing oil and need somebody built, these are the guys to give a call. Burrow Global, burrowglobal.org. We’re going to have that linked right from texasbusinessradio.com if you’re driving and can’t take notes. Appreciate you listening. We’re going to take a quick break. You don’t even have time to go anywhere. We’re going to go pay a couple of our own bills. We’ll be back right on the other side of the break with a whole lot more Texas Business Radio. In the meantime, go connect with us on social media. You’ll be glad you did. We’ve got a lot of content out there. We’ll be back.
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In addition to hosting "Texas Business Radio," Matt is an investment banker and serial entrepreneur from Montgomery, Texas. He is the owner of RREA Media and Register Real Estate Advisors and a Managing Director and Principal at Corporate Finance Associates. He has a BS from the United States Military Academy at West Point and an MBA from Rice University in Houston. You can read more about Matt HERE.