Michael Saleeby, CEO of MCC Chemicals, talks about chasing margin in the oilfield chemical business.
Please excuse any typos in this hasty transcript.
Matt Register: Hey guys, welcome to Texas Business Radio. 8-4-4-8-1-4-8-1-4-4 is our 24 hour call in line. Get them in now. Get them in later. We’re going to get the experts on here to get those questions answered. We also monitor hash tag. TBR on Twitter. T-B-R Texas Business Radio.
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We’re talking chemicals today. The chemical industry in Texas in huge, and they’re a lot of very interesting companies that are operating in that chemical industry, and we got a studio full of them today to bring you some very interesting stories about chemicals and chemistry. What do you think Jay?
Jay W Curry: Oh, I got it great. This is huge in Texas. It’s very interesting. They’re all kinds of splinters that people have made a real good living, and built some great companies, in the chemical industry. It is big here in Texas.
Matt Register: MCC Chemicals is out of Houston, Texas now, Michael Saleeby is the President and CEO. Michael, welcome to the show.
Michale Saleeby: Well, thank you.
Matt Register: So, MCC chemicals, what do you do, and who do you do it to?
Michale Saleeby: What we do is we are a global oil field chemical manufacturer, and we service the upstream, midstream, and downstream segment of oil and gas.
Matt Register: So by servicing you were producing chemicals, or you were doing a chemical process to some of the oil?
Michale Saleeby: We manufacturer our own chemicals. We are formulators.
Matt Register: Awesome. What are some of the processes that you do? Because you mentioned your downstream, your upstream, you do a lot of stuff. What are some of the processes? Who are your main customers in this?
Michale Saleeby: We have a versatile customer base.
Matt Register: Okay.
Michale Saleeby: And going from service companies, operators, and distributors, and agents, and contractors. Let’s start with the upstream. We have here in the U.S. is the fracking, which is the hydraulic fracturing. They use lots of additives to build up the pressure to have a successful frack job.
So they use a friction reducer, for example, and a scale inhibitor, clay stabilizers, and mutual solvents, and bactericide. On the acidizing side, this is when they work over the well. Old wells that are not producing as it should, they inject hydrochloric acid, and then with that they inject erosion inhibitors to protect the tubing and the equipment. We manufacture at high temperature, up to 400 Fahrenheit, and up to 300, and a low temperature of 250 and below.
Jay W Curry: This sounds like a one stop shop. Right?
Michale Saleeby: Yes. It is actually. We started as a production chemical company, and it was built by formulators, and we used to formulate nc2 on the well. We used to build a product where the crude oil, for example, needed a certain time span to split the oil from water.
And then, after like acquisitions … we spent out. After that, we came up with a new strategy that is to build a product line for the upstream, which is easier to approach and less costly. So we turned the company into a one stop shop chemical solution company.
Matt Register: Well, that’s interesting. A lot of companies, and we talk to a lot of middle market companies, right? They may find themself in an industry that is not necessarily favorable. There is either a glut of competitors in the market, it’s either a commoditized something that makes it unfavorable, yet a lot of them cannot identify, or don’t identify, how to get out of that industry, and into segments of the industry that are a little more favorable.
Talk to me about the difference in the production side of the downstream of your business, and talk to me about the transition over to more of the upstream, because that’s a completely different line of business, and has completely different characteristics to it, right?
Michale Saleeby: Yes, indeed. The production chemical, it is long cycle business, and it requires lots of infrastructure, and then investment, as in terms of bottle testing, sending people offshore, field trials, all that will take like a year, or a year and a half.
This product segment, for us, it’s a given. It’s like this is what we should specialize in.
Matt Register: Sure.
Michale Saleeby: So we wanted to move into an easier, and less risky, part of the business. That is developing in the upstream side. The client asks you for samples, they tell us what are the parameters of drilling, or acidizing, or fracking, and then we give them the product that will meet their expectations.
Matt Register: Well, hat’s off to you, because being in a very capital intensive business, right? Your production side. That’s where your company made its name.
Michale Saleeby: Yes. True.
Matt Register: And has its reputation, but it’s a capital intensive business. It’s a long sale cycle. There’s a lot of unfavorable things about it, and moving to an off the shelf product side of it has a very short sales cycle, a relatively low capital requirement, completely changed the face of your business. Didn’t it?
Michale Saleeby: Yes. Definitely. It balances things out. The good thing about the production chemicals, you have a locked contract for three to five years.
Matt Register: If you can afford to make it until you actually get the contract, right?
Michale Saleeby: Yes. Exactly. This is like another thing. Two or three years of hard work, you might not have the contract, but if you have it, it is great, because it keeps you going for three to five years.
On the upstream it is like spot orders. It’s like there is a frack job, they order … and this is why in the past two or three years we took a hit, because the fracking stopped to a certain extent, so we had to shift back again to the production to keep the bread and butter business coming in.
Matt Register: Well, and that’s another benefit of having the diversification, right?
Michale Saleeby: Yes.
Matt Register: They’re generally both not down simultaneously, they’re all cycles, so when one’s peaked the other one’s not.
Michale Saleeby: Sure. Yeah.
Matt Register: So it keeps the lights on, right? In the mean time.
Michale Saleeby: Yes. You feel better. You’re not like stressed out having all your eggs in one basket.
Jay W Curry: Yeah. One thing we do know about the oil business is its up and down, right? I mean.
Michale Saleeby: Sure.
Jay W Curry: This is your answer to that.
Michale Saleeby: Yes. That’s my answer. I recommend to anyone who is leading a company is to look outside the box to see how they can balance their businesses so they have a less riskier operation.
Matt Register: Well, and anytime you can reduce risk in your business the better, now if you guys listening are an oil field services company, those are the guys who need to give you a call. Right?
Michale Saleeby: Yes.
Matt Register: Are the ones that are actually out there operating and drilling these rigs. You have a product line that is diverse enough that you can provide them with what they need, regardless, of the conditions on the ground.
Michale Saleeby: That’s correct. Yeah.
Jay W Curry: So with everything you said it really sounds like you’re not really just a one stop shop. You’re also solutions oriented.
Michale Saleeby: Yes. We are. It’s like if we get an inquiry without like a background information coming from the field, we will not cater for it, because that’s not a serious inquiry. We don’t want our product to fail, and then we get the blame.
So we ask the right questions about the parameters, about the crude oil, what API gravity it is?
Matt Register: Sure, and then work with their engineers and come up with a solution that’s going to be able to pick the right product to solve their problem. Correct?
Michale Saleeby: Yes. That’s correct.
Matt Register: Should somebody want to learn more, what’s the easiest way for somebody to learn more about MCC?
Michale Saleeby: Let them go on mccchemicals.com. That’s our website. It’s very informative. They can send an email on email@example.com and we will respond within 24 hours.
Matt Register: Got it. Michael Saleeby, President and CEO of MCC Chemicals. Mccchemicals.com. We’re going to have it linked right there from texasbusinessradio.com. If you’re driving, and can’t take notes, we got it, we’re going to have it linked right there.
Michael, thank you very much for joining us.
Michale Saleeby: Thanks for having me. It was really an opportunity for us to present our products and our company.
Matt Register: Wonderful. We got to pay some bills. We’ll be back right after this.
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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.