Tim Davis, Director of Technology for TAM International, joins us to talk about oilfield technology and how TAM helps companies get more production out of wells.
Please excuse any typos in this hasty transcript.
Matt Register: Hey, guys. Welcome back to the show. Texas Business Radio, texasbusinessradio.com is the website. If you haven’t been there, do yourself a favor and get there. You can see the whole broadcast in beautiful high-definition video, see all kinds of really good stuff on there. A lot of information we don’t necessarily put out over the airways. It’s right there, texasbusinessradio.com, as well as links to all of our guests. I’m your Host, Matt Register. Jay Curry is the one sitting over there in the co-host chair. We’re talking a little bit about energy and there is a lot goes on in the energy economy in Texas. We have a very interesting company in here, TAM International, that is one part engineering firm, one part manufacturer, one part equipment rental, one part service company. They do quite a bit, but all surrounding one little corner of the energy business. I want to hear all about it. Guys, 844-814-8144 is our 24-hour call in line. Get your calls in, get them in now, get them in later, get them in the middle of the night. It’s a 24-hour line. I don’t have an opinion. We’re going to get the experts in here to get those questions answered. Just like Tim Davis, the Director of Technology for TAM International. Tim, welcome to the show, sir.
Tim Davis: Thanks for having us.
Matt Register: So talk to me a little bit about TAM International. What do you do and who do you do it to?
Tim Davis: Well, this year at TAM International, we’re celebrating our 50th anniversary. So we’re 50 years old.
Matt Register: Happy Birthday.
Jay Curry: Congratulations.
Tim Davis: That’s an awesome milestone, and we’re taking every advantage of it, as we celebrate it to the industry. But we’ve been around for 50 years, as I said. And we develop, and design, and manufacture inflatable and
swellable packers, as well as other accessory equipment that compliments those services.
Matt Register: Well, I tell you what. We’re going to back up a little bit because, during the break, you were able to explain this to me, like I was five. And I actually understood it. Now explain to us what an inflatable packer is, and what does it do, and when does somebody need it?
Tim Davis: All right. Well, packers are used in the design of a well, through the life of a well. They’re meant to contain or direct fluids in certain directions. An inflatable packer is unique, in that it goes in the well with a small diameter. So it can go through restrictions and set in large diameters. So it can inflate up to twice, two and a half times its diameter that it was manufactured.
Matt Register: Okay, so if there’s the opportunity for fluids to flow a different direction, you can basically swell this thing up, seal off the one that you don’t want fluids to go down, and it directs the fluids to the other one. Is that along the right lines?
Tim Davis: Yeah, that’s right. Now there’s two things. There’s an inflate and then there’s a swellable.
Matt Register: Okay.
Tim Davis: An inflate is a mechanical process. You pump fluid into the element and the element expands out.
Matt Register: Okay.
Tim Davis: A swellable just reacts to the fluid that’s in the well and it actually increases in size. No mechanical parts.
Matt Register: Really?
Tim Davis: Yes.
Matt Register: Now is that reusable or does it swell up and then you have to do something to cut it out of there?
Tim Davis: No, it stays. It’s a permanent installation.
Matt Register: Okay.
Tim Davis: Yeah.
Matt Register: So when does … At what point in the lifecycle of a well, you have drilling and then when it’s producing, and then they finally close it. At what point in that cycle do people need this?
Tim Davis: Well, the fortunate thing about our products is that we’re in the whole lifecycle of a well. So from the design of the well upfront, to the time you have to plug and band the well, we have solutions that the customers need from us.
Matt Register: That’s interesting. During the break, we were talking about the different, I guess, divisions within your company. Because you guys do all, basically anything to do with those packers, you guys handle it. Everything from making them to making them for other people, to making them for yourself, to making them for a rental fleet that goes out. Walk us through a little bit about everything you do for these things, because that’s an interesting way to grow a company, right.
Tim Davis: Right. So there’s a lot of one-offs early on in TAM. So it was a small company, and a customer, usually an end user, an oil company would have a problem. And they would find out about TAM, and they would actually engineer a solution. And then we try to build off that product line. Well, now we have a pretty well-established line, but we still do the specific designs, customized designs for some customers. We have customers over in the Middle East that need very large product. We’re talking about 24″ in diameter product to build big packers and be able to place cement where it needs to be. So it’s the solutions. Customers come to us, they have a problem, and we develop and engineer a solution.
Matt Register: So you’re an engineering company at heart, I guess, right?
Tim Davis: Yeah. Engineering and manufacturing. I would say we’re probably more of a manufacturing company, but everything we manufacture-
Jay Curry: Designed yourselves.
Matt Register: Is custom engineered. That’s right. So that niche manufacturing is an interesting business in and of itself. Because you don’t have the economies of scale to be able to, you’re not running thousands of the same part. You have to get good at predicting how custom engineered solutions are going to manufacture, right. I mean, this is precision manufacturing, but it’s custom precision manufacturing, right?
Tim Davis: Oh, it’s definitely a challenge. Right now, we’re fortunate in today’s boom and North America’s driving our business right now-
Matt Register: Sure.
Tim Davis: By far. The Eastern Hemisphere, it’s starting to pick back up, but they’ve been slow. But what’s fortunate about this shale play, a lot of the areas like the Permian Basis, there’s millions of wells out there. This is what we call Brown Field, right. And so to get to their pay zone, they got to go through a lot of old production.
Matt Register: Sure.
Tim Davis: So it’s depleted, it’s low pressure, and it’s very difficult to get cement in place.
Matt Register: Okay.
Tim Davis: And these wells have to be cemented on the outside of the casing, with a pipe that they stick in the well. And that’s for safety and for HSE reasons.
Jay Curry: Stability.
Tim Davis: Right, and so but cement is heavy, so they can’t get it all the way back to surface. So they have to stage it in place. And so we have equipment that allows them to add cement in stages.
Matt Register: At what point did you guys decide, “All right, our customers need our product. But they also need help running our product. We’re going to go ahead and become a service company, as well.” When did that come about?
Tim Davis: It’s from the very beginning. It’s always been … It’s not a complicated service, but it requires a full understanding of being able to go out there and execute. And execute successfully, right. So it’s something you just can’t give to a customer and they just follow a set of instructions and run it. You got to be trained, you got to understand it, there’s got to be design and procedures written upfront.
Matt Register: And there’s got to be a little bit of an art to it, right? It’s something they’re willing to write checks to keep from messing up themself, right?
Tim Davis: There’s definitely an art to it. Because no well is the same. As much as you would like to think that every well’s the same, they’re all different. They all have some unique challenges. And so you have to have the people out there that can recognize those and make the changes and adjustments, as needed.
Jay Curry: So a company like yours that’s been around for 50 years, you can actually see, in the old days, things moved very slow in the oilfield, and it was really who you know. But now, technology, which is dominating every other industry is really penetrating the oil and gas business. You’re seeing that quite a bit. Is technology evolving fairly quickly?
Tim Davis: Oh, it’s evolving rapidly. Much faster than I’ve ever seen it in my 30-plus year career. But it’s not only developing the new products, it’s getting existing products that may be 25 years old. And now getting to work in a different scenario than what they were originally designed for. That’s a lot of what we do, is take what we already have, and make the adjustments to match the new challenge.
Matt Register: Now the interesting stuff. Now the last few years, I know it’s picked up in the last year or so. But before that, you’d just gone through a pretty significant downturn. How are some of the ways your company… because you guys are a bigger company than a lot of the guys that we have on this show, right. And a lot of these guys, to weather a downturn as a smaller company is not an easy thing to do. You guys weathered it just fine. I’m assuming you identified pretty early that it was a downturn and took drastic measures to make sure that you guys were going to be okay, correct?
Tim Davis: Yeah, so it was pretty easy to react within a few months of when things really got terrible. We’re a privately held company, so we have a lot more flexibility-
Matt Register: Yeah, that’s huge.
Tim Davis: Than a publicly held company, so we implemented some really heavy financial strategies up front. Number one is, let’s increase cash flow. One way to increase cash flow is to eliminate debt.
Matt Register: Sure.
Tim Davis: So we took the opportunity to fix those challenges. And then, just like any other company, we had to downsize. We had to right-size, I guess, we call it, for what the market is telling us.
Matt Register: Sure.
Tim Davis: And then we just went with the market. The market dictates the price. And we really studied the market. We talked to our customers, “Where do we have to be?” Which then, when you really challenged our margins and market pricing, you get really innovating on your manufacturing costs and your designs.
Matt Register: Well, and no doubt. And it’s always fascinating to me, when oil is in a boom, right. There’s a lot of players in the market. And then as soon as the market falls out, then everybody realizes, “Man, we don’t know how to make money when prices are realistic,” right. And it’s always a challenge for everybody to figure out and find those creative ways to cram cost out of things. Interesting stuff. Tim Davis, Director of Technology, TAM International. Tim, what’s the easiest way for somebody to learn more, should they want to learn more?
Tim Davis: The easiest way is to go to our website at T-A-M-I-N-T-L.com. There, you’ll find all sorts of resources on all of our product lines, as well as contact information.
Matt Register: All right. T-A-M-I-N-T-L.com. We’re going to have it linked right there from texasbusinessradio.com if you’re driving and can’t take notes. In the meantime, go to the website, text to businessradio.com, connect with us on social media. Thank you very much for joining us. This has been interesting. We got a whole lot more coming up right on the other side of the break. Don’t go anywhere, guys. You don’t even have time to go anywhere. 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.