This storage tank business has managed to grow through the downturn and here’s how
Image: Bilal Hydrie
Buy low, sell high.
That’s one philosophy Bilal Hydrie has employed to grow equipment supplier Inclusive Energy through the oil industry downturn.
“This year we spent between $8 million and $10 million on equipment,” says Hydrie, president and chief executive officer of Inclusive Energy. “On all that equipment, we paid 30–40 cents on the dollar. As soon as things start picking up, there will be a good return on our money.”
Surplus storage tanks and equipment accounts for about 75 per cent of Inclusive Energy's revenues today. Hydrie says there’s about $25 million of equipment sitting in three Inclusive Energy yards across Alberta.
Good prices, great service and in-house financing—from rent-to-own-agreements to share-in-production joint-venture arrangements—keep things moving, even though revenues are half what they were in 2014.
So how do you make $10 million of equipment purchases and joint-venture investments during a downturn?
The answer is private equity. Hydrie comes from the family that controls the Habib Group, a 100-year-old enterprise with businesses in banking, insurance, manufacturing and trading of refined sugar, ethanol, CO2, textiles and automotive products. It employs some 30,000 people around the world.
“So if a customer needs funding for their projects, we can also fund up to $10 million in a joint venture,” Hydrie says. “We recently did that with one company in Lloydminster. It’s a disposal facility. We supply all the equipment and take care of the [licensee liability rating], and once the company starts generating cash flow, we can start getting royalties and a return on our money.”
Access to capital is Inclusive Energy’s competitive advantage, but that shouldn’t take anything away from Hydrie’s business skills and hard work in building the company.
After graduating from SAIT Polytechnic with a chemical engineering diploma, he worked in Alberta’s oil and gas industry for a few years. He heard talk of a growing market niche in western Canada for storing and transporting industrial fluids as the industry shifted to resource play production and saw first-hand the inefficiencies in storage tank fabrication—slow turnarounds on orders, inflated costs and financial inflexibility. So, in 2009, he decided he could do better.
Inclusive Energy’s formula was to offer a one-stop shop. Design, custom fabrication, delivery, set up, repair and reconditioning of existing equipment, sales of new and used equipment—and, of course, financing if needed.
The company found its niche and business grew. Then oil prices collapsed in 2014, but Hydrie, a true businessman, refused to see the downturn as anything but another opportunity. Inclusive Energy cut its overhead, adapted to weather the storm and set itself on a path to prosper in the recovery.
“In 2008, people started panicking, went out of business. But by 2012, oil prices were back above $100. Those people who didn’t explore opportunities are still out of business. People who took on the risk and hung on have done amazing,” he says.
Each downturn plays out differently and this one may still take a little longer, Hydrie concedes, but “you just have to have patience.”
Patience. You don’t always hear that advice from a young man looking to make his mark in the world. But there’s more than money standing behind Hydrie. A Business in Calgary profile from September 2016 has Hydrie quoted as saying, “All the deals go through [Hasnain Habib, the chair of Inclusive Energy]…. He is my greatest mentor and has the greatest experience in the industry and international businesses, several of which he is managing himself.”
That network of business mentors and associates are additional resources that have guided Hydrie to diversify into wider business interests. He is an independent director of Pennine Petroleum, a TSX-listed company planning to explore opportunities in Albania. As director of North American operations for the Habib Group, Hydrie has access to sophisticated private investors in the Middle East. Hence, Hydrie is also the executive director of Global Centurion Investments.
“We put together a very large fund for Alberta only that’s $25 million. It's all private money. No public money involved. We’re looking for great opportunities to invest that money. We're looking at all different sectors, whichever makes sense,” he says.
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