OIL FIELD SERVICES:

One company's rapid expansion comes through buyout binge

HOUSTON -- Dan Eberhart has big plans for his fledgling oil field services company.

Born out of North Dakota's Bakken Shale boom, Frontier Energy Group has been expanding rapidly for the past four years.

Based in Denver, Frontier has been on an aggressive march to do business across the country in other shale plays, including the Eagle Ford and Permian Basin in Texas, emerging centers in Oklahoma, and in Ohio, where development of the Utica Shale is picking up speed.

Frontier's method of growth is simple -- gobbling up the competition.

In four short years, Eberhart's team has bought out eight smaller oil field service companies, absorbing their talent and equipment to grow from a small outfit to a $100 million business with more than 300 employees. He said the company now operates out of 26 locations in 10 states but is constantly looking for opportunities in others.

"Our mission is to become the best wellhead company, not necessarily the biggest," Eberhart said. "There's going to be a lot of development in the Utica and Mississippi Lime."

Its latest acquisition occurred earlier this month, when Frontier announced the purchase of Canary Wellhead of Oklahoma City. That purchase was mainly aimed at gaining a foothold in the Mississippi Lime Shale of northern Oklahoma and southern Kansas. Oil and gas companies are in the midst of repeating there what they did in the Bakken and Eagle Ford zones, scrambling for leases and acreages to pave the way for a massive increase in drilling and hydraulic fracturing.

The new combined firm, renamed Canary LLC, has plans to go head to head with the biggest players of oil field services, giants such as Halliburton Co. and Schlumberger Ltd.

Now one of the largest companies in its segment of the oil and gas industry, Canary says on its website that it "provides comprehensive oilfield drilling & production services to oil & gas companies throughout the United States." The firm offers wellhead services for conventional and hydraulically fracturing wells.

Before acquiring the property and name of Canary, the former Frontier Energy Group marked other major milestones along its fast growth spurt last year. The company was awarded "best in show" by judges at last year's Energy Exhibition and Symposium, an annual oil and gas trade show focused on the Rocky Mountains area.

New construction projects are also being launched as Canary builds its business and staff numbers. Plans for new or expanded facilities in Colorado and Wyoming are in the works. And last year, Canary celebrated groundbreaking on a $6 million office and warehouse project in North Dakota. The new building will be three times as large as the previous office center there.

Southward march continues

Eberhart said his firm's southward march from North Dakota to Oklahoma is now taking Canary to Texas. In an interview, Eberhart told EnergyWire to look out for news of more acquisitions by Canary in the first or second quarter of this year as the young CEO shops around Houston and Texas in search of even more opportunities to continue the company's relentless growth.

Though he wouldn't mention names, Eberhart suggested that at least two smaller oil field service providers are on Canary's radar.

And Canary may not be the only one looking to grow through mergers or acquisitions. A consolidation of the dozens of smaller wellhead service companies has been anticipated for some time but has yet to materialize.

The collapse of natural gas prices and the shift within the industry that it forced may have delayed many consolidation deals that would have otherwise come about. Though Canary managed to keep growing, many of its peers had to focus on merely surviving the transition to more crude oil and natural gas liquids extraction while gas producers sought out other demand centers for the huge volumes of gas the United States now produces and holds in reserves.

Eberhart said he expects consolidation of oil field service providers to pick up pace this year. The reasoning behind this prediction, he said, is that Canary has come to appreciate how the big oil and gas producers prefer dealing with larger oil field service companies, especially those that demonstrate maturity in the industry and a "strong safety culture."

Winning financing from banks has also become easier as Canary has grown in size, he added. Other companies are now starting to follow those lessons and begin growing through acquisitions, as well.

"A lot of mom and pops, and medium and large companies, are consolidating these days," Eberhart said. "E&Ps [exploration and production companies] really want bigger service companies."

Though still much smaller than the larger rivals it will be competing for business with in Texas, Canary's young executive team insists that it is not looking to sell its own firm and cash out. Eberhart says he sees a "whole second act" coming soon to the Bakken Shale story, and a lot of activity is expected in Ohio this year.

And though seemingly saturated, Canary sees plenty of business opportunities in the old industry haunts in Texas and Oklahoma, as well. Where it finds it difficult to make inroads directly, the expanding firm can always purchase other companies that have already carved out a niche in the oil patch.

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