Russ: Hi I’m Russ Capper and this is The EnergyMakers Show coming to you today from Oklahoma City and I’m very pleased to have as my guest John Carnuccio, the President and COO of Centek. John welcome to the EnergyMakers.
John: Thank you. Thanks for having me.
Russ: You bet. Tell us about Centek.
John: Well Centek here in Oklahoma City we’ve been in operation since 2012 and we manufacture a product called the Centralizer and associated stop collars that go with it. Our primary market here in Oklahoma City is North America which would include the U.S., Canada and Mexico.
Russ: Okay. And you keep referring to here in the U.S. because the company’s headquarter is in the U.K. and that’s where it was founded right?
John: Yes. The company was founded in the U.K. in Devon, England in 2001 and saw quite a bit of growth in that first decade if you will internationally and decided to take on the North American market so in 2012 and that’s how Centek, Inc. came to be.
Russ: Okay. In 2012 there getting to be quite a bit of activity here in the U.S.A. right?
John: Very much so. The shale revolution was well on the way and the horizontal drilling was a very appropriate utilization application for our product.
Russ: Sure, okay. And so today that’s the primary market here in the U.S. – or the largest market for you as horizontal wells, right?
John: It actually if you really look at it it’s the largest market internationally was well. If you just look at rig count there’s more rigs in North America operating than there is internationally in the rest of the world.
Russ: Well we’ve been championing the success here in the U.S. for quite some time, I’d love to hear the story though too. In fact, comparatively speaking, don’t want to get you in trouble with headquarters, but do you do more business here than they do outside?
John: In terms of volume of products it’s very similar. In terms of revenue because their market demands bigger sizes than ours – the shale market requires more of the smaller sizes – so from a revenue standpoint they’re a little bit bigger than us; plus they’ve been around a lot longer than us. They’ve got a little bit more of an established market than we do, but we’re well on their heels in 5 years.
Russ: Interesting. So in my preparation for meeting with you I understand that what Centek did with centralizers is that you were the first one to use essentially a single piece of metal. Do I have that right?
John: Absolutely, yes.
Russ: That makes a big difference?
John: That was major innovation in the centralizer product at that time was the single piece design which now allows the entire product to be fully heat treated. Therefore it makes it stronger, it makes it more responsive to the issues that you find downhole and just allows much higher performance, especially with horizontal drilling, which puts a whole different type of stresses on not just the product itself but the casing that’s going downhole. So it needs a lot more help to get to the bottom of the well.
Russ: That’s interesting. So today that’s been copied by competitors.
John: Oh yes. We’re finding in the last couple of years during – the industry just kind of went through a bit of a downturn in the last couple of years and what we found during that time is that we’ve got a lot of companies that now are copying the Centek design and the Centek product. Now copying doesn’t mean they’ve got it right; what copy means is they’ve got something that looks similar.
And so they’re going to market – and a lot of these are companies out of India and China – and they’re going to market and they’re touting this Centek-like product – even in some cases using our name. So we’ve found ourselves now in a different kind of competitive situation than in the past where we were competing design against old style design, now we’re competing against these copycats; these lookalikes if you will.
Russ: Well that’s supposed to be flattering. Do you find it flattering?
John: Imitation, the highest form of flattery, which really tells us we’ve arrived and really made a dent because now you have everybody – and I mean everybody just about – in the business has a Centek copy. They haven’t quite got it right yet so we’re trying to stay ahead of the pack if you will and still providing the best product out there.
Russ: You probably benefit from it somewhat. I was an old IBMer back in the IBM Big Blue days and it was always known that a buyer was safe in choosing IBM even though there were lots of good technologies coming along, so you should still be – are you doing well? Let me ask that question.
John: Yeah, actually the industry has picked back up and our market share has grown actually. We’re doing well; the market is not quite the size it was 2 years ago but eventually maybe over the next couple of years we might start to approach that again. But in the meantime we’ve been fairly successful in growing our market share and yes, that brand now is highly recognized internationally for being the premium, top of the line, best quality product out there. So that imitation, we just tell them don’t judge a book by its cover and don’t fall for those cheap imitations.
Russ: And it’s made right here in Oklahoma City.
John: Right here in Oklahoma City; well over almost a million and a half of them made in the last 5 years which mean they’re downhole with no problem.
Russ: Okay. How many employees do you have today?
John: Today we’ve got 54 employees here.
Russ: Okay, is that the highest or were you higher?
John: No, we were a little higher before the downturn but the other thing that we’ve done, our workforce here is highly engaged and very much involved in the business; everybody down to the machine operators on the floor. We spent the downturn actually becoming highly efficient through everybody’s involvement and innovation if you will in our production processes, so we’re actually able to operate now at a much higher efficiency rate than we did before. But before the downturn we were approaching 90 employees.
Russ: So tell us about the future. I mean there has to be other ideas and similar products that entice you at times.
John: Yes, Centek is always looking at the challenges of the market and new markets to get into; the deep water market which is not new per se but it’s the newest frontier if you will. We continue to develop new products with new capabilities to meet the challenges of the evolving market. And we know with today’s oil prices and today’s challenging market and the competitive nature and operators trying to keep their costs low we keep looking at ways to meet their needs and have the right products to meet their challenges. And so we’re constantly evolving and looking at the future in terms of what complimentary products we could look into to continue to grow the company as the industry recovers.
Russ: Well it sounds like you’re aimed in the right direction but John I really appreciate you sharing your story with us.
John: You bet my pleasure.
Russ: You bet. And that wraps up my discussion with John Carnuccio, President and COO of Centek, Inc., and this is The EnergyMakers Show.
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