Premier Pipe L.P. Supplies the Pipe for Oil and Gas Production

SCOA Subsidiary has another year of solid sales in 2005; Looks for increased demand in 2006

Like the New England Patriots, Premier Pipe is a recent three time champion, winner of the President's Trophy given annually to SCOA's top performing subsidiary. And much like the Patriots, Premier Pipe will have another outstanding year in fiscal 2006, setting a new standard for themselves with $500 million in sales.

Premier Pipe has achieved their success incrementally, by consistently providing superior products and service, and innovating with long term contracts with their top customers. And if success is preparation and luck, they have had some luck too.

"This business has historically been very cyclical but the fundamentals have changed to a great degree," explained Ron Dewan, Chairman and CEO of Premier Pipe. "You will see drilling escalate as demand for oil and gas continues to grow. And with increased drilling, our business will continue to expand."

Premier Pipe: Texas Meets Tokyo

Premier Pipe sells casing and tubing to the oil and gas industries and in recent years has increased their logistics expertise, sending crucial OCTG (Oil Country Tubular Goods) to active wells from bonded and insured stockyards as it's needed by its customers.

Premier Pipe was established by Ron Dewan, Mark Kays, the current president of SC Global Tubular Solutions LLC (SCGTS) and SCOA executives in October 1987. SCOA and Mr. Dewan established the relationship in 1980 and in the ensueing years developed strong customer relationships, with SC providing the high quality casing and tubing the industry required.

By late 1987, all parties thought the time was right to officially join forces and build a business together.

"SCOA set up the financing and together we formed our team of people," said Mr. Dewan. "Our original business plan foresaw a company that could grow to $20 million in annual revenue."

That proved to be a conservative estimate. Premier Pipe did $20 million worth of revenue in its first year and has continued to grow and prosper since then.

"We were very innovative early in the game," said Mr. Dewan, explaining the success of Premier Pipe. "We cultivated alliance programs and made long-term agreements that gave us additional purchasing power with the steel manufacturers."

Demand Upswing

In the last down cycle for the U.S. oil industry in 2002, there were 830 operating oil and gas rigs. Today there are 1480 and that number will continue to increase, according to Mr. Dewan.

In addition, the wells the oil companies are drilling are becoming deeper and more challenging. With advances in technology, wells can drill as deep as 30,000 feet, and the deeper the well, the more pipe that is required.

The average well depletes about 30 percent of its oil and gas each year, so there are always new wells that need Premier Pipe's tubular products. And energy companies are constantly exploring for new sources of oil and gas to build up their reserves, which are their primary asset.

In recent years, Premier Pipe has increased business with the burgeoning natural gas industry. 85 percent of active rigs in the U.S. now drill for natural gas.

"We are very active with natural gas drillers," said Mr. Dewan. "That's where the industry is going."

Premier Pipe is also selling more of their premium thread products which have a higher value addition than their regular products. The high-quality casing and tubing is popular with deep onshore and offshore drilling.

Most of Premier Pipe's customers are in the lower 48 states and spread throughout what is called the Gulf Coast and Mid-continent regions: Texas, Oklahoma and Louisiana. Recently, Premier opened Rocky Mountain offices in Denver, Colorado and Casper, Wyoming.

They buy their casing and tubing from a variety of manufacturers including V&M Tube and SCOA affiliate V&M Star. Other major sources include Lone Star Steel, Maverick Tube, Newport Steel, TCA and Voest Alpine. Their chrome tubing is supplied by Sumitomo Metals through SCOA Houston and is a very valuable part of their product line. Top customers include BP, XTO Energy, Anadarko Petroleum, BHP, Newfield Exploration and ExxonMobil.

Since about 70 percent of their business involves long-term agreements, energy companies depend upon Premier Pipe to get their tubular products to the well sites in a timely and efficient manner. Premier Pipe's success in entering into long term agreements with steel mills on the one end, and oil companies on the other, is a testament to their marketing prowess.

Premier Pipe has 40 employees at their five offices in Houston, Dallas, New Orleans, Denver and Casper, Wyoming. When talking to prospective customers, Premier presents themselves as a "united front" with the Tubular Group in Houston as well as other SC Tubular companies.

The iTIMS (Internet Tubular Information Management System) that SCGTS currently owns to aide all SC Tubular Group's implementations of OCTG Supply Chain Management Projects around the globe was originally developed as a joint effort between Premier and the SCOA Tubular Group.

Defending Their Crown

"It was very exciting. We are always thrilled and proud to win," said Mr. Dewan of the 2004 President's Award. "And of course, the employees of Premier will do all that is possible to perform at the highest level this year, and we hope to put ourselves in a position to win this very prestigious award again."

Premier Pipe's long term agreements with large energy companies ensure that busines is poised for growth into the foreseeable future

"I believe the strong fundamentals of the energy industry will continue beyond 2006FY, and Premier will remain a key for the future success of the SCOA Tubular Group," said Makoto Horie, SVP, SCOA Tubular Group and GM of the Houston office.

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