Lloydminster– Astec Safety Inc. of Lloydminster is adapting with the times, both in having dealt with the downturn in the oil sector and changing how safety courses are taught. Now, with a solid grip on the online future, the company is forging ahead.
On Feb. 22 Pipeline News spoke to Jeff Mulligan, former mayor of Lloydminster from 2009 to 2013, who is now one of four partners behind Astec Safety. He joined in March 2016. The other partners include CEO Chris Johnston, who is also the chief innovation officer. Grant Klippenstein looks after sales and business relations. Vern Fallscheer takes care of the shop and service.
One of Astec’s new additions is a mobile live fire simulator, introduced last fall.
Formerly the CEO of Common Wealth Credit Union (1997-2009), Mulligan has an ownership interest in several other businesses. He teaches leadership development training to CEOs and senior executives, for instance, and has been contracted by both the Saskatchewan Association of Rural Municipalities (SARM) and Saskatchewan Urban Municipalities Association (SUMA) to teach municipal leadership. He spends most of his time with Astec, focusing on financial aspects and strategic planning.
Four years ago, Astec Safety moved into the former Peavey Mart building on the north side of Highway 16, on the west side of Lloydminster.
“We’ve seen the economic impact of the downturn,” Mulligan said. The company adapted by changing its business model. “We decided our growth strategy would be around a licensed branch model.”
They are not technically franchises according to Alberta regulations. Mulligan explained, “We have licence agreements.”
They sold the assets and operations of their Provost and Bonnyville, Alta., branches to their respective owner-operators. The sales brought in capital so the company didn’t have to just rely on retained earnings. Myterra Ventures Inc. purchased Provost, under previous manager of training Ed Masson. They had previously talked about growth strategies as far back as 2011 to expand across Western Canada, including Fort McMurray and points east.
In the Bonnyville area Primco Commercial LP, a division of Primco Dene, is the Astec Safety owner-operator. They own a casino and several local businesses around Cold Lake including a large oilfield camp services company. Primco was interested in Astec’s Bonnyville Branch. With a local presence in the market, Mulligan said it was a compelling reason to move forward. That happened in January 2016, the month the price of oil hit US$26 per barrel.
James Blackman is the CEO of the Primco group of companies. Mulligan noted that during the last downturn, Blackman acquired companies.
Mulligan explained that during a downturn, you know your worst case revenue scenario, and companies can be purchased at a depreciated value.
“Those are the two we’ve done so far,” Mulligan said. The intention is to retain Lloydminster as a corporate location, at this time, and look for new opportunities in Alberta, Saskatchewan and British Columbia.
Astec also has eight active memorandum of understanding holders who are third-party trainers instructing Astec courses in their markets. These include Lakeland College and trainers in Grande Prairie, Fort McMurray, Calgary, Saskatoon, Regina, Vancouver and the Maritimes.
Online future
Mulligan said the single biggest growth area is online learning. Workplace Hazardous Materials Information System (WHMIS) is a good example.
“The biggest seller is ground disturbance,” he said of Astec’s online offerings.
The Alberta Common Ground Alliance is the keeper of the standard for ground disturbance. “You have to become an endorsed provider,” he said. They were the first to offer an online course, launched on June 15, 2015. Now there are a few other providers.
Roughly 80 per cent of their ground disturbance classes are taken online.
Other courses now available online include confined space, hours of service and basic fire. Some companies do practical training as well to create a “blended” model.
Astec Safety can provide learning management software and systems and create online portals for larger companies.
Mulligan noted that during a downturn, you can’t give up on safety training, so you have to look at how you can do it cheaper. “There’s now a lot of talk of blended learning – getting theory online, but perhaps having practical skills in person,” he said.
The ground disturbance course take 3.5 hours to do online, versus eight hours in person. This is possible for Astec Safety because the training is essentially one-on-one.
“Basically, any classroom course, you can cut (the time) in half,” he said of online courses.
Mobile power equipment courses are all in class now, but that, too, is moving to an online environment. “I think blended learning is where that is going to land,” he said.
Some older industry people are skeptical of online training, Mulligan noted.
For testing, he noted, “We have an online proctored version which films and records you.”
The terminal must have a camera, i.e. a webcam like those built into most laptops, to offer a proctored exam.
Orientation training is another offering they can provide, including site orientation as well as broader corporate orientation. This is particularly useful for contractors and turnarounds, he noted. Workers can log in and do it (on their own time) and have it complete before arriving onsite for work.
Surviving the downturn
Like nearly all oilfield services companies, Astec Safety has spent the last few years enduring the toughest downturn in the oilpatch in generations.
As mentioned above, they sold off two locations. In Lloydminster, they reduced 3 ½ positions out of 18. Mulligan said, “We did reduce our use of contractors,” but he added they tried to maintain full-time personnel.
In terms of services and sales, they saw a reduction of around 30 to 35 per cent up to September 2016, when things started to turn around. Training had also declined about 40 per cent by the time it hit bottom.
Their slowest period was in the spring of 2015. Two to four people in every class was funded by government programs. By September of 2015, some of those people cancelled classes because they had jobs now.
By January and February of 2017, sales were down only about 15 per cent from their 2014 numbers, a substantial recovery. The shop recovered the quickest, with items like self-contained breathing apparatus, supplied air breathing apparatus and fall protection. He noted that gas monitor sensors have a lifespan, which drives some level of replacement and service business in spite of the economic downturn.
Fire extinguisher certifications came in, too. “We’ll see a guy back up a truck and trailer with 50 fire extinguishers,” Mulligan said. People are buying new breathing apparatus, too.
“Much of our growth has been east of Lloydminster,” he said, pointing out the Edam and Rush Lake areas, areas where Husky has been active.
Husky Energy is their largest client, so their talk of a new 30,000 bpd asphalt refinery on the east side of Lloydminster shows promise for the company.
Run a great company, that’s your exit strategy
Astec Safety Inc. partner Jeff Mulligan also provides leadership training to businesses and municipalities. Some of Mulligan’s business philosophy comes out when you ask him about the future.
He said, “The future in our business is in finding strategic partners. When we talk about survival, we talk about change. If we take a traditional view of how we grow our business, of how we fund our business, we will likely all fail, at some level. What I’m seeing, with the 30- to 50 year-old entrepreneur, is a way different view of what is proprietary, and what is eligible for partnering, and what is eligible for joint venturing and sharing. They’re not as protectionist. What you’re going to see is not just best-practice sharing. I think you’re going to see more partner work. I think you’re going to see more joint venture work. I think you’re going to see more people saying, ‘Well, I’m really specializing in this. I’m not going to compete. We’re not going to eat each other’s margins.’
“I think we’ll see more of that consolidation and collaboration, because the next generation coming up wasn’t brought up with that protectionist (view): ‘I built it, I designed it. I’m going to manufacture it. I’m going to distribute it. I’m going to support it.’ They’re saying, ‘I just need a piece of that business, and I’ll do it very well. I’ll get the efficiencies I need, because I’ll create the volumes I need through partnering.’
“If anything good comes from these downturns, you find out how to run your company more effectively, more optimally and leaner.
“It’s almost an inevitable correction to affluence. You get to a point where, you see some people cut half their staff. Others, like us, have cut three or four out of 18. But what you found out was you can run the company with less fixed costs, and you can create margins, and you can create more efficient processes. So, as desperate as it felt in 2015, and the first part of 2016, what we take away from it is a company that much better understands its processes and has re-engineered many of them,” Mulligan said.
“I think prior to the downturn, people were always looking for the home run, the one swing, one-hit wonder. I think people now realize that success is made up of a whole bunch of small successes, done very well. Rather than that one swing, I hit it out of the park, I sold the company and capitalized on this, I think what people are realizing now – they talk about succession, what’s your exit strategy. Well, shouldn’t your exit strategy be serving your customers well, providing value, and running a great company? Then you have all sorts of exit options.
“I try to get people to quit talking about exit strategy. I get them to talk about what their strategy is to be a great business, and to be valuable to your customers. Then, you know what? You’ll have all the exit strategies you want when the times comes.
“A whole bunch of people, in the good times, were really running their companies towards some imagined exit strategy. ‘I’m going to leave this way.’
“Yes, you have to be cognizant of what your exit strategies might be, but the best medicine that’s come out of this is this: What we need to do is run a great organization, that adds value to the community and our partners. We won’t have to worry, because the best exit strategy is, 50 years from now, Astec Safety has great people running it, and does great things in the community,” Mulligan concluded.
