Used oilfield equipment jumps as low price ‘gong show’ subsides

The uptick in oil and gas activity has more companies looking to buy and sell used equipment, and that means Marlon Ellerby’s phone is ringing with requests for quotes.

“The values seem to be coming back,” says the president and chief executive officer of Calgary-based Energy Auctions, a brokerage and auction company focused on oil and gas process equipment.

“We’re seeing plants that cost $500,000 now coming in at $350,000 or $375,000, so it’s not as bad as what it was in the gong show of 2015.”

After the price floor fell out from the second-hand market in 2014, process equipment that would have been valued at $100,000 was only worth $20,000–$40,000 in 2015. The only people selling at such low values were those who absolutely had to, Ellerby says.

Producers now can mostly turn a profit at today’s commodity prices, and that has renewed demand for used equipment. Ellerby says pump jacks are particularly good sellers. Separators, tanks, line heaters, compressors—pretty much any surface equipment in oil and gas operations—are also moving as both buyers and sellers come to terms with the current market values.

“On the buying side, a lot of engineering firms are calling us looking for equipment,” Ellerby says.

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Most of the equipment changes hands in western Canada, but Energy Auction is a global business with sales in the U.S., Cuba, Dubai and Australia. “The Permian Basin is very busy. Australia is really busy right now,” Ellerby says.

There’s no secret about which basins are busy and which aren’t, but Ellerby is always mindful of tipping his cards. The ranks of oil and gas equipment brokers have swollen in recent years after so many industry layoffs. If somebody knows somebody with equipment for sale, a new broker is born. The barrier to entry in used equipment brokering is easy to jump.

What’s more difficult is building the relationships and networking with heavy hitters—you want them to think of you first when they have equipment on their minds.

It helps if you have four contracted employees in key oil and gas centres around the globe, as Energy Auctions does. Canadian equipment is a premium product in other parts of the world.

“Canadian equipment—due to the regulations and safety protocols, the CSA standards—is built to a higher standard than anywhere else,” Ellerby says. “Along with our weak dollar, this makes it very attractive to buyers of equipment outside of Canada.”

Ellerby’s auctioneering experience also sets his company apart. Coming from a background in agriculture, an industry no stranger to auctions, he launched Energy Auctions in 2007. The operation doesn’t pretend to compete with the likes of Ritchie Bros. Auctioneers and others, but Ellerby’s content with his niche.

As an auctioneer, Ellerby often works with equipment brokers who typically handle one piece of equipment at a time.

“If you need it gone, an auction will come in lock, stock and barrel,” Ellery says. “You go into a yard, set up an auction and sell off 600 or 700 lots.”

Some believe that selling prices are lower in auctions compared to brokered equipment sales, but “the market is the market,” Ellerby says.