Tank Trailer Demand Booming, Spurred by Oil and Gas Drilling

A surge in tank truck business, spurred by oil and shale gas drilling, is fueling an “incredibly hot” market for tank trailers to haul crude oil, sand and related products, industry officials said.

Demand to haul those products, as well as water, has helped boost tank volumes 16% this year, outpacing the 3.1% growth in overall truckload volume, according to American Trucking Associations. Flatbed carriers serving areas such as the Marcellus shale gas formation centered in Pennsylvania also are gaining business (10-10, p. 3).

“The market is hot, incredibly hot,” said Jim Miller, vice president of Walker Group Holdings, whose Brenner tank trailer division serves the oil and gas business. “You can’t build trailers fast enough.”

At trailer maker Polar Corp., oil and gas equipment leapt this year to 29% of the company’s business from 11%.

“We are very bullish about demand for that equipment,” said Ted Fick, CEO of Polar, noting that the market began to take off late last year.

Well drilling has grown 17% in 2011, according to oil-field services firm Baker Hughes Inc. A single well can generate 9,000 truckloads of business, an industry source said.

“The oil and gas exploration is really helping our business,” Greg Heyer, vice president of sales and marketing for Heil Trailer, told Transport Topics. Demand is strong and is outpacing supply, Heyer said, for trailers to haul crude oil and sand. That prompted Heil to add manufacturing capacity, Heyer added.

Heyer described the market for that equipment as “crazy.”

Fick said he anticipates growth will continue for five more years, with a potential tripling of manufacturing compared with 2009.

For competitive reasons, all of the officials were reluctant to disclose specific business volumes.

Demand is strongest for vacuum and crude oil trailers in Texas, with additional regional strength in North Dakota, Pennsylvania, Oklahoma and Arkansas, Miller said.

Increasing exploration in those states, as well as Canada’s oil sands in northern Alberta, has triggered other market changes, including multiple acquisitions and a planned public stock offering.

There have been at least seven energy-related acquisitions, and fleets such as Quality Distribution Inc. have said they are considering more.

Among the Canadian acquisitions were Trimac Transportation’s purchase of Benson Tank Lines and Select Energy Services’ acquisition of Riverside Transportation.

In the United States, Reladyne LLC acquired Derrick Oil and Supply, a Texas firm, and Select Energy Services Inc., Houston, bought Riverside Transportation, Carlsbad, N.M.

Quality earlier this month announced it is buying Greensville Transport, an intermodal tank container hauler and depot operator for as much as $9 million.

“This [Greensville] deal is an indication of the strong [mergers and acquisitions] pipeline for Quality,” said a report issued by Kevin Sterling, a BB&T Capital Markets analyst. “This is just the tip of the iceberg . . . especially in the core bulk and water transportation businesses.”

In addition to acquisitions, privately held Frac Tech Inc., which provides materials and trucking to exploration companies, has said it intends to sell as much as $1.15 billion in stock.

Energy exploration also triggered extensive social and economic changes in cities such as Williston, N.D., and Midland, Texas, where unemployment is as low as 2%.

Chris Broussard, president of the Oilfield Trucking Solutions unit of Chesapeake Energy Corp., told TT that a taco chain in Williston put fliers on its orders offering starting wages of $15 an hour, more than double the national minimum wage.

“The reality is that these local businesses are having to compete with oilfield-related energy companies,” Broussard said. “There are lots of people who have taken up temporary residence just to work in these cities.”

Exploration has revived eastern cities such as Williamsport, Pa., where there was “nothing going on economically for 25 years” until Marcellus shale gas drilling began several years ago, said Pete Miller, assistant vice president of sales for tank carrier Bulkmatic Inc.

Exploration could even boost rail shipments, said a report from Wolfe Trahan, which noted a 300% rise in rail crude oil shipments this year because of demand and tight pipeline capacity.