Salomón Saba
Chief Business Officer
Walworth Group
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View from the Top

Historic Brand Survives Historic Times

By Pedro Alcalá | Fri, 05/29/2020 - 14:57

Q: What is Walworth Group strategy to maintain necessary operational volumes through COVID-19?

A: We have been dealing with the pandemic by relaying in our strong inventories and our supply chain partners. We also have established protocols to maintain operational efficiency. The industries we serve are among sectors of economic activity considered essential activities both in Mexico and in the US. We have experienced no major gaps in our supply and production lines. We have experienced difficulties and some projects have been canceled. Our supply chain has thankfully remained solidly reliable throughout the crisis.  

Q: What is Walworth Group structure within the Mexican oil and gas industry?  

A: The companies that make up Walworth Group could be divided into three major categories. First, is the valve manufacturing company. We are the largest and most important valve manufacturer in Mexico, and we are present in about 40 countries. As an international player we are very proud to be a Mexican enterprise. The history of our valve brand stretches back 180 years to the New York City heating systems of the 1840s. Second, Tubos y Barras Huecas (TBH) unit distributes steel pipes and bars throughout Mexico, this business unit that turned 40 years old. Finally, about six years ago, the group acquired its first service division through a company called GPT Services. It is well-known in the industry for its specialized services such as live pipeline intervention, which include services such as hot tapping, line stopping and live line welding. GPT is also a service contractor on the oilfield.

In recent years in Mexico, most of the operational volumes of these divisions were focused on exploration and production activities for the Mexican oil and gas industry. This is particularly true of PEMEX’s offshore operations, which was and continues to be our most important client. Recently, activity has been increasing in the downstream sector, specifically liquid storage terminals, which is a category of projects that has quickly multiplied lately thanks to new legislation. Natural gas transport, both by CENAGAS and private companies, is another growing sector that provides us a steady and increasing stream of work. Although it is too early to analyze, exploration and production activities have decreased in a manner that is proportional to lower oil prices. However, we are seeing an upturn in midstream activity both in Mexico and in the US. This is partly due to the many storage and transportation issues that the current oil crisis has created. This is accelerating the development of those projects, which is very encouraging for us.

Storage terminals represent the segment where greenfield CAPEX is currently developing and we can position ourselves as project suppliers from the ground up, almost as though we were EPC partners. This is different to our approach to the natural gas pipeline segment, where initial project investment might be drying up. We still want to continue being involved in that area through more brownfield modalities, such as capacity expansions, increase in interconnections, route management and maintenance contracts. We want to continue adapting our commercial structure to the types of projects we pursue, which allows us to develop new product and business lines. For example, we have recently gotten involved successfully in the supply of loading arms.

Regarding the industry’s upstream segment, there are a number of opportunities that we are exploring that come from an increase in activity from private operators. Through our services division, we have come in contact with private operators in onshore fields, and we have been working with some of them already for a while now, not only through services and component supply, but also through the supply and installation of wellhead trees. In this market landscape, it will be interesting to see what the future will bring for these fields. Efficiency will be the key element when it comes to the choices these operators will have to make.  

Q: What conversations are you having with your distributors?  

A: We have a national network of distributors in Mexico that serve a variety of industries and clients that go beyond oil and gas and into the general industry, these include mining, chemical, paper and water industries. This is the time to create new synergies between all these different types of economic activities in order to create sturdier structures of mutual support. This could allow us to work under better commercial and pricing conditions that we can then extend to our clients. Through more open communication with our distributors, we can be more involved about what they are dealing with on a case-by-case basis, which facilitates closing deals and ensuring current and future businesses. Through conversations and coordination, our company and our distributors can help each other identify potential clients.  

In this oil price-depressed market, the assumption is sometimes made that the market for new valves and components becomes more active due to a new and urgent need for necessary infrastructure and components that store and transport commodities, while operators wait for a better market to sell them in. What we have experienced is actually an increase in valve and facilities maintenance activities. The flexibility to participate in the market in more than one way has proven effective to navigate safer through the current turbulent waters.

Q: Which clients would you consider to be key drivers of your development and growth? 

A: In 2019, we signed a national frame agreement with PEMEX that covers valve supply and maintenance. The contract is very much active and it involves all of PEMEX’s divisions and subsidiaries. We also have additional contracts for valve supply that are more specialized to the needs of PEMEX Exploration & Production. We are also working a great deal with prominent midstream players in Mexico, especially in natural gas transport segment, where we have seen an upturn in activities after the terms of their agreements with the government were successfully resolved last year. We also play a role as a general adviser to the industry’s development. We host seminars and training sessions with oil and gas technicians to make sure the Mexican oil and gas industry operates with the highest quality standards, efficiency, safety and minimal environmental impact. In general, our portfolio and balance sheet will continue to be dependent on the oil and gas sector, despite our ongoing efforts for diversification in sectors that have even included incursions into the geothermal industry, water and wastewater market, power generation and maritime industry. In terms of growth, we are no different from other companies in our tier, 2020 demands quick adaptation and survival skills. Our strategy is quickly adapting and being revised constantly, focusing on preservation and adaptation.

 

Walworth Group is a supplier of industrial components and technical services to a number of sectors, such as oil and gas, energy and mining. Companies under their umbrella include Walworth Valves, GPT Services and TBH.   

Pedro Alcalá Pedro Alcalá Journalist and Industry Analyst