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Exterran plans temporary closure due to oil slump
By Kalea Hall
YOUNGSTOWN
The Mahoning Valley is no stranger to the impact of falling energy prices.
First, it was Vallourec Star. Second, it was TMK IPSCO.
And then Vallourec, again and again. Then Parker Hannifin.
Now, Exterran has been hit by the downturn in oil and gas.
The Houston-based energy company, with an oil and gas production equipment plant at 2572 Salt Springs Road, announced Friday it had let go of 11 employees and would let go the remaining 57 by the end of March, thus effectively closing the operation – for now.
“Like others in the energy business, we have seen a downturn in oil and gas,” said Susan Moore, head of corporate communications for the company. “We fully expect to return to full production. We just don’t know when that will be.”
Since June 2014, oil prices have plunged. The cost for a barrel was once $100 and above and now is about $37 a barrel, according to the U.S. Energy Information Administration.
Analysts say OPEC has not cut back on production, which has continued to cause the drop in oil prices. The global competitors are able to still make a profit at the lower cost while U.S. producers have taken a hit and had to make cutbacks. The cutbacks affected companies that support the industry, such as Exterran.
“Nothing much has changed,” said Kurt Rankin, economist for PNC Bank. “Oil prices are falling further.”
PNC’s latest economic outlook shows oil prices going up to $57 a barrel by 2017. Although several local companies have taken hits, Rankin doesn’t believe this will bring down the local economy.
The Valley first saw the impact of the downturn in the industry in February when Vallourec Star, a plant that produces small-diameter pipe for hydraulic fracturing, announced a three-week shutdown.
At the same time, the TMK IPSCO pipe-threading plant in Brookfield laid off 10 percent of its workforce.
In July, Vallourec announced a workforce reduction of about 60 to 80 jobs effective in August.
Then Vallourec announced another workforce reduction in October. Details on how many employees were let go were not released, but the reduction occurred in all areas of the company’s production and administrative departments for both hourly and salary positions. All received a severance package.
Also in October, the United Steel Workers and Cleveland-based Parker Hannifin came to an agreement on a shutdown package for the company’s hydraulic-gear-pump plant in Youngstown where 137 work. The shutdown has an 18-month timeline.
A weakness in a variety of markets the plant serves, from construction to oil and gas, and an increase in global competition led the company to consider the closure, the Cleveland-based company said.
Now, Exterran leaders will close the doors on a $13 million, 65,000-square-foot plant that opened in 2013.
“We have been right-sizing our business to align with market conditions,” Moore said.
When the plant opened, Gov. John Kasich touted the business as another rebound story for the Valley.
“We’ve seen lots of activity and it goes along with what’s an incredibly indomitable spirit – there’s something about Youngstown – I don’t know if it’s in the water, I don’t know what it is,” Kasich said at the May 7, 2013, ribbon-cutting for Exterran. “It seems like no matter how many times people get knocked down here, we just get back on our feet. It just makes such a difference, and now you’re seeing this whole Valley beginning to regenerate itself.”
The Youngstown/Warren Regional Chamber helped to bring the plant here by showing the company potential plant locations and coordinating a package of assistance to attract them to the area.
“We were in pretty stiff competition with an area in western Pennsylvania,” said Sarah Boyarko, senior vice president of economic development for the chamber.
Boyarko wasn’t surprised to hear about Exterran’s shutdown considering the industrywide challenges. “It’s disappointing news,” she said.
As far as other energy projects in the area, Boyarko said they are on hold until the industry recovers.
“It’s just one industry,” she said. “There’s a whole lot of opportunity in other industries. There still are pending opportunities in manufacturing and distribution to serve the energy industry.”