Getting to the Source of Used HDD

Quite simply, it’s all in the name.

Nothing fancy. A descriptor, a colon and the industry acronym. Source: HDD,it’s a source for horizontal directional drilling (HDD) products. You can’t getmuch more succinct than that. But, like most things, there’s more to it.

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Source: HDD specializes in used HDD products, but it’s not just some usedequipment lot where everything is sold as is. No, what Source: HDD provides arerefurbished machines and equipment. The products the company sells have beenthoroughly overhauled and restored to the original specs. Everything is tornapart and rebuilt from the ground up.

The company got its start in 1999, but didn’t formalize until 2000, when itmoved to a proper workspace with office, shop and yard, — a 5,000-sq ft facilityin Wichita, Kan. The company later moved to another facility in 2003 that hadtotal of 40,000 sq ft between two buildings. Recently, the company moved againto a larger facility in Hutchinson, Kan. The new headquarters is a 70,000-sq ftbuilding on 12 acres of land, which houses Source: HDD and its sister company,StraightLline.

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The whole idea for Source: HDD was to be a one-stop shop for directionaldrilling contractors, says Don Cary, president of both Source: HDD andStraightLine. By providing quality used products, Source: HDD allows smallercontractors to purchase equipment without breaking the bank.

“We had in mind to be the purchasing agent for companies,” Cary says.“Smaller drilling contractors don’t have purchasing agents on staff, and it wasour resolve to sort through available products and brands and help people pickand choose what is right for them.”

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The one-stop shop idea was furthered by the purchase of StraightLine, an HDDequipment manufacturer, in December 2003.

“It had always been our desire to make our way into a major supplier ofdownhole tools, wear parts and accessories for all brands of drillingequipment,” Cary says. “The acquisition of the StraightLine shop really allowedus to get a start with that because it was a complete, vertically integratedmanufacturing company that included everything from fabrication, machine shop,welding, painting — everything — [and the ability] to convert raw materials tofinished goods.”

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And because StraightLine was already associated with the drilling industry,it was a good fit with Source: HDD. Cary also had a previous relationship withthe company as a founding partner in 1984, during which time he helped developand deliver the company’s first drill in 1989. He left the company in 1998.

Although Source: HDD and StraightLine are separate brands, that separation isin name only. The companies share the same workspace, employees and revenue.There are 55 employees, and Cary expects the sales volume for the companies toexceed $10 million for 2006. The only difference is what the two companiesprovide.

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“StraightLine is all things new. Source: HDD is the equivalent, all thingsused,” Cary says.

Source: HDD purchases the equipment it sells through banks, contractors,auctions and, more and more, through trade-ins and consignments. During the pastsix years, Source: HDD has processed and sold more than 300 drills in additionto the accessories, parts and tools it also provides.

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Cary says he sees more trade-ins because contractors seem to be purchasingmore new equipment and getting rid of their older models in recentyears.

The Source
The majority ofthe drill rigs Source: HDD handles are 80,000 lbs of push/pull and smaller —compact to mid-size rigs. These rigs are ideal for communications, gas and powerutility work. The company does not seek to purchase maxi rigs (those with100,000 lbs of push/pull and more).

Maxi rigs are in high demand compared to the other size drills, Cary says.However, aside from the high cost and limited availability, Source: HDD does notpursue used maxi rigs because the machines tend to be sold from owner to ownerand not through dealers.

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Instead, Source: HDD sticks to what it knows. The company focuses onproviding work-ready equipment. Because of the company’s manufacturing shop, itcan re-weld and re-fit parts to restore older drills to original specs.

“Ourcompetitive edge in the market is providing equipment that’s ready to drill forpeople who are ready to go to work,” Cary says. “We don’t compete on price, butwe compete on quality.

“I think we’re unique in that way. It’s a differentiator for us from peoplewho broker equipment or people who sell as is. We do neither of those.”
Inaddition to refurbishing the equipment, Source: HDD runs the equipment through aseries of field tests — actually drilling with the equipment to make sure it’sready to go.

As a self-proclaimed purchasing agent, Source: HDD also helps its customersfind the right equipment and accessories for the job, Cary says. The first stepis knowing the job at hand. All the company needs to know is the soil conditionsand the type of job. From there, the proper rig size can be determined.

Once the right size rig is determined, Source: HDD can help buyers understandhow to build out their system with support equipment and tools, which willenhance the rig’s ability to perform work successfully, Cary says. Versatilitycomes in tool types, mud volume and appropriate back-reamers.

Some small and mid-size rigs, Cary suggests, can be improved with theaddition of a larger mud-pump, boosting drilling fluid volume.

Some contractors have a tendency to stick with what worked once, trying toapply certain tools too broadly, Cary says. Instead, the tools should be fit tothe conditions.

Source: HDD, as well as StraightLine, has made the push in recent years tofocus on manufacturing more parts, accessories and tools for the industry,followed by new and used drills.

The companies process and manufacture wear parts like wrench components; mixand storage tanks; and accessories such as pipe racks, reamers, bits and grips.

StraightLine produces the SL2020, a 20,000-lb mid-size rig, as its sole drillin the market. Cary expects to manufacture and sell 60 units this year.

Early Lessons
During the late 1990s,Cary worked as a consultant in the HDD industry. However, following the collapseof the HDD market in the early 2000s, he re-entered the manufacturing facet ofthe industry, starting Source: HDD.

“It was evident that it was a very different market — a very differentmarket,” Cary says. “Learning how to do business in a market that was depressedwas quite different than what we experienced in the mid-1990s that’sforsure.

“The market was heading down at a pretty high rate, and nobody had recognizedit yet. We figured out how to make the best of the market in that condition.”

Although Cary says the market is strong right now, that doesn’t mean it won’tface another stagnate period.

“I think [a down turn] will happen again,” Cary says. “The view of ourindustry, at least domestically, is that we’re looking at five good years aheadof us. I would tend to agree with that. But for one reason or sets of reasons,we’ll certainly face another slow down.”

Is Cary prepared for that? “I think the honest man would say, ‘I would liketo think so.’”

A Look Ahead
Cary’s estimation of fiveyears full of solid work is based on the evidence he sees in the continuedresurgence of the telecommunications installation work, such asfiber-to-the-home (FTTH), in the United States and the new life in the pipelinebusiness nationally and internationally.

In addition, the economy seems to have picked up again, Cary says. The amountof HDD work has caused a void in available large-scale drill rigs.

“It’s evident to everyone I talk to who runs bigger drills,” he says. “Peopleare looking for good used larger drills, and they’re almost not available.”

These factors along with the improved technology and increased ability of HDDrigs during the last 10 years have led to more installations that involve HDD.
“All those things will contribute to pretty solid work,” Cary says.

An Inherent Cycle
The ebb and flow ofbusiness is something Cary says he can’t avoid. He has seen the market collapseand rise again. Another downturn is inevitable. The same goes with the usedequipment business.

“The used equipment business is not as good now as it has been,” Cary says.“New equipment sales have found its legs. There is less available good usedequipment in the marketplace right now. People have bought it up and put it backto work.”

For the next several years, new drills will lead the market,Cary says.However, the inherent cycle of the business eventually will lead back to useddrills, while Source: HDD will be what it always has been — a source for usedHDD.

Bradley Kramer is assistant editor of Trenchless Technology.

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