Pipeline Inspection
Overview. We believe that the Pipeline Inspection segment is a leading provider
of independent inspection services to the pipeline industry. We provide essential
services for pipelines, gathering systems, local distribution systems, equipment,
and facilities to our well-established customer base. We provide inspection
to oil and natural gas producers, public utility companies, and other pipeline
operators that are required by law to inspect their gathering systems, storage
facilities, infrastructure, distribution systems and pipelines. Our approximately
120 pipeline inspection and integrity service customers include oil and natural
gas producers, pipeline owners and operators and public utility companies throughout
North America. We also have entered into a joint venture with CF Inspection,
a nationally-qualified minority-owned inspection firm affiliated with one of
Holdings’ owners. CF Inspection serves energy companies that require a
minority-owned vendor. We own 49% of CF Inspection and Cynthia A. Field, the
daughter of Charles C. Stephenson, Jr., owns the remaining 51% of CF Inspection.
In 2017, CF Inspection represented approximately 3.5% of our consolidated revenue.
Pipeline Inspection offers independent inspection services for the following
facilities and equipment:
Transmission pipelines (oil, gas and liquids);
Oil and natural gas gathering systems;
Natural gas processing plants;
Pump, compressor, measurement, and regulation stations;
Storage facilities and terminals; and
Gas distribution systems.
Operations. Oil and natural gas producers, public utility companies, and other
pipeline operators are required by federal and state law and regulation to inspect
their pipelines and gathering systems on a regular basis in order to protect
the environment and ensure public safety. At the beginning of an engagement,
our personnel meet with the customer to determine the scope of the project and
determine related staffing needs. We then develop a customized, detailed staffing
plan, utilizing our proprietary database of more than 16,000 professionals.
Our inspectors have significant industry experience and are certified to meet
the qualification requirements of both the customer and the Pipeline and Hazardous
Materials Safety Administration (“PHMSA”). As the industry continues
to adopt new technology, demand has increased for inspectors with greater technical
skills and computer proficiencies. Our customers require inspectors to undergo
specific training prior to performing inspection work on their projects. We
utilize the National Center for Construction Education and Research and Veriforce
training curricula to train and evaluate employees, along with other resources.
In addition to assignment-specific training, welding inspectors and coating
inspectors also must meet special certification requirements. During the years
ended December 31, 2017, 2016 and 2015 we employed or engaged an average of
1,145, 1,147 and 1,392 inspectors, respectively, in the U.S. and Canada.
Our scope of services include the following:
Project coordination (construction or maintenance coordination for in-line
pipeline inspection projects);
Staking services (marking a dig site for surveyed anomalies);
Pig tracking services (mapping and tracking of third-party pipeline cleaning
and inspection units, called pigs);
Maintenance inspection (third-party pipeline periodic inspection to comply
with PHMSA regulations);
Construction inspection (third-party new construction inspection/oversight
on behalf of owner);
Ultrasonic nondestructive examination services (using high-frequency sound
waves to detect pipeline imperfections); and
Related data management services.
Integrity Services
Overview. The Integrity Services segment, comprised of our Brown operations,
provides hydrostatic testing and related services to the pipeline industry,
including major natural gas and petroleum companies, as well as pipeline construction
companies. We focus on helping our customers meet regulatory pipeline integrity
requirements. Our primary emphasis is on hydrostatic testing projects on new
and existing pipelines required to maintain compliance with state and federal
regulations. We perform all aspects of pipeline hydrostatic testing including
filling, pressure testing, and dewatering. Unique test conditions, such as ultra-high
pressure tests and pneumatic or nitrogen testing, are performed on a routine
basis as well. We provide services on newly-constructed and existing natural
gas and petroleum pipelines.
Operations . Oil and natural gas producers, midstream operators, public utility
companies, and other pipeline operators are required by federal and state law
to perform routine maintenance on their pipelines and gathering systems on a
regular basis. In addition, operators and or pipeline construction companies
are required to integrity-test newly-constructed pipelines prior to placing
the pipelines in service. In our Integrity Services segment, we contract directly
with pipeline owners or with pipeline construction companies to provide testing
services. We own and operate our own fill and testing equipment, including specially-designed
test trailers. We use a range of fill and pressure equipment to accommodate
projects of various sizes. The segment averaged 20, 23 and 33 field technicians
performing the testing services during the years ended December 31, 2017, 2016
and 2015, respectively.
Water Services Segment
Overview. Through our Water Services segment, which specializes in water and
environmental services, we currently own and operate nine salt water disposal
facilities (which excludes one salt water disposal facility In Pecos, Texas
in the Permian Basin, Pecos, which we sold in early 2018 and which is excluded
from the description below), eight of which are in the Bakken Shale region of
the Williston Basin in North Dakota and one of which is in the Permian Basin
in west Texas. Four of our facilities are connected to ten different pipelines
owned by various energy companies in both North Dakota and the Permian basin.
In addition to owning and operating these nine salt water disposal facilities,
we manage another salt water disposal facility in which we own a 25% interest.
Operations. Water Services currently generates revenue by providing the following
services:
Flowback water management. We dispose of flowback water produced from hydraulic
fracturing operations during the completion of oil and natural gas wells. Fracturing
fluids, including a significant amount of water and proppant, are injected into
the well during the completion process and are partially recovered as flowback
water. E&P companies have significantly increased their volumes of completion
barrels of water in various formations in order to get higher productions yields
when the wells are put into production. When it is removed, this flowback water
contains sand, salt, chemicals, and residual oil. The oil and natural gas producer
typically either transports the flowback water to one of our salt water disposal
facilities via pipeline or by truck or contracts with a trucking company for
transport. Once the water is received at the salt water disposal facility, we
treat the water through a combination of separation tanks, gun barrels, and
chemical processes, store the water as necessary prior to injection, and then
inject the water into the salt water disposal well at depths of at least 4,000
feet after recovering the skim oil. Like produced water, we assess the composition
of flowback water in our facilities so that we can maximize oil separation and
treat the water to maximize the life of our equipment and the wellbore. We believe
our approach to scientifically and methodically filtering and treating the flowback
water prior to injecting it into our wells helps extend the life of our wells
and furthers our reputation as an environmentally-conscious service provider.
Produced water management. We dispose of naturally-occurring water that is
extracted during the oil and natural gas production process. This produced water
is generated during the entire lifecycle of an oil and natural gas well. While
the level of hydrocarbon production declines over the life of a well, the amount
of salt water produced may decline more slowly or, in some cases, may even increase.
The oil and natural gas producer separates the produced water from the production
stream and either transports it to one of our salt water disposal facilities
by truck or pipeline or contracts with a trucking company to transport it to
one of our salt water disposal facilities. Once we receive the water at one
of our salt water disposal facilities, we filter and treat the water and then
inject it into the salt water disposal well at depths of at least 4,000 feet
after recovering any skim oil. We also maintain the ability to store salt water
pending injection. All of our existing facilities were constructed using completion
techniques consistent with current industry practices. We periodically sample,
test, and assess produced water to determine its chemistry so that we can properly
treat the water with the appropriate chemicals that maximize oil separation
and the life of our wells.
Byproduct sales. Before we inject flowback and/or produced water into a salt
water disposal well, we separate the residual oil from the salt water stream.
We then store the residual oil in our tanks and sell it to third parties. The
residual oil recovery can be significant when substantial drilling and completions
occur near our salt water disposal facilities.
Management of existing salt water disposal facilities. In addition to the
salt water disposal facilities we own or lease, we own a management and development
company that manages an additional salt water disposal facility in North Dakota.
Our responsibilities in managing this salt water disposal facility typically
include operations, billing, collections, insurance, maintenance, repairs and,
in some cases, sales and marketing. We are compensated for management of this
facility based on a percentage of the gross revenue of the facility or a minimum
monthly fee.