from reservoir levels to interstate pipeline standards. Additionally, Energy
Industries manufactures heat exchangers used in fabricating natural gas
compressor packages and other industrial applications.
Energy Industries fabricates natural gas compressor packages at its Corpus
Christi fabrication facility from components which are acquired from various
suppliers at market prices. Energy Industries maintains an inventory of
compressor and engine components at its Corpus Christi facility to support the
fabrication and repair of natural gas compressor packages.
Including its Corpus Christi, Texas location, Energy Industries maintains
twelve branch offices in Texas, Louisiana, Oklahoma, Arkansas and New Mexico.
Branch office personnel negotiate natural gas compressor package rentals and
sales, perform maintenance services for Energy Industries' fleet of rental
compressors and other natural gas compressor packages on a contract basis and
recondition Energy Industries' rental fleet packages when rental contracts
expire. Energy Industries also has facilities for fabricating natural gas
compressor packages at its branches in Midland and Houston, Texas and Lafayette,
Louisiana if market conditions require.
Natural Gas Compressor Package Rentals. Energy Industries maintains a
fleet of approximately 700 natural gas compressor packages of various sizes for
rental to natural gas producers and processors. Energy Industries rents natural
gas compressor packages under contracts which require monthly payments based on
a fixed fee or on the volume of gas compressed. The initial fixed term of a
natural gas compressor package rental is generally between three and 36 months
and thereafter continues on a month-to-month basis. It is typical for a
customer to continue to rent a package for a period substantially longer than
the initial term of the contract. Contract pricing, which is based on
prevailing market conditions, generally contains provisions for periodic rate
adjustments to reflect market changes.
Natural gas compressor package rental utilization is affected primarily by
the number and age of producing oil and gas wells, the volume of natural gas
consumed and natural gas prices. Average rental rates for natural gas
compressor packages are determined primarily by the demand for packages and
secondarily by the size and horsepower of a natural gas compressor package.
Natural Gas Compressor Package Sales. In addition to operating a fleet of
natural gas compressor packages for rental purposes, Energy Industries designs,
fabricates and sells natural gas compressor packages to customer specifications.
Energy Industries sells compressor packages to natural gas producers, gatherers
and transmission companies which expect the long life of their associated
reserves or pipeline to justify the capital cost of acquiring, rather than
renting, a natural gas compressor package. Most of Energy Industries' natural
gas compressor package sales are for larger, high horsepower packages.
Because of the relatively high capital costs associated with these units,
Energy Industries provides a capital lease financing option to its customers.
Under the terms of a typical capital lease, a purchaser will lease the natural
gas compressor package from Energy Industries for a period of between three and
four years at monthly lease rates. At the termination of the lease, the lessee
has the option to purchase the natural gas compressor package or return the
natural gas compressor package to Energy Industries.
Maintenance and Repair Services. Energy Industries provides on-site
maintenance services to its rental and sales customers and to other users of
natural gas compressor packages. Maintenance services provided by Energy
Industries include regular monitoring of compressor package operations and
performance of a standardized, routine maintenance program to equipment in the
field. Energy Industries sells compressor parts in connection with maintenance
service operations. Each branch location and each field technician maintains a
small inventory of commonly used natural gas compressor package parts. Routine
repairs to natural gas compressor packages covered under maintenance contracts
will be made from this inventory.
Natural Gas Compression Markets. Energy Industries conducts the majority
of its operations in established natural gas producing regions of the United
States, located in Texas, Louisiana, Arkansas, Oklahoma, New Mexico and offshore
in the Gulf of Mexico. Its customers are natural gas companies and pipelines
which are involved in the production, processing and transmission of natural