Exterran Corp. is consolidating its two Houston compression manufacturing/fabrication plants as it continues to reject low-profit orders.
By the end of the year, the 12001 North Houston Rosslyn Road facility will be closed in favor of streamlined operations at the 4444 Brittmoore Road plant.
The company reported a US$5.4 million net loss for the first quarter of 2019, compared to US$14.1 million of net income in the fourth period of 2018 and US$5.3 million of net income in the first quarter of last year.
Exterran Partners spun off Exterran Corp. in 2015 to operate its international services and global fabrication businesses. The parent company was rebranded Archrock Inc., which operates domestic gas contract compression services.
Andrew Way, Exterran president and CEO, said, “Since the spinoff, we have focused on improving returns, paying down debt, investing in the business and creating a stable cash flow business.”
Way said although the compression business has been booming, Exterran has rejected more than US$100 million in orders that didn’t meet its internal threshold for double-digit profit margins.
“Over time, we could fill factories with low-margin business, but it doesn’t help the cause,” Way said. “It doesn’t take a lot to figure out that if you continue to fill the factories with a lot of compression volume in the way that the current market is buying, it’s going to have a detrimental effect to our overall returns.”
Way said the policy would affect the volume but not the value of Exterran’s orders. “I think for 2019, our compression revenue will continue to fall in line with what we’ve seen.
“(We may have) a smaller compression business over time and that’s okay. But if it’s got better returns … it will eventually come through and generate the right portfolio of profitability and cash flow that we want.”