January 2013

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Page 57 of 83

Energy It���s All Right Now, In Fact It���s a Gas Equipment dealers will continue to rock ���n roll to the beat of hydraulic fracking. By Mark Killpack and Mickey Coats All indications point to 2013 as a solid year for construction equipment distribution. On the whole, it���s safe to say dealers have proactively managed all aspects of their respective business models through the 2007 downturn. The result is a dealer base that can profitably operate in a very uncertain business environment caused by potential changes in tax laws, regulations, and more. End users are renting more than buying and aging fleets need to be replaced. Today, business decisions are made quickly, yet responsibly. Most dealers can grow, shrink or change direction with each new developing situation. In 2012, we saw a strong return to growth and profit by the industry at large. The major drivers of this growth were mining, scrap metals, agriculture, forestry and landfill. In other words, virtually all commodities saw signs of growth. In the construction sector, multifamily housing was strong in most parts of the country. To a lesser extent commercial, industrial and highway work also improved. Residential housing began to show signs of stabilization. While all of those things impact the economy on the whole, the most significant driver for the economy is currently the development of shale formations containing natural gas and oil. The transformation of the energy industry means significant opportunities for construction equipment dealers. Unconventional Growth For years, the U.S. energy industry focused on traditional methods of extracting oil and gas by drilling vertical wells. The oil or gas production zones, often called plays, exhibit certain characteristics that allow hydrocarbons to pool together in quantities that make it economically worth a producer���s trouble to drill to them. Energy experts believe that the traditional vertical well method will always have a place in the industry because it is the bread and butter of independent producers that supply a large percentage of the total domestic oil and gas. That said, in the past several years, the industry has taken an obvious and dramatic shift to unconventional methods for extraction, which requires new equipment from the ground up, so to speak. These unconventional methods include horizontal drilling, which is becoming a popular alternative to vertical drilling. There are economic and environmental benefits to this approach. One well can now be drilled in multiple horizontal directions, rather than just straight down. This means fewer wells but more access to hydrocarbons. Horizonal drilling, coupled with hydraulic fracturing, have together brought unconventional drilling to a new level. Hydraulic fracturing, often referred to as ���fracking,��� is (continued on page 58) 56 | www.cedmag.com | Construction Equipment Distribution | January 2013 56_BOKF_Feature_KP.indd 56 12/21/12 1:24 PM

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