By Hein & Associates
Published in Knowledge Link on Apr 30, 2012

Oil was below $40 per barrel, natural gas prices were less than half what they were a year earlier, and the S&P 500 was a paltry 735. The time was the Great Recession. The oilfield services industry as a whole looked to be shutting down operations, or at least taking shelter from the storm. Almost nobody was thinking about growth. The owners of Casedhole Solutions didn’t get the memo or chose to ignore it. From 2009 to 2011, they grew revenues 161%, and went from 75 to 420 employees.

In 2008, Intervale Capital invested in Casedhole as a well servicing roll-up transaction with the original owners (“The Five Guys” as we like to call them). Shortly after completing the transaction, the Great Recession hit and markets crashed. Casedhole took the same actions as most of its peers; the owners cut staff and prepared to weather the storm.

The difference with Casedhole was the fact that The Five Guys knew they needed to grow to survive. This was a difficult task at the time. The Wall Street Journal headline stated after the February 2009 State of the Union speech, “Obama Seeks to Snap Gloom.” Companies, including Casedhole, were wondering how they were going to make their debt payments. Customers were laying down rigs and everyone was forecasting a repeat of the 1980’s oil bust.

With Intervale’s backing, Casedhole opened facilities in Bakken and Haynesville with key shale and multi-phase fracking plays. Since the banks were not lending at the time, the expansion had to be fully funded with equity contributions. Don Gawick, CEO, said, “It was a very gutsy call by Intervale in 2009 to make that kind of investment.”

Funding wasn’t the only part of the equation for Casedhole’s success. Many private equity roll-up transactions struggled with the transition from the founders and the new management. The Five Guys led a transition to a new management group.

In March 2010, they brought in Gawick as CEO and other vice presidents to lead the growth projects. According to Gawick, The Five Guys were “the glue that held everything together.” They transitioned their respective core competencies to the new management team. In addition, they proved to be a valuable moderator between Intervale and the new management. Lyle Love and Brian Buffington are the only two of the five original owners still involved in operations. Love serves as the Chairman of the Board, while Buffington leads the pipe recovery service line.

Not all things came easy during the turnaround. Leading into 2009, Casedhole had laid off a large part of its operational staff. The Five Guys cut their pay to nothing or minimal amounts and they froze capital spending on current operations. Asked what mantra they used to keep motivated in the darkest days, one of The Five Guys preached every day, “We have to figure out something to make it better…it’s going to get better.”

Casedhole hired more than 350 employees in a very short time by tapping into its broad networks. “We knew a lot of people, and we recruited the majority from independents and not the large shops. We sought top talent, and today our senior management team members have an average of 26 years’ experience,” says Gawick. With new talent came new ideas, new tools, and new business.

This new team was amazed at how fast things could get done, citing that these kinds of changes could never be made at the larger shops. As Tom Wilkins, CFO, commented, “The speed at which decisions are made is enlightening…like they turned a wild horse loose.” The power of staying positive and the encouragement of seeing results only fed the growth.

Once growth started occurring, it remained difficult to convince everyone outside the company. Casedhole had already deployed the equity provided by Intervale. Management was seeing revenue jump off the page so they thought it was time to get new debt financing to continue growing. One small obstacle—lenders did not believe it was possible. Wilkins remembers, “Bankers would tend to leave meetings with a ‘don’t call us, we’ll call you’ message.” Casedhole was not able to secure lending until mid-2011, yet has survived the storm and is well positioned to extend its growth into the future.

Casedhole’s story is evidence of the power of staying positive, working together, and taking on the challenges despite perceived obstacles. We have enjoyed watching the company grow and become a great success story.