United Rentals Inc. and Fluor Corp. are teaming up to offer equipment, tools and logistics services for oil-and-gas owners along the Gulf Coast. Executives say the venture may later expand beyond the region.
“We are just getting started,” says Michael Kneeland, CEO of Greenwich, Conn.-based United Rental. With construction markets still down, firms sitting on equipment are looking to put idle assets to work. Both firms have received a lift from Gulf Coast cleanup contracts but want to target the region’s industrial market. If successful, the 50:50 deal between United and Fluor’s captive equipment rental unit, AMECO, would help each grow sales and margins in what Kneeland expects to be a “choppy” recovery.
“We see the primary market, non-residential construction, continuing to decline, though we see the rate of decline mitigating,” Kneeland says. Still, “It’s not going to be until 2011 until you see year-over-year comp improvements,” he says. Economic woes also have caused delays in oil-and-gas projects, which typically are planned out far in advance. “We think that [market] has got to come back,” says Gary Bernardez, president of AMECO, Greenville, S.C. “Although they cut back their spending, it is more sustainable—but it becomes more and more competitive because it is the only game in town.”
As part of the deal, United will be able to access AMECO’s site-management brain trust and its vast tool inventory; AMECO will be able to tap into United’s broad equipment fleet and nationwide distribution. Fluor is an experienced industrial builder, and industrial rental accounts for just under 20% of United’s sales. United’s total revenue was just over $1 billion for the first half of 2010, down 14.4% over the same period of last year. After downsizing and selling off machines, United is ready to restart. With an average unit age of 45 months, the fleet is valued at $3.76 billion, which is down from $3.79 billion last year, when the average unit age was 40 months. AMECO’s fleet is valued at $625 million, not including tools and other small gear.
Executives at United—AMECO being one of its largest customers—also hope the deal will help the rental giant transition from a roll-up to a more client-friendly business. “A lot of our customers have asked us about things like site-management services,” says Kneeland. “It would take a lot of time and effort for us to fine-tune and replicate that.”
How the venture’s revenues are reported is still sketchy. Kneeland says United will provide updates. On the AMECO side, equipment revenues will continue to roll into Fluor’s global services segment, which does not provide breakouts for individual business units.
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