Maverick Tube Corporation Business Information, Profile, and History

Company Perspectives:

Mission statement: To enhance shareholder value through the profitable manufacture and sale of high quality steel tubular goods. To deal fairly with our customers, vendors, and employees while being a good citizen to our communities. To achieve growth in sales and profits through expansion of our product offerings while being a low cost producer of those products we manufacture.

History of Maverick Tube Corporation

Maverick Tube Corporation is the largest North American producer of welded steel tubular products used by the oil industry. In industry parlance, Maverick makes "oil country tubular goods," or OCTG. While 70 percent of its revenue comes from the energy industry, Maverick also manufactures a variety of other tubing products. It makes tubing used in the construction and transportation industries, standard pipe and pipe piling, coiled tubing, umbilicals, and electrical conduits. The firm greatly expanded its North American market share in 2000 when it merged with a leading Canadian tube manufacturer, Prudential Steel Ltd. Maverick operates 24 production plants at nine locations in North America, including a huge state-of-the-art facility in Hickman, Arkansas. Maverick specializes in low-cost production, and it is known for using domestic steel. The company has suffered many ups and downs following sometimes abrupt swings in oil and gas production. But Maverick has grown steadily since its inception, both through acquisition and by adding on to existing facilities. The company began with a single Missouri mill, and by 2003 had the capacity to produce almost 2.1 million tons of pipe and tubing annually.

Jumping into the Oil Industry in the 1980s

Maverick Tube Corporation was founded in 1978 by Don Beattie, a mechanical engineer and successful Missouri businessman. Earlier, Beattie founded the Bull Moose Tube Company in 1962, in Wellston, Missouri. Bull Moose went through several owners after 1968, and became a leading North American tubing manufacturer. Beattie began Maverick with a single mill in Union, Missouri, which made mechanical tubing. Mechanical tubing is used in furniture, scaffolding, and in bicycle frames, as well as in other sports equipment. Beattie apparently chose the name Maverick to signify that his company would do things differently from the existing tubing companies found predominantly in the East. Specifically, he hoped the company would be more friendly to customers. After Maverick's first year, Beattie decided to move the company in a new direction. The oil and gas industry was booming, and Beattie converted the Union plant to make tubing for oil wells.

Beattie sold Maverick in 1981. For $15 million, the company became a subsidiary of San Diego-based Nucorp Energy Inc. Nucorp Energy began as a real estate investment company. In 1979 Nucorp was taken over by Richard L. Burns, a flamboyant executive who had previously headed an oil and coal company called R.L. Burns Corp. R.L. Burns had grown very quickly, raising money principally from Continental Illinois Bank & Trust Co., which lent it more than $100 million. Heavy debt and allegations of executive misconduct led R.L. Burns to the brink of bankruptcy by 1978. Burns left that company, which then changed its name to Pyro Energy Corporation, and began running Nucorp. Nucorp surged into the oil and gas industry, buying up more than 20 small oilfield equipment firms over the course of a few years. The company had sales of $38 million in 1979, the year Burns came in. By 1981, Nucorp posted sales of $416 million.

Nucorp left real estate for oil and gas at a time when the energy industry was undergoing an enormous expansion. Companies began investing heavily in domestic oil production in 1979, when the price of oil was rising. Companies that provided service and equipment to oil drillers faced a market that could gobble up whatever they could produce. Maverick Tube began producing OCTG, as did hundreds of other small companies. According to Business Week (September 27, 1982), some 400 new oilfield service companies joined the industry group the International Association of Drilling Contractors between 1979 and 1981, providing a rough measure of how quickly the service industry grew in that short span. Nucorp rode the wave by buying up oilfield equipment makers, including Maverick Tube. Nucorp had no particular expertise in the oilfield service industry, but it was able to make money as long as the energy industry continued its upward climb. The company borrowed heavily to fund its acquisitions, and it piled up $525 million in debt by early 1982. That year the oil boom collapsed. Spending for oil and gas exploration dropped 25 percent, and the many companies that had worked around the clock to provide parts and equipment found themselves with warehouses full of excess inventory. Nucorp was not the only company caught by the sudden drop in oil exploration. Industry analysts had predicted a continued rise in the market for the next few years, and instead of a slowdown the market abruptly crashed. But Nucorp had such a high debt level that it could not survive. Profits had risen more than 200 percent in 1981 over the year previous, but the company racked up $42 million in losses over the first two quarters of 1982, then filed for bankruptcy.

Richard Burns left the company a few months before Nucorp filed for Chapter 11 (a bankruptcy proceeding that allows the company to continue to operate). The company was soon hit with allegations of misconduct, specifically that it had recorded revenue from sales that were only pending. The Wall Street Journal (July 5, 1983) called Nucorp "a corporate house of cards, shakily assembled on phony sales, questionable accounting and dubious claims about its oil reserves." Burns was convicted in 1985 of several charges brought against him by the Securities and Exchange Commission. Amidst all this mess, Maverick was apparently still operating profitably. But it had taken on debt through its parent company. The reorganization of the company under Chapter 11 found Maverick owing creditors $326 million. This was later reduced substantially, to only $22.8 million. Founder Don Beattie resigned from Maverick in 1983, and Jon Lloyd became president. Maverick managed to produce $100 million in sales for 1984, and it seemed to be doing the best among Nucorp's many subsidiaries. The company moved back into the southwestern and Rocky Mountain markets, areas it had fled after 1981, as business improved. Maverick at that time used exclusively domestic raw materials, and it was able to produce pipe at a low cost. The company's president declared that business for 1983 was outstanding, and it seemed that if it were not for Nucorp's troubles, Maverick would be getting along just fine. Because Maverick was profitable, Nucorp was loathe to sell it, even as it divested itself of its other subsidiaries. Don Beattie expressed interest in buying back Maverick in 1984, but that deal did not come off. A total of 45 percent of Maverick's stock was owned by its creditor banks, and 55 percent by its other creditors.

Emerging from Bankruptcy in the Mid-1980s

In July 1984, Maverick Tube emerged from bankruptcy. It was the first Nucorp subsidiary to do so. In December 1985, the company severed its ties to Nucorp. As many as 20 different parties were interested in buying Maverick, which posted sales of $107 million for 1985. The company invested in new equipment, spending $150,000 to revamp machinery, and it began producing a new kind of steel pipe that was used for transporting crude oil above ground. Maverick lost money in the first quarter of 1986 as the oilfield services industry contracted again. Yet a Maverick board member told the St. Louis Business Journal (July 14, 1986) that the company was "doing quite well in a horrible market." The company benefited from being a low-cost producer, and it was able to use slack time to install new equipment and upgrade old machinery.

Maverick got new owners in 1987 when a management group bought out the company. The group paid approximately $15.5 million for the company, only a little more than what it sold for in 1981. Gregg Eisenberg became Maverick's new president in 1988. The oilfield services market seemed to be improving, and the company began to look for acquisitions. In the last month of 1989 Maverick bought the Conroe Pipe Co., in Conroe, Texas, for $11.5 million. The purchase of Conroe Pipe gave Maverick more production capacity, and also brought it into a new market, making larger diameter pipes that were used in deeper wells. Partially in order to pay off debt arising from the acquisition, Maverick held its first public stock offering soon after. Maverick debuted on the American Stock Exchange in March 1991. The company was still at the mercy, however, of sudden swings in the energy market. Maverick's stock went on sale at $13.50 and then rose to $16 a few weeks later. But before a month was up, the company had to announce a drop in its earnings. Sales fell by 25 percent in Maverick's first quarter as a public company, and it lost money. Maverick's stock dived to around $5. The company decided to relocate its Union, Missouri plant to new quarters in Hickman, Arkansas. With its stock price still greatly depressed, Maverick raised cash by selling a 5 percent interest in the company to a wealthy St. Louis family investment group.

Maverick hoped to diversify its product line in the early 1990s so it would be less vulnerable to the boom-and-bust cycles of the energy market. It hoped to buy an Oregon company in 1993 that made pipe for water and electrical transmission. But that sale did not come off. The company bought equipment in 1993 that would let it back into the structural tubing market, which it left in 1980 in favor of OCTG. The next year, Maverick moved its stock listing from the American Exchange to NASDAQ.

Maverick built a new mill at its site in Hickman, Arkansas, in 1994 and added a new product line, hollow structural sections. The company's fate was still closely tied to the oil industry, however. The market for OCTG began to improve in the mid-1990s, and by 1997 Maverick was doing very well. The oil industry had finally used up equipment it had stockpiled in the early 1990s, and the demand for new pipe sent the price soaring. Maverick's stock price, which had long languished, suddenly climbed to more than $50 a share. Maverick's profit for 1997 was almost double that of the year previous. The company continued to look into new markets in the late 1990s. In 1999 it made another substantial investment in its Hickman plant, and added equipment to make certain large-diameter pipes.

Industry Leader in the 2000s

The big news in 2000 was Maverick's purchase of the Canadian company Prudential Steel Ltd. Prudential, based in Calgary, Alberta, was the second largest OCTG and line pipe producer in Canada. The combined company became the largest OCTG company in North America. The price was approximately $484 million, paid for with Maverick stock. The new company now had ten tube mills at five locations, and some 2,000 employees. While Maverick posted a third-quarter loss in 2000 due to expenses related to the merger, its sales increased substantially that year. As oil and natural gas prices went up, the company did very well. Sales for 2000 hit $560 million, with profits of $16.6 million. That year Maverick moved its stock listing from the NASDAQ exchange to the New York Stock Exchange.

The company took some time to adjust to the merger with its Canadian partner. In 2001 Maverick closed a plant in Longview, Washington, that it had acquired when it bought Prudential Steel. A Western steelmaker that had supplied the plant went out of business, making difficulties for Longview, so Maverick moved the plant's equipment to its large facility in Hickman, Arkansas. At the same time, Maverick bought up more tubing companies. In 2002 Maverick acquired Precision Tube Technology, a company that made coiled tubing and coiled line pipe. This broadened Maverick's product line. Also in 2002 Maverick purchased five pipe mills that had comprised the tube division of LTV Steel Corp., which went bankrupt. The LTV division made electrical conduit at five locations in the Midwest and South. Maverick spent approximately $120.2 million to acquire LTV's plants, which gave it another new market. LTV's electrical conduit, sold under the brand name Republic Conduit, controlled some 35 percent of the U.S. market.

Demand for natural gas increased in the United States in the early 2000s, stimulating new drilling in North America. Although Maverick had moved into several new product lines, it still made 70 percent of its revenue from energy-related tubing. More drilling and rising gas prices meant favorable conditions for Maverick, and the company expected increasing sales into the middle of the decade. Maverick made another key acquisition in 2003, picking up Houston-based SeaCat Corp., a manufacturer of coiled tubing that was used for undersea oil and gas rigs. By late 2003, the average daily rig count, a crucial indicator of oil industry growth, was up almost 30 percent compared with the same time a year earlier. Maverick expected a very good year, and sales were already up almost 100 percent. The company had been through many similar booms, and weathered the following busts as well. In the meantime it had grown from a small player into the industry leader.

Principal Subsidiaries: Prudential Steel Ltd. (Canada); Precision Tube Technology; Republic Conduit; SeaCat, LP.

Principal Competitors: LoneStar Technologies, Inc.; NS Group, Inc.

Chronology

• Key Dates:
• 1978: The company is founded with one mill in Union, Missouri.
• 1981: The company is sold to Nucorp Energy Inc.
• 1982: The company declares bankruptcy as Nucorp goes under.
• 1984: The company emerges from bankruptcy.
• 1987: A management group buys the company.
• 1991: Maverick goes public.
• 2000: The company merges with Prudential Steel Ltd.