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Philpott Rubber goes after shale drilling market

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Photo by Crain's Cleveland Business photo Russ Schabel (left), Philpott Rubber vice president and general manager, and President and CEO Mike Baach are banking on a new joint venture to help them sell into the shale gas market.

BRUNSWICK, Ohio—Shortly after help- ing found Corrpro Companies Inc. in Medina, Ohio, Mike Baach was transferred to Texas in 1979. He was assigned to an office just outside of Houston, where he learned the energy business and its players on Corrpro's behalf.

Little did he know then that the experience would be a big asset more than 30 years later, right back where he started.

Corrpro's forte was and still is preventing corrosion in underground pipe-lines. Baach moved back to Ohio in 1986 to assist the company in going public, and stuck with the firm for nearly 20 more years.

He learned along the way as Corrpro became a world leader in preventing not only pipelines, but refineries, storage facilities and other important infrastructure, from succumbing to deterioration.

He retired from Corrpro in 2005. A year later Baach took his now-valuable experience to Philpott Rubber Co., where he became CEO in 2009.

A brave new market

Oil and gas had not been a major growth market for Brunswick-based Philpott. For 123 years, it had been molding parts and supplies from rubber, plastic and specialty polymers, largely for industrial customers. Its products were things like conveyor belts and seals used in foundries or other heavy industries. It even made seals for toilets.

Like just about any mid-sized manufacturer in Ohio, Philpott always was on the lookout for new business—but new foundries and other big industrial prospects haven't been exactly popping up like daisies on the Ohio landscape in recent years.

Fortunately, Baach's familiarity with the energy sector from his days with Corrpro is helping Philpott Energy exploit opportunities in the Marcellus and Utica shales of Ohio and Pennsylvania.

"Energy hasn't been a huge driver of industrial business for a while and when this started over with the Marcellus Shale activities, finds and developments, it came to mind to us that we better find a way to participate in this," Baach said.

The company's products already were performing well in the harsh environment of foundries, tire factories and other heavy industries, so Baach believed Philpott could make products tough enough to work on a drilling rig.

Philpott's strategic plan called for entry into the energy market with new products, focused on the shale gas basins in West Virginia, Ohio, Pennsylvania and New York.

The company already made gaskets and other related items for the oil and gas industry, but Baach wanted Phil-pott to become a solutions provider rath-er than simply a manufactuer of generic parts.

In an eight-month period between 2010 and 2011, Philpott executives start- ed looking toward the energy industry and their customers in it to determine where companies were experiencing prob--lems.

The idea was to develop both products and services to meet customers' challenges or find a third party addressing customer needs, such as a supplier or oil field service provider, and work with that firm.

Philpott learned, among other things, that a single fluid combining the properties of a lubricant and a viscosifier—in other words, one with the right amount of both thick and slippery properties—would help during the well completion process.

A partner for the dance

During their research, Philpott execs discovered CoilChem, a New Castle, Okla.-based company founded in 2009. CoilChem's product is polymer-based and provided a natural alignment with Philpott's expertise and strategies—and most importantly, an answer to the needs of new customers drilling for shale gas.

"When we found this product, rather than reinventing the wheel, we said, "we're very good at bringing science and technology to our customers whether we develop it or someone else does,'" Baach said.

In his own 30 years in the energy industry, CoilChem CEO Jerry Noles said he saw a disconnect between the oilfield service industry that was using drilling chemicals and the chemical companies that manufactured them.

"They really didn't understand the intricacies associated with the problems one another faced," Noles said. "So the chemicals being used were not tailored to each individual application."

Drillers experimented and improvised. In many cases, chemicals were adapted from one area of the oil and gas industry and used for a broad range of other applications. Because of this, Noles said much of the success of the chemicals used in drilling, as well as the success of the rigs that used them, was hit and miss.

CoilChem developed specific formulas for specific drilling applications and also set out to minimize the amount of chemicals needed for the drilling and completion of each well. It also made them biodegradable.

CoilChem has four products that are injected into drilling wells during the completion phase to help reduce pipe-on-pipe friction and pump pressure, while creating varying viscosity levels. Phil-pott is its partner and sells and services the products for drillers and their suppliers in the Utica and Marcellus.

Symbiosis

Both companies say they are benefiting from the partnership and sales are growing.

"We expect our sales in their area to continue to grow as (they have) over the last several years. This is in large part due to the basin-specific focus provided by Philpott," Noles said.

Customers select which polymer-based fluid is best for their operations and Philpott provides a "Chemtrack" unit, or a flat bed, loaded with barrels of ChoilChem's chemicals.

Each unit is equipped with a computer-like programmable logic controller that allows for precise control of when and how quickly the chemicals are released.

The private company does not disclose its net income, but Baach said it doubled its revenues since 2009 and should book about $25 million in sales this year. Not coincidentally, perhaps, 2009 was the same year Baach brought his oil and gas experience to the helm and also just about time that drilling began heating up in Pennsylvania.

The company's new Energy division, formed in 2011 to focus on the shale gas industry, already represents about 13 percent of Philpott's total business.

Baach is glad to be back in the oil and gas business.

"The opportunities out there are huge," he said.