Marc Rossiter - Enerflex Ltd.

In this episode of the Canadian Equities podcast Marc Rossiter, President & CEO of Enerflex Ltd., joins Robert Cooper to discuss the natural gas market, energy transition, leadership and international business. For the full length version of the Canadian Equities podcast connect with us at acumencapital.com/podcast.  

Transcript

Moderator 0:00

Welcome to Canadian equities, a short bi-weekly podcast series, where we speak with top business leaders and hear their perspectives on the industries in which they operate for the full length version. Find our link in the podcast notes or connect with us@documentcapital.com. I'm your host Robert Cooper. Today I'm joined by Enerflex limited president and CEO, mark Rossiter. And our flex is a global operating company that engineers designs manufacturers and provides aftermarket. For equipment systems and turnkey facilities use to process and move natural gas from the wellhead to the pipeline and our flex trades on the TSX. Under the ticker EFX today, we will be discussing leadership, the natural gas equipment, market, energy transition, and international business. Mark. Thanks so much for spending time with Canadian equities today.

Marc Rossiter 0:48

Robert, it's my pleasure. Thanks for having me

Moderator 0:51

mark, for those who may not know the company, what does it do and where does it all?

Marc Rossiter 0:56

Uh, Airflex is, uh, we build service install own and operate natural gas infrastructure in across 55 offices in 17 countries. Uh, an easy way for me to explain it is that we're sort of Ford, Hertz and Uber all wrapped up into one for modularized natural gas infrastructure. We've got two world-class manufacturing facilities, one in Calgary, one in Houston. We own and operate close to a million horsepower of natural gas compression assets around the world. And we've got about 150 service technicians that are driving and flying all around the world to keep our client's equipment running. One thing that's very interesting that we do is that we, we combine all these different services into what we call integrated projects. And if I can give you a quick example of an integrated project, uh, in, in the middle east, we had a client that was producing about 50,000 barrels of oil. But to do that, they were flaring about 15 million standard cubic feet, a day gas. So Enerflex people we built about a $70 million gas plant that took the flare gas, treated. It used half of it to generate electricity and treated the other half to go into a local pipeline. And we got the oil production going and we did this on a 10 year take or pay contract for the. And a fixed monthly billing for the deal. So we designed it, we packaged all the equipment in our Houston shop. We installed it with our team and in Oman, and we currently are on a ten-year operations contract to operate that for the local local folks. So that's, that's sort of, all of our services brought into one to give you an idea of some of the fun stuff we do.

Moderator 2:34

Many people may not know, but you're an, an engineering officer in the canyon army. Tell us about that experience. And second, the lessons you took on leadership from the military that may or may not apply to the corporate environment.

Marc Rossiter 2:48

Yeah, sure. Robert, I mean, I joined RMC. I went to military college. That's where I got my engineering degree. When I was 17 years old. I came from a relatively straightforward upbringing in Nova Scotia and I worked hard at sports, but I never really experienced any sort of true hardship in my life. Well, going to RMC and going through your army training, it was hard. There's no doubt of that. But it, it had a profound impact on, on my life. I, a lot of my best friends I met when I was there. Some of the lessons that I took from it was in, in high stress environments. Good and bad leadership choices and behaviors are very obvious when you're under stress. Um, you learn a lot by watching you learn a lot by watching how your friends act under stress, how senior people act under. And then you also get to practice a lot yourself, like in, in training, the main way that they trained junior officers is that they give them opportunities to lead their peers. So you'd be in a group of say 10 or 20 people. And, uh, somebody will come along and say, Hey, Ross, or you're up next, you got to lead this group of people to do something. You've got to go on a 10 mile patrol, or you've got to do a move 15 kilometers to a new camp, whatever it is. You're all of a sudden in charge and you've got to lead people that are tired, have an eaten pretty grumpy, but you got to commit yourself to the mission and get it done. That was really hard. It was super challenging. But what I learned from it was for starters, we have a saying in, in, in the military before you can leave, you have to learn how to. So you had to learn the skills of being a soldier before you could even dream about being a leader of those soldiers. And that was drilled into us. And along with that, that comes a lot of humility. Like you really have to realize that this stuff isn't easy, a big thing I take from it. And I tell a lot of young leaders is you have to be yourself. There's no blueprint for this stuff. You have to be really true to yourself, your own skills, you know, your own personality and just do your best in the corporate world. I w I tell people a lot of times don't be too quick to take on a leadership role back to that saying of before you can lead, you have to learn how to follow perfect. Your craft, be just the world's best individual contributor, and really know all the skills that it takes to do your particular job, and then take on a leadership opportunity when that comes, but don't be too anxious to do it, you know, really, really get good at what you're doing for. And once you've learned how to follow, then you can start thinking about whether or not you'd make a great leader. And if leadership is right for you, it's not right for everybody. And frankly, in a more senior leadership role like I am in today, um, there's no replacement for patience and reconnaissance when you're executing on a business strategy and a lot of the very best general officers throughout history exhibited those two traits of patience and reconnaissance in equal measure. And, and that's what I'm trying to get better at the.

Moderator 5:46

How does Enerflex fit into the so-called energy transition?

Marc Rossiter 5:50

Robert, I think we fit into the transition, like, like a hand in a glove, you know, when, when you think about that word energy transition and the so-called energy transition, what we're really doing is, is we're thinking about how can we live the same quality life, the same standard of living, um, which consumes energy, but like, let's make that energy and that way of life lower. Well, the only way to do this to re-engineer the actual sources of energy. We've been building these sources of energy for 40 years. So we feel like we're in a very good position to rethink how this energy is, is, is delivered to people. Um, we've been building modular plug and play energy systems for over 40 years. Um, and so we can design those same systems to be low carbon it's it's, it's not a technologically challenging thing for us to do. For instance, we built 150 carbon capture projects in the history of our company and we enter flex equipment handles over 20% of the CO2 that's currently sequestered in the United States. So the technology is there. I think making it better and more efficient over time, that's all really important, but Enerflex people and our facilities and our technology. We've got the ability to do these projects to. Those same skillsets. Uh, we we've packaged it over 3 million horsepower of electric compression and electric gas plants in history of our company.

Moderator 7:15

How much different is it operating in foreign markets than it is in Canada?

Marc Rossiter 7:20

Uh, it's extremely different. Um, and, uh, you know, I've been, I was in the United States operating for much longer than I was in Canada. And there are subtle differences between the two. Uh, but once you leave north America, things are a lot different. And a lot of the differences come into maturity of the gas supply ecosystem within that country. And what drives supply demand in that particular space in north America, you sit back and you go, okay, what's a Henry hub price, what's gas storage, and you can get a pretty good picture of what's going to happen in the, in the industry for the next 12, 18, 24 months internationally. It's, it's almost micro supply. So in Brazil, for instance, we, we love Brazil as a country. We've been investing a lot of money there in the last decade. A lot of their natural gas is going for power gen because hydroelectric is very intermittent because of rainy dry seasons. So Henry hub could be a dollar 25 people in Brazil don't care because they've got the natural gas. It's a way of providing electricity that they. And so, uh, there could be projects that get sanctioned in Brazil when things in north America are looking really poorly. So it's a lot of fun and you know, what's different is every country we operate in has its own drivers that customers are frequently government owned or they're, multi-nationals operating under government license. So there's a geopolitical angle to it as well. Funny thing, uh, you know, I would say that Canada is more geopolitically risky today than a lot of the countries within which we operate. Especially as it pertains to production of natural gas. So everyone's a little bit different. A lot of the countries aren't as mature and in gas supply. And when we go into a country that's growing its gas supply. That's great for us because we bring a lot of expertise. We bring a lot of technology. We bring the ability to allow them to develop their gas, their gas reserves by buying equipment from. From renting it from us from asking us to build the entire plant and operate under a 10 year take or pay. So we're really quite flexible. Some of those countries are, uh, are growing their production.

Moderator 9:26

Well, you just said, how has that informed your go to market strategy in those various markets?

Marc Rossiter 9:33

Ah, well, well, great question. The, the go-to-market strategy. I, you know what, I, I frequently tell people where. Ford Hertz, Uber all wrapped up when it comes to natural gas equipment. And each of those markets want something different. North America, especially Canada is Ford. They just want to buy stuff. The operators are very good at driving their own cars. They don't want anybody to drive them around. They just want good cars on time and on budget. And frankly, uh, had become much more cost-conscious over the last five to 10 years. Then they were prior to that. So, so our go to market strategy in Canada is all about being cost competitive with good equipment and good service. The United States was very similar for a long time, but just recently, about four years ago, we added the rentals part of our business into the U S because there's a pretty big component of us customers that they want us to aggregate demand for compression and deploy it with our expertise because they feel like we can do it better than, than them doing it themselves. And so that's a big part of our, of our current revenue stack in the United States is the rental business. And it's steady. The engineer systems is, has the ability to give us the most torque, but the rentals business is quite steady. So we go to market in the United States, rentals, new units and service globally. It's almost, it's almost a hundred percent asset ownership opportunities. So people don't want to buy stuff. They want us to. Be the vertical integrator of the mud, modularize it, ship it, install it, and also hire operation staff to run it for us because we may feel if I'm an operator in Bahrain, I may be a really good oil producer, but I'm not necessarily great on gas. It's sort of new. So I'm going to bring somebody from a, that's got the experience to come help us do that in terms of week that worked for us. So it's, it's complex. How do we go to market in each of those countries, but it's very much. And the customer context and that specific country. And I feel that even though having sales service rentals and installation business lines can lead to a complex business, that's not always easy for investors to understand. It's rooted in the customer context of the global natural gas industry. And I'm very happy with the complexity because in each geography country, it's a lot. Then when you look at the business. So a lot of people think we need to electrify things that used to be based on fossil fuel combustion. We've been electrifying things forever. So our skill sets our, our desire to build technology centric, facilities, own operate service, if it's right in with the energy transition. And that's why we're, we're really quite excited about that as a growing market.

Moderator 12:19

Mark Rossiter of Enerflex. Thanks so much for joining us today. We appreciate it

Marc Rossiter 12:22

Okay, Robert, thanks a lot for having me and have yourself a great November December

Moderator 12:30

note that this podcast is not making an investment recommendation on any companies discussed. We welcome your comments on today's episode or any other episode, connect with us at Acumen Capital dot com.