Expanded and Upgraded

Newpark Shipbuilding has increased its portfolio of businesses from one to six in the past 18 months, but don't expect this Houston-Galveston region company to rest on its laurels. More growth is expected and planned. Newpark Shipbuilding was formed in the early 1990s by Sam and Frank Eakin. The Eakins, with an investment banking background, saw opportunity in the Houston-Galveston area for consolidation amidst the fragmented shipbuilding industry. The Eakin's goal was a strong shipyard network. Less than a decade later, Newpark Shipbuilding has acquired enough yards to constitute what the company refers to as a "shipbuilding network." Altogether, six facilities have been acquired in the Houston-Galveston area, employing more than 1,200 people. The full service commercial shipyard features product and geographic diversification. There are no "specialties" here; the company is active in the repair, construction and conversion of boats, barges, ships and offshore drilling rigs The first yard Newpark acquired was on Brady Island, in the Houston Ship Channel. The yard instantly carried the name "Newpark," and was followed by two other acquisitions in the Houston area - Greens Bayou and Pasadena. In addition, the company acquired three yards in the Galveston area: Galveston Island, and the East Yard and West Yard facilities on Pelican Island. Today, the company's headquarters - First Wave, a holding company - are in Houston. The East Pelican Island facility is the focus of the Galveston, or offshore, operations; while Brady Island is the focus of the inland operations. Even though Newpark acquired existing shipyards - for example, the East Pelican Island facility was once owned by Todd Shipbuilding - it didn't mean the shipyards were fully functional from the start. "We put a lot of money into the shipyards," says Don Francis, director of marketing, Newpark Shipbuilding. "For example, we've put nearly $30 million into the East Pelican Island facility. When we acquired the yard; it was in bad shape; it needed everything. "We had to repower the yard, run new electric. New plumbing was installed. Then, we set to work on upgrading the shipyard capabilities. We increased the crane capacity, overhauled the drydocks - there was a lot of remodeling. We enlarged and lengthened some piers. We dredged. "Now, we have a yard where the longest pier is 1,125 ft., with a 40 ft. water depth. The yard can do topside work and small ship drydock repair. We're acquiring a Panamax-sized drydock, and once that's in place, we'll be able to accommodate 85 percent of all the ships transiting the Gulf of Mexico." Repairs are sure to become an even more integral part of Newpark's focus. As Francis points out, OSV construction has slowed, in response to the struggling oil price, "but that market always changes," he says. "It's down now, it'll be back up again." Instead, Francis is eyeing the tank barge conversions, mandated by OPA 90, as one of the major projects the company is planning and preparing for. "The tank barge conversions have a deadline, as set forth in OPA 90," says Francis. "We haven't seen a lot of that work yet, so we're guessing between now and the deadlines, we'll start to see progressively more of it. We're certainly making it a priority to pursue that work." Additionally, as ship traffic in major ports increases, so does the demand for ship repair. Francis says the company is fully aware of the increasing traffic, and is developing its ship repair facilities to match that expected increased demand. Short-term, Francis says the slumping oil price will only continue to foster an environment prone to consolidation. On a longer-term level, obviously, the oil price will rebound, especially, Francis says, on the deepwater side. He also points to a growing industry trend towards replacing coastal freighters with ITBs, which certainly bodes well for the company. Matters of concern to Newpark are the continuing environmental pressures, as well as government regulations - especially the debates surrounding the Jones Act, and the contested and proposed reforms, called for yearly by lobbying groups, he says. "The biggest obstacle we've faced so far, from a corporate viewpoint, is integrating the six yards into one," says Francis. "Our corporate business systems are shared by all the yards. We think of the yards as a shipyard network, and integrating those has been a huge challenge. We're building our computer networks, and finalizing the integration, but, really, you never quite finish when you're improving efficiency." The computer network encompasses the yards, the accounting systems, the reporting systems and the entire management organization. Grady Walker, executive vice-president of the inland division, echoes Francis' sentiments. "We went from one to six yards in the past 18 months. Until the cultural evolution of merging the six different yards into one is completed, there's always a challenge. "Now, with the six different yards, each with its own area of expertise, we're able to package our services. We can offer 'one-stop shopping.' For example, when we acquired the John Bludworth yard in Pasadena, we got the best inland pushboat facility in the area, bar none. With the Galveston Island facility now a dedicated barge new-construction facility, we were able to go back to customers and offer a full package of boat, barge and cleaning. On the shipbuilding side, Walker says there've been "hundreds of little opportunities we've capitalized on," as the company continues to establish its own "best practices," and then, improve on those new standards. "When we bought the old Trinity facility at Greens Bayou, which had built a lot of barges, it had a reputation of being an efficient yard," says Walker. "We were able to increase the efficiency by doubling the module size produced in the shop before going to the field for erection. We took more advantage of the automatic process in the shop, and cut the amount of man-hours needed to build a barge by 10 percent, which is a substantial savings in the newbuild world." With six facilities in the area - the West and East Pelican Island facilities are adjacent, and the Galveston and Houston facilities are all within 15 minutes of each other - the furthest ride is from the Houston group to the Galveston group, which can be made in under an hour. "That geographic proximity allows us to maintain a stable labor base," says Francis. "If business gets soft at one facility, we can ship our labor around. We're able to retain our good workforce." "We shift our resources quite frequently," adds Walker, "and we can pull our resources from a number of yards quickly. We can meet special turnaround requirements and resource needs. When we've had big rig jobs, we've taken manpower out of our inland division and sent them to Galveston, and the process works in reverse, as well." Newpark Shipbuilding still anticipates growth. "We want to diversify geographically," Francis says. "We've done - and we're still doing - a good job of diversifying by product line, now we want to diversify geographically. "However, the expansion has to fit our culture. We're not just going to run out and buy a yard because it's for sale. We're still exploring opportunities that complement our existing yards. There are opportunities out there in ship repair and tank barge conversions, ocean barge conversions. We'll continue to do a good business in barge construction and barge repair, and we think our tug new-construction business will grow this coming year, as well. Obviously, given our location, OSVs are always a possibility for booming growth. "Currently, we do everything but military work, although, we're pursuing that now, as well," Francis says. "There's a lot of opportunities in custom fabrication. We have substantial fabrication capacity, and we're in the process of developing a separate business line, for customers both inside and outside the marine industry. We have a large crane capacity, a large fabrication space under-roof, and a large coverslip, so shipping large structures is not a problem. Additionally, that will be one more facet of our business." And as the company expands its market focus, its areas of business and, potentially, its geographic presence, it is now starting to expand and increase its efforts at marketing and affecting public perception. "We're a fairly new company," says Francis, "and so far the marketing efforts have been mostly in the form of press releases and magazine interviews. Now, we have a comprehensive marketing plan in place: we'll be at a number of trade shows; we'll have an advertising campaign; we've begun a campaign to target specific markets. "My job is to convey an image of a widely capable company, not necessarily one specifically centered in the Houston-Galveston area [especially important considering Newpark's plans to geographically expand]." The company identifies potential in any new acquisition. Rather than target a particular industry, the facility needs to "fit" into the model Newpark has established in its six existing facilities. "As time goes on, we'll expand as we identify opportunities that will work for us," says Francis. "Basically, we look for the best opportunities, and we're choosy."-Chris Palermo