Oil and Gas Startups Podcast

0:00 What's going on, Digital Wildcat is welcome to another week of the oil and gas startups podcast. I got my man Todd here with core fueling today. Todd, what's going on, man? How are you doing?

0:09 I'm much. Thank you very much. Appreciate the opportunity to be here today. Yeah, dude. Absolutely. We were talking before we got on the show and sometimes I zone out a little bit because it's

0:20 like, I want to ask you these questions and a bunch of background on the show. And so I heard you talking about Mount Rainier in Seattle here a minute ago and that kind of, you're talking to Julie

0:33 and that kind of made my ear spring up because I used to live in Washington and spend a lot of time in Mount Rainier National Park. And so we'll have to dive into that in a little bit. But first,

0:44 tell me a little bit about what core fueling is just high level Sure, 40, 000 foot view of what you guys do, and we'll dive into that in your background. Yeah, I'll give you a, I'll try to keep

0:57 it brief and as uncomplicated as I can. We actually have two companies, and it's important to kind of talk about both of them. There's core fueling and then Manicore fuels and they're kind of

1:10 sister companies, kind of common ownership between the two. Manicore actually got started a little bit before the pandemic 2018 to provide diesel fuel to the oil and gas space in West Texas,

1:26 primarily for frack work. So historically those pumps that they use to fracture wells are where the work was done by pumps, high horsepower pumps that were diesel fueled. And after Hurricane Harvey,

1:42 there was a major dislocation in the market for diesel fuel out there. And some of my colleagues who got there before I did saw an opportunity to come in there and provide another community. you

1:54 know, company that could provide those fueling services. And so for the first year or so of Manicore, it was just delivering diesel fuel to the well site, not terribly complicated or interesting,

2:06 but after about a year or so, those same customers came back and asked for automation. And that's simply, you know, in the old days of oil and gas work, you would show up with a Bobtail fuel

2:20 truck, which is one of those shorter, you know, tank trucks. Tank trucks, yeah And I would jump out with a hose and fill up the pumps individually. And so you can imagine that makes sense when

2:32 you only have a few pumps and you're doing a few frack stages without getting too technical on how wells are drilled and completed. So 15 years ago, you might have a well that had 10 stages. You

2:44 were there for half a day, then gone. Well, the wells now that are, you know, have multiple laterals off of a pad might have 500 stages. of frack work. So every time you're down to refuel,

2:57 that's time, you know, kind of waste of time. You have whole crews just waiting. So these companies said there has to be a better way to continuously feed fuel into these pumps. And so that's

3:09 where core got started. We capitalize it separately. At the time, Manicore was actually a subsidiary of another company. And so, you know, the company core was formed really to kind of build

3:21 these automation systems Okay. So my colleagues had looked to originally rent systems from another party that didn't make sense economically. So the genesis of core was basically to design and build

3:35 these automated fueling systems and then lease them to the kind of the sister company. And so the best way I can explain it is, you know, these are think of like a brain that sits on site that

3:50 feeds diesel fuel continuously into the pumps. Yeah. And I kind of think of it like a thermostat where it's not to fill it up to the top, the tanks or let them go to the bottom, but to kind of

4:01 keep it consistent. Let's keep it steady. Keep it steady, you know. And we track the fuel rates and those pumps. So that really was kind of 2019 timeframe. Cool. Did that happen? And obviously

4:14 the pandemic struck. You know, our business like most were affected, but really within a handful of months, the business bounced back very rapidly and by the end of 2020, we were kind of back up

4:27 to pre-pandemic levels. So you guys got into the game with diesel fuel delivery, then built out automation for these operations. It got more complex. Let's talk about your background real quick,

4:43 because earlier when you came to the office, you know, we're just talking about how we knew some mutual guys over at Lime Rock things of this nature. What was your background? It sounded like you

4:52 were in finance. That's right. Yeah, I started my career on Wall Street and leveraged finance in New York, and did that for a number of years and actually moved out to the west coast to help a

5:03 friend of mine with a couple of startups out there before going back to business school. And after getting my MBA, I wound up in Houston and spent about 18 years in the Energy Investment Banking

5:19 space. I brought you to Houston. Really the opportunity. If you want to do Energy Banking, it's kind of the center, the university for that. So that's where the opportunity is where I wanted to

5:30 be. My wife was also in law school here, so it made it a lot easier to pick Houston as the place where I wanted to be. But yeah, spent almost 18 years in the space doing Thank you. murders and

5:44 acquisitions, IPOs, other capital raises for primarily energy service companies. But I did EP deals in a wide variety of other projects when I was a banker. And that's actually how I met the guys

5:59 at core and

6:03 Manticore were originally

6:06 a client of mine. So I was really impressed with the team. Yeah, so they're a client of yours through the bank and then

6:15 they come to you with this idea of thesis on the field delivery opportunity in the market. It was already built by that point in time. So like I had met the, one of the principles kind of primary

6:29 backers of the business really at its infancy before it kind of right when it was started and we stayed in touch. That led to kind of doing some advisory work for them And then, bye.

6:45 2022, there was an opportunity for me to come on board as their CFO at that point in time. Cool. So I feel like I've known the team and the company almost since the beginning. Yes, since that

6:55 section. But as an outsider at first and then kind of stepping into the company directly. Yeah. And so you guys see the need for a material step change in technology for the automation of fueling.

7:11 And so let's talk about that going from kind of pure play service business of delivering fuel to, okay, providing a technological solution to solving a problem. What

7:28 was, you know, one, let me ask about the technology real quick. You know, was this something that you guys developed from the ground up proprietary and automated system? Was it something that

7:39 you took off the shelf, packaged it together. How did, how, how, how was the technology? develop. Yeah, so it really was from the ground up the way the way it was built. It I think the kind

7:51 of mark one versions were like almost like one of those racing trailers, which had some slots in the side and reels with hoses that would come out of it. And in some ways it's it was simple, but

8:04 the the real secret sauce is the kind of PLC that the software that runs the system The the system itself, maybe the easiest way to explain it is you have a frack tank or a big tank next to it that

8:17 you can put 20, 000 gallons of diesel fuel in. And it pulls from that tank, and then it distributes it, distributes it through a series of, you know, I would kind of describe it as like a, um,

8:30 a loop system that you think about, you know, distributing hot water in your house or, you have a series of types. You have a boiler system. And, uh, and then from that, There's a series of

8:40 reels and hoses that go out. individually that send fuel and some of our larger systems have 20 plus lines or reels. Yeah, so laying this out kind of visually here is you got a large tank with 20,

8:57 000 gallons of fuel and then it sounds like you have it hard-lined around the location and then you have reels that come off of that or hoses that Yeah, so the frack tanks sits right next to the

9:12 system itself, it pulls from that and then it then distributes it through a series of additional hoses that are run directly to the frack pumps and they're saddle tanks. And we, where we really,

9:26 you know, the trailer itself and the reels and the hoses, I mean, that's all stuff you buy from third parties. The secret sauce is really the software and how it interacts with we have a

9:38 proprietary device that actually sits within the fuel tank. the, the frack pumps tanks that wirelessly is transmitting the, you know, basically the fluid levels. Yeah. I was going to say is like

9:50 it sounds like you guys have some type of algorithm that says, um, hey, this is, this is the, uh, fuel level in, in the individual, uh, pump and it's always maintaining that, that kind of

10:04 constant field level. And so where my mind is going is like, you probably had some combination of hardware, which sounds like you do That's right. And then on the software side, some type of

10:13 algorithm that's, um, saying, Hey, pump one over here needs needs fuel feeding to it. And so it absolutely, because some of the other systems out there, ironically, like what we didn't talk

10:24 about, that it's not just the downtime, the, the reason automation is important is to eliminate that downtime. You're never stopping to refuel, but it's also safety. You're getting folks out of

10:36 the hot zone where you have a bunch of this frack iron, Yeah, high pressure. you're not having to bring guys in there to refuel. So you're really keeping people out of that area to step in there.

10:49 And so you have the safety, the efficiency, but the system has a lot of fail-safes. I mean, whether someone tries to drive off with a

10:59 pump when it's still connected, it'll break. You know, if the connection with that device is lost, it'll stop, right, that particular line will cut off 'Cause what we don't want to have is

11:11 spills. And you can imagine when you have an automated system that's constantly feeding fuel, the, you know - And the risk of spills goes up. Yeah, a guy filling up a tank by hand, you know,

11:22 he's going to know it's full stop, right? But if you're two in the morning and you have a system pumping, you know, even if it's low pressure, you can - Especially, you can't tell you how many

11:31 times I've seen water transfer flood location, you know, filling up tanks, so people just don't pay attention. And by the time someone notices, you know,

11:40 1000 gallons of fluid on the ground. Exactly, so that those are really a lot of the things that were factored into its design. And initially, like most things in the oil field, we had tons of

11:53 data that we would talk, you know, bring to folks and they didn't know what to do with it. I mean, you'd have guys that say that's great, you know, thanks, but you know, just make sure you get

12:01 the fuel to the equipment. And the, but the real value in that data is, we can show folks if pump five is consuming more fuel than the other pumps that probably indicates that pumps running harder.

12:18 Some, you know, it's not running as efficiently. So there's an issue, you know, potential mechanical issue or failure with that. Yeah, that's interesting. You start kind of backing into

12:27 diagnostics of equipment based off of data from the health system. That's interesting. And it's not, you know, not to use our core component of our system that. That's why people are necessarily

12:40 using it. But the fact that you have, you can see that. And then even more interesting, you can start to look if you're an operator with multiple fleets, you can see if one of your managers is

12:54 using 5 less fuel than another one. Like, how are they doing their jobs? Like, how is, because the fuel costs are significant, right? I mean, you

13:03 can - I mean, it's one of the major inputs to the job, right? Yeah, 100, 000, 800, 000 gallons in a month of diesel, just on one job. And so, if you have someone that can save 5 or 10 of

13:16 that cost, it's meaningful. Yeah, no, it's, that's sort of things like getting interesting for me is like how you can, you know, get

13:26 maintenance data on equipment to see, you know, which pumps aren't running efficiently. If you're an operator, you know, comparing fleet versus fleet And so that's like not something that, you

13:38 know, I started fracking

13:41 12 years ago. Yeah. And it was your little bobtail tanker truck coming out and just that dude manually filling. And it's like there was no opportunity to get any type of insider data through that,

13:57 right? It was ancillary, I mean, and that's why just the industry's changed a lot because those early jobs, there was a little bit of fuel, a little bit of sand, a little bit of water, right,

14:10 that you needed. And now it's become such a logistics play just to get all that stuff there. And we'd like to think our system that we're not gonna be the bottleneck or the problem on the fueling

14:23 side. I mean, more often than not now, it's the wire line or sand or water. I mean, but it's not the fuel side. Always just blaming it on. And the data that we're collecting, It's become even

14:35 more important because, you know, something we've done within the last. three years is to add compressed natural gas as a fuel source now. And you really need that. We're one of the few folks

14:48 that supplies everything, the diesel, the automation and the compressed natural gas. And so we can show folks the displacement, right? That they're getting, you know, you were using 600, 000

14:60 gallons of diesel a month. Now you're using 200 and you're displacing it with the gas. And unless you kind of have the data, all that data, it's hard to kind of definitively show somebody. It's

15:10 hard to articulate that. Just to show it, yeah. Between the two. Yeah, which kind of leads me in my next question, which is about eFrax and like how y'all think about

15:20 building this business is based on fueling with kind of the rise of eFrax. And obviously, diesel is still heavily, heavily used, but how you guys,

15:29 this is like more a question from you guys operating the business. I'm an entrepreneur and so I think about these things. It's like how y'all think about shifts in the market and that shift to

15:37 E-frag in. You know, you just alluded to, you guys do CNG, compress natural gas. And so yeah, how do you think about shifting market wall, building this company? Sure, so

15:53 we like to think every few years. So I noted that we started off just delivering diesel through our sister company and then added automation. And within another year or two, we had folks asking

16:03 about compressed natural gas And so we started doing the homework on that and looked and saw the trends of not just e-fracts, but dual fuel, you know, DGB or dynamic gas blended pumps that use,

16:19 can either use diesel or natural gas, or in some cases, propane. So we saw the trends. Is that common right now? Oh yeah, so. Do these dynamic fuel? Yeah, so the DGB pumps, you know, kind

16:32 of using your question, We think maybe 10 to 15 of the market now are EFRACs. which are typically running off of gas turbines on site.

16:46 We believe more than half the market now is some form of dual fuel pumps. So they run on combination of diesel and natural gas and then the remainder would be the more traditional diesel pumps. But

16:59 there's no question that the, you know, Halliburton's, you know, propetros of the world, et cetera, are upgrading their fleets either to EFRACs or to dual fuel pumps. And so the dual fuel is,

17:18 we anticipate it's going to be the majority of the market for the next few years. It's relatively cheaper to upgrade those pumps. You know, an E fleet, if

17:28 you're including the class of a turbine and the pumps, I mean, it's tens of millions of dollars for each one of those. Yeah, a lot of CapEx lot of catbacks and you know over time you'll see more

17:38 of that but Um, but in the interim, if you need to swap out four or five, six pumps, you'll do the dual fuel. Yeah. And so we, we saw those trends and, um, and saw that benefit and frankly,

17:51 we also believe, I mean, you know, we, we do believe in the environmental impact of use, compress natural gas, 30 to 40, you know, less

18:03 CO2, yeah, socks, knocks, emissions It's better and on a diesel gallon equivalent basis, it's cheaper than, than D's list. I mean, look, I mean, it's a no brainer, right? For C and G. I

18:16 mean, T. Boone is always preaching this. Clinton was. I mean, the, the, the, you know, I think that the idea of like, electric semi trucks is stupid. And it's like, why are we not going to

18:29 compress natural gas on these or dual fuel on these? Um, um, and so I'm right there with you It just makes so much sense. on the, on the CNG side from, from y'all's service. What does that,

18:42 what does that look like? How are you guys, how do you provide the CNG, you know, are a lot of these tracks running off of fuel gas that's being compressed or are you guys hauling in the CNG?

18:56 Tell me about that a little bit. Yeah, so our focus is, is, so I'm glad you brought it up. I mean, the, right now you do really have two solutions, which is we call ours like a virtual

19:09 pipeline. So we actually compress the gas. We have facilities where you take pipeline grade gas. It's already been cleaned up. And then we compress it to about 4, 000 PSI. And then we have

19:24 specialized trailers, which haul that gas to the site. And they, when you're on site, you then have to decompress the gas and it, that requires, you know, another piece of equipment which we've

19:36 actually built our own systems. So you actually, you have to decompress it. Yeah, you can't feed it into the equipment at 4, 000 PSI or a turbine. It's that's just too high pressure. Yeah. So

19:48 typically you're reducing the pressure, you know, on site to maybe 500 PSI. Gotcha, yeah, so compressing it at a high PSI just for density purposes of transportation and then decompress it. Then

20:02 you decompress it on site and depending on what's on site, you know, we also have distribution units which are similar to our automation system with a bunch of reels and hoses to distribute it once

20:15 you get on site. And so where we had some really significant advantages, maybe over some kind of like a newer startup that just does CNG, we had the diesel business and those customers. So you

20:29 obviously had an entry point, but we also had the logistics. You know, we're running a bunch of trucks already with diesel and a lot of this is a logistics play. You know, you're compressing gas,

20:40 you're transporting it. Yeah. You're picking up an empty trailer on site. So it's a cycle of moving assets around at any given time. And, you know, so we have the trucks, the dispatch, the

20:51 drivers. Yeah, putting out all the infrastructure. All the infrastructure in place to do that, as well as the customer base that's looking to add the CNG So that made it a very natural or organic,

21:03 you know, kind of expansion area for us. But what's interesting is, you do have folks trying to use field gas, which in a perfect world, everybody would try to use field gas. But the problem is

21:17 you need enough production in the area that you're producing the volumes. Even the quality is not so much an issue, 'cause these turbines in particular can burn just about anything, right? a bunch

21:29 of junk in the gas. The problem is the pressure. If there's, if there's big fluctuations in the pressure, you get, you know, I'm not an engineer, but a cavitation, like it can cause, you

21:40 could damage like a20 million turbine. Yeah. And so ironically, what we've seen is even when they're trying to use field gas, we may be called in to have a trailer, like of CNG on standby, just

21:53 in case the pressure drops or there's a problem to, to, to, to keep the system there. But, you know, again, we're not in the field gas space, at least, at, at least as of today, but there's

22:04 a lot of ancillary equipment you need for that to potentially scrub the gas, clean it, keep the pressure at a certain level. Yeah. And because there's not like a foolproof solution for that, I

22:17 think a lot of the engineers, you know, company guys, they, they, they'd like to have the backup there. Yeah, it's nice to have. Yeah. The, so when you guys are hauling the CNG, how do you

22:28 all, cause, how do you know, how 'cause it's kind of like similar to like a frack sand mine. It's usually like get a find locations that are centrally located where you can do the compression.

22:43 And then have it within kind of some vicinity of other locations that you're serving. So, which is a tough logistics play. I mean, let's say you said it's all logistics. How do you guys, like

22:57 when y'all are doing the compression, are you just buying gas off of a mission company off the pipeline and doing

23:11 it there on site? How

23:17 does that work? Yeah, so we're cited right next to, we have two different facilities. One is a little bit north of Midland and others quite a bit further west, not too far from New Mexico border.

23:25 And they were strategically put there for the very reasons you mentioned, which is, it's a long way to haul gas. from Midland out to kind of southeastern New Mexico, but we cited our facilities

23:38 right next to gas plants, like literally right kind of on the fence line to those plants. And so, we have a pipe coming in directly from those facilities that we can compress the gas from. And we

23:53 looked carefully at those locations. We have a very good kind of a vendor

24:00 on the midstream side that works with us. Yeah. And you know, 'cause we wanna make sure there's not a problem with the volumes that they can handle what we need to pull. Yeah, that's what I was

24:09 saying, it's like, you know. And there's no way. I mean, we're maybe 10 of the volume that those plants are running. There's a ton of gas in West Texas. So, we're nowhere close to, you know,

24:21 and they would happily sell us like every, like every B2 that they have Yeah, exactly. So we don't have a problem with supply. I think that the locations are important. And as you said, as we

24:36 continue to grow, we'll look to expand and potentially add more of these plants in compression. I mean, we have a lot of space at each one of these facilities to add, you know, we have seven

24:49 compressors at the moment and we can easily add, you know, another four or five compressors to each site Yeah, yeah, no, that's super interesting to me. I mean, eFrax have been a big topic run

25:01 here lately. You know, I've done videos with Liberty and ST9 on their eFrax system. Pro-Frax is a big investor of ours. We talked to them about this all time. Sam Sledge over at Pro-Petro, we

25:15 talked to them a lot. And so it's cool to see the changing dynamics in frack over the last 10, 10 years. 15 years and appreciate the statistics you gave on, what the market's made up of, Vfrax

25:30 and dual fuels. And

25:33 one comment that you made that stood out to me, it wasn't even a comment, it was a thought of yours. But essentially what you guys said is like, we went from fuel delivery to two years later to

25:45 automation to two years later, compressed natural gas. We have a neon sign out here in the hallway, this has evolved or die. And that's what you guys are doing. It's like, there's new

25:55 opportunities in the market, and we're just staying fluid with the market and in the needs that it has and whatever aligns with the health business. And you can leverage your strengths for it. You

26:03 guys are attacking those opportunities. Sure. Yeah. And I think we like to say, you know, every, you know, maybe 18 months, two years, there's another, you know, area to look at. And to

26:18 date, we've been very oil and gas centric, which that's. our backgrounds, we know that space and we think there's a ton of opportunity. I think in particular with CNG, there's tailwinds behind

26:33 that space that will continue to make inroads

26:37 for frat related work. But there's also huge opportunities outside of oil and gas. You mentioned tractors like fleet fuel for

26:48 CNG. It's certainly not just oil and gas. I mean, you have UPS, FedEx Yeah. Frito-Lay. I mean, you pick a company that's running tractors. They love to find ways to displace diesel in their

27:01 tractors. Our own tractors actually can run on CNG, too. Nice. And so we're trying to practice what we preach and use that as a fuel and - I mean, that's sick, because you guys are producing the

27:16 CNGs. Sorry, they just - they fuel up right there on on - So economically, it makes a lot of sense to look at those areas. data centers, a lot of places that historically use diesel generators or

27:29 backups there, there's a big opportunity for compressed natural gas in these areas and so we're

27:39 evaluating all these spots. I mean, I still think there's a huge amount of runway just in the oil and gas segment, but we're certainly not blind to other sectors. I mean, we saw the freeze in

27:52 Houston a few years ago and I even like back up power plants that could need some

28:02 CNG on site. That's actually a

28:05 good thought. Actually, I think it was Will Franklin that brought this up from Lime Rock. We were just talking about Will before we got on here. If we were listening to this, we were talking all

28:13 kinds of shit about you, man.

28:15 We weren't talking about it about you, Will. But I I think it was Will that brought it up on Twitter, talking about. How everyone's getting backup generators at their house in Houston and

28:26 does the gas pipeline infrastructure, the distribution network support all of that demand in terms of

28:37 does have the pressure that it needs to feed all these gen sets at these homes and so just like really interesting dynamics across the board when it comes to gas distribution and eating CNG. So yeah,

28:53 I mean, it's just like opportunity galore out there. So we think so. I mean, I like

29:01 to think of myself like, is it all of the above like energy advocate? Yeah. And so I never like to look at zero sum game. Like when I look at alternative energy, I really think, you know, not

29:16 just the US, but the planet needs every. source of energy we can get. There's no way to support, you know, 8 billion people, right, on the planet with the needs we have to, you know, to just

29:27 say we're just going to use one or the other. And escalating needs. And escalating needs. Yeah. And in fact, I mean, there were some recent articles about this. They're having to extend, you

29:38 know, coal power plants, you know, retirement dates, because there's no way they can make up for the lack of power if they took those plants offline. And so we really look, you know, gas, you

29:50 know, it's obviously still a hydrocarbon, but it's a cleaner one. And, you know, if and until we have a better, you know, energy source, it makes a lot of sense where we can transition. It's

30:01 not going to be the perfect solution. Yeah. But we think it makes a lot of sense in a few of these applications. And so, yeah, we're excited to continue to help folks with that journey. All

30:13 right, Todd, if we have any EP operators,

30:19 fact fleets listening, and they want to find out information on you guys, where can they find you? What's your website? So yeah, the corefuellingcom is probably the best one to reach out

30:36 to in terms of learning about the technology And you can find links

30:43 to our sister company, Manticore fuels as well. But that's one of the best places to go. And yeah, I mean, I'll put in a plug for us. I mean, we do think that we're, we like to think that

30:55 we're white glove service. So, and as I mentioned before, we're one of the few operators that can supply everything, a one-stop shop for diesel, diesel automation, CNG and related services. And

31:10 that's a, it is a unique combination that, not everyone can package together and as you can appreciate being in and around the oilfield, it's just different, right? Even large operators or

31:23 fueling companies don't necessarily like the oilfield because you're driving on lease roads and it's 247 business where it's not like construction or Monday through Friday. I mean, it's say 247,

31:40 I'll call it 364, maybe Christmas day, people have up, but pretty much every day the rest of the year, they're working and it's running. And so not everybody likes that, you know, it's not,

31:52 you know, we tell our folks, it's not easy work, it's hard dirty work, but

31:59 it's one that I think, you know, if you can do what you say you're going to do on time and then people appreciate that. Yeah, absolutely, it's

32:08 my everything about the industry. So. All right, we will drop a link to your website in the show notes. If you're listening, you want to check it out, hit that link and go learn about the

32:20 technology. Reach out to Todd and team here. Todd, appreciate you being on the show today. Yep, thank you very much. It's been a pleasure. Yep. All right guys, we will catch you on the next

32:28 episode.