The boom in North American energy and infrastructure projects has intensified competition for workers and fuelled demand for modular housing as energy producers shift from temporarily flying in workers to housing them at worksites.
That has spurred consolidation, investment and lofty revenue goals in the modular-structure sector as players shift to building housing for workers.
Aldergrove’s Shelter Industries Inc., for example, generates about 80% of its $50 million annual revenue building staff housing for energy projects operated by companies such as Canadian Natural Resources Ltd. (TSX:CNQ).
Two years ago, most of Shelter’s revenue came from building modular school structures.
“We see the oil and gas sector being strong for the next three to five years as there seems to be no let-up,” Shelter’s president Harold Clifford told Business in Vancouver. “We expect to double our annual revenue in the next five years.”
Vancouver’s WesternOne Equity Income Fund (TSX:WEQ.UN) bought the Langley-based modular -structure builder Britco Structures Inc. for $93 million in June from Rick McClymont and David Taft, who founded the venture in 1977.
WesternOne did the deal in part to diversify its operations.
Much of its previous business was focused on renting scissor-lifts and equipment to B.C.’s film-production sector.
With the HST about to be eliminated, analysts have noted that WesternOne’s equipment rentals to film and TV production companies could suffer.
Meanwhile, its Britco division has:
•increased its workforce at two B.C. manufacturing plants to 400 from 323 employees in June;
•spent about $2 million last fall to buy a 130,000-square-foot manufacturing facility in Waco, Texas, out of bankruptcy; and
•spent $2.8 million to buy Edmonton-based Alberta Modulars Inc. in early February.
Britco announced February 28 that its 80-employee Texas manufacturing facility has started production. Its 75-employee Edmonton operation was already operating at capacity.
“There are derivative plays on the oilsands,” National Bank analyst Trevor Johnson explained to Business in Vancouver.
“There are the producers, the Suncors of the world. Then there are the service companies for those producers. Finally, you can leverage off the service companies. What do they need? That’s where housing comes in.”
The energy sector’s labour shortage fuels demand for modular staff housing in two ways:
•it’s more efficient for energy companies to house staff on-site than at hotels in nearby Fort McMurray, where room rates have soared, vacancy is low and there would be a commute; and
•workers are demanding better accommodation than a room in an old trailer where they have to walk down the hall to go to the washroom or shower.
“Think of a three-star hotel, a Super 8, or maybe a step up from that. That’s effectively what our housing is,” Britco president Mike Ridley told BIV. “The market is starting to move to private washrooms, bigger space, 42-inch flat-screen TVs, really nice kitchen facilities with great catering, great food and full-size gymnasiums.”
The boom has helped Britco snag the largest project in its history: a $50 million contract to provide Oklahoma City-based Devon Energy with 880 rooms in 10 two-storey dorm wings totalling 280,000 square feet near Devon’s Alberta operations.
The proposed Keystone pipeline could be a big source of future Britco revenue.
TransCanada Corp. (TSX:TRP) announced February 27 that it would build the southern leg of the Keystone XL pipeline between Cushing, Oklahoma, and the Texas gulf coast.
Bidding on Keystone-related work was not part of Ridley’s rationale for buying a Texas manufacturing facility, but he said that if U.S. President Barack Obama approves the pipeline, Britco will likely bid on jobs along the pipeline route from Canada to Texas.
Britco is the largest B.C.-based modular-home manufacturer. It has 220 staff at its Agassiz plant, another 180 employees in Penticton and about $80 million in annual sales.
The largest player in the Canadian market is the 3,000-employee modular-structure division of global conglomerate Atco Group.
About 600 of its workers are based in Canada.
In the last year, Atco has built 2,500 staff housing units for clients working on infrastructure or energy projects in B.C. and Alberta. •
