DistributionNOW (DNOW) 4th Quarter 2015 Earnings Call Notes

DistributionNow (DNOW) CEO Robert Workman said this energy downturn is unparalleled

This particular downturn, which will be about the fifth of my career, makes others pale in comparison both in severity and longevity.”  

While prices for the products and materials they buy to ultimately distribute to energy companies are continuing to drop

A slowdown in China’s economic growth, coupled with increasing steel production levels, is pushing commodity prices lower as steel and metal input costs continue downward. More dumping suits are being filed in an effort to shore up prices in respective markets.  In the fourth quarter, we saw raw material prices for scrap, hot-rolled coil, and most commodities drop further.  As this downturn continues, we expect to see more closures, possible bankruptcies, consolidations and dumping suits.”

DistributionNow (DNOW) CEO Robert Workman said now is the best time to be buying distressed energy assets 

“The best time to consolidate is always going to be in a downturn as opposed to when the market’s really hot and you’re paying 50% to 100% more than you would otherwise. So we see it as an opportunity to make some strategic acquisitions that fit certain holes in our solutions offering or in certain geographies. We think now is the time to do it, especially with our runway of balance sheet room.”

DistributionNow (DNOW) CEO Robert Workman said the energy M&A landscape remains bifurcated 

That said, the bid-ask spread between buyers and sellers could widen in this uncertain market. Right now, we are seeing a broad spectrum of sellers from those who would rather wait for an upturn than sell and risk selling below what they value their businesses to be worth to sellers who are fire-selling to avoid declaring bankruptcy.”