When Waste Connections Inc. CEO Ronald Mittelstaedt saw his company break through the $1 billion revenue mark four years ago, he indicated the second billion would come faster than the first.
The Woodlands, Texas-company now anticipates it could hit the $2 billion mark next year, based on guidance released during the company's recent third quarter conference call.
And the company sees plenty of growth beyond that with its new oilfield wastes business as a key driver in the years ahead. Fresh off its $1.3 billion all-cash acquisition of R360 Environmental Solutions Inc., Waste Connections sees the oilfield waste disposal and treatment business as a big opportunity.
"The oilfield waste disposal business and treatment business is still very fragmented. Although R360 is comfortably the leader in that field, it's still a very fragmented business," Mittelstaedt said on the call with securities analysts.
Waste Connections figures the oilfield waste business is worth about $1.5 billion to $2 billion annually where R360 operates. And that leaves plenty of room to capture additional market share, Mittelstaedt said.
"So if I said R360 is doing $300 million of that, that would tell you they've got somewhere around 15% – I'm rounding – or so of that market. And not all of that do we want, by any means, but I think to say that we believe that … over the next five years, we could increase that business from a $300 million to a $500 million business, I think that's a fair statement."
Waste Connections started out in 1997 and by the end of 2002 the company was just shy of the half billion dollar mark in annual revenue. The company broke through the $1 billion barrier in 2008 and brought in $1.5 billion last year.
Guidance released on the recent conference call indicates that the company expects revenue to be $1.95 billion to $2 billion next year.
"Any increase in oilfield waste activity, improvement in the economy or recycling prices or additional acquisitions would provide upside to these estimates," the CEO said.
Waste Connections has its roots in solid waste management, and Mittelstaedt has indicated that's where the bulk of the company's business always will remain.
But he sees oilfield waste disposal and treatment as a growing industry that provides more upside potential when compared with solid waste. That potential comes with risk.
Oilfield waste is considered a growth business thanks to the growing popularity of a relatively new extraction approach. Hydraulic fracturing – "fracking," for short – is a process that releases oil and gas deposits in shale that had been unreachable. New technology has resulted in a tremendous push in the drilling of new wells.
And more oilfield waste – such as hydrocarbon-contaminated rock and earth brought to the surface while the well is being drilled, water used during the drilling process and petroleum-based muds that are used to lubricate the drilling process – means more opportunity.
About 75% of those materials end up in oilfield waste landfills and the other 25% is recycled, the CEO has said.