|David Glendon is taking over as the new president and CEO of Sprague Energy, based in Portsmouth, N.H. Sprague is a leading independent wholesale energy products distributor in the Northeastern U.S., with over seven million barrels of capacity at 21 terminals. Since joining Sprague in June 2003, Glendon has served as the senior vice president of oil and materials handling, focusing on driving the execution of a customer-centric approach across all elements of the business.
Prior to joining Sprague, Dave was a partner and global account manager at Monitor Group, a global consulting and merchant-banking firm. He was also a founder and managing director of Monitor Equity Advisors, working with leading private capital providers in evaluating transactions and enhancing the strategic positions of their portfolio investments.
Fuel Oil News took the opportunity to ask Glendon about Sprague’s current and future initiatives.
FON: With the volatility in pricing for petroleum products we have all experienced this heating season of ‘07- ‘08, what programs, practices or techniques has Sprague Energy offered its customers to be successful?
Glendon: We offer our customers two key elements in addition to the commodity. First, we have a range of price protection programs that are tailored to different segments of our customer base, from standard fixed price and cap programs to more elaborate collar programs and our proprietary e-commerce platform for both prompt and futures purchases. Second, we offer our customers information and insight into market dynamics to enable better buying decisions. Our MarketWatch service provides a concise summary of the dynamics affecting energy markets. While we are careful not to provide specific buy or sell recommendations, we believe that well-informed customers are best equipped to deal with the unprecedented volatility we’ve seen recently.
FON: Has there been a particularly valuable program that you would like to expand upon for the interest of our readers?
Glendon: I believe that our “Free Range Pricing” program has tremendous value in today’s volatile environment. It provides dealers with both price protection and margin enhancement opportunity at little to no extra cost. Dealers can offer a cap price to homeowners while establishing a collar around their own costs, affording them downside participation at much lower costs than traditional options programs allow. This also takes the guesswork out of “when to pull the trigger” on downside pricing and ties the physical barrels to the hedging activities seamlessly. Retailers can now offer customers the price security they desire with both lower risks and opportunity for enhanced margins if markets fall from current lofty levels. We see this as a valuable tool for our dealers in retaining customers in today’s challenging price environment.
FON: Does Spague Energy look to add any other products to its array of offerings to the industry for our next heating season?
Glendon: We will continue to expand our suite of both products and services to help our customers succeed. On the product side, we are committed to the growth of our Heatforce premium heating oil in order to combat the continued degradation of the heating oil pool as more blendstocks find their way into the supply picture. We have been installing additive injection facilities at many of our terminals in order to offer our customers a higher quality product, reducing the time and expense associated with unplanned service calls. We also continue to expand our e-commerce offering to enable futures purchases in addition to prompt barrels. Customers transacting online can set target levels and see the execution of their orders at a known price rather than wait for their “fill,” which can often take place at much different levels than intended in today’s volatile environment.
FON: If conditions support it, would Sprague Energy look to expand its number of terminals and facilities? And, is there interest at Sprague Energy in expanding the capacity for product at the sites they now operate from?
Glendon: We are always exploring opportunities to expand our business in both current and potential facilities. Multiples for terminal assets have been very high over the past couple of years as companies with different capital structures have competed for these assets. We have started to see valuations slip a little recently as the market structure changes and conservation has begun to affect demand for petroleum products.
FON: As the first terminal marketer in the United States to be certified BQ-9000 by the National Biodiesel Board, what expectations does Sprague have for the future of biofuels and Bioheat™ in particular ?
Glendon:We remain bullish on bioheat and believe that a quality offering will continue to make inroads into the heating oil pool. We see biofuels at an important inflection point in its development, with unprecedented interest from both consumers and politicians. While we are supportive of efforts to grow its usage, we have some trepidation that mandates will result in significant quality problems for the industry as the growth attracts potentially off-spec material. We are strong supporters of the BQ-9000 program and believe that the industry needs to police itself effectively if we are to see growth in biofuels usage for all the positive reasons that have been widely discussed.
FON: Why has Sprague taken the lead in converting to net gallon billing?
Glendon: We see net gallons as the most effective means of making direct comparisons across suppliers. With different oil temperatures and gravity, the historic practice of gross gallon pricing meant that dealers could not accurately assess the relative economics of various suppliers’ offerings. We anticipate that the industry will ultimately embrace this practice as a fairer method for pricing petroleum products.