By Eric Peterson | Nov 29, 2021
Leak detection technology and related services
The grandfather of current owner Carolyn Heath Haag, Milton Heath Sr. started Heath Consultants as a tree-trimming business in Massachusetts in the 1930s. As lines carrying gasified coal became more and more common, dying trees were an early sign of leaks.
That led Milton to move from trimming trees to detecting gas leaks. "He would get calls from gas companies to come investigate why these trees died," says Paul Wehnert, the company's executive VP and chief marketing officer today. "That became a business."
It began with visual inspections around gas networks for impacted vegetation. "Then he developed equipment to go out and investigate the leaks and determine the hazards of the leaks," says Wehnert.
The company relocated to Texas in 1992, and is now the largest company in methane detection with two divisions: product manufacturing, with about 150 employees in a 22,000-square-foot facility in Houston supported by an adjacent 26,000-square-foot building with a CNC machine shop and warehouse space; and field services, with more than 1,500 employees in nearly every state.
The former division manufactures the tools of the trade used by the latter, and represents about a third of the revenue. "[Field technicians] use the products we manufacture," says Wehnert. "We also sell that same equipment to our utility partners, who also use it. They can buy the equipment from us and do the work themselves or they can hire us to do the work for them."
Heath Consultants designs everything in Houston and manufactures some products in-house, working with contract manufacturers for components. Partners in Texas and Oklahoma, for example, manufacture the company's printed circuit boards. "We try to do everything domestically," says Wehnert.
The company also manufactures pipe and cable locators for water and electric utilities, and also offers relevant field services like meter reading and underground utility locating that dovetail into its core competencies.
Wehnert says methane leak detection remains front and center. "We're the industry leader from wellhead to burner tip," he says. "We go from production wells to gas gathering and into gas distribution."
"We have portable platforms that are carried by a person, we have mobile platforms that are vehicle-mounted," he continues. "We have fixed systems that are placed in the field and monitor 24/7. We've even experimented with some aerial platforms as well."
Manufacturing and field services are synergistic, says Wehnert, and collaboratively catalyze innovation. "Our field people are our worst critics," he notes. "During product development and R&D, we have the ability to put it out there in the field and get feedback from people who are doing work with that device day in and day out in all types of weather."
Sitgreaves joined the company in 2016 and assumed duties of CEO in 2019 after serving as CFO. "I'm a CPA and came up in public accounting," he says. "I was in the construction industry when the housing bubble popped in '08-09. Then I rode the wave of oil and gas. I saw it at its highest and its lowest. I learned a lot about how to right-size organizations."
He adds, "I'm a plan-for -the-worst, hope-for-the-best kind of guy. When you're not prepared for the bad times, they're going to hit you hard."
The family-owned aspect attracted Sitgreaves to Heath Consultants. "The ability to really set up a partnership and have a long-term relationship where we're not trying to strip things out, drive margins higher, and just get a sales transaction, that type of business really appeals to me."
Awareness of methane detection has been on the rise since he took over as CEO in 2019. "It's a hot-button topic," says Sitgreaves. "Paul has been doing this for 40-plus years, and we've never seen anything like it."
Safety regulations have catalyzed sales in recent years. "When you're distributing natural gas throughout an entire community in the United States or throughout the world, the object is to keep the natural gas in the pipe," says Wehnert. "If it leaks, it becomes a safety hazard. We design the equipment and we provide the field services to locate those leaks before they become serious."
As the largest population centers have the largest utility grids, California, Texas, and New York are the company's largest markets. Local policies also play a role. "There's a lot of regulations on methane as a greenhouse gas contributing to climate change," says Wehnert. "Now there's more and more emphasis beyond just safety -- now there's a huge environmental piece."
Innovation has also driven Heath Consultants for its near-century in business. Released in 2019, RMLD-CS a second-generation, handheld, laser-based methane detector that's about a quarter the size of its predecessor without impacting performance. "It's a manufacturing marvel from the way we look at it," says Wehnert. "The technology allows us to detect natural gas leaks from 100 feet away."
The company continues to innovate. The latest is a mobile leak detection system dubbed Discover AMLD (Advanced Mobile Leak Detection). A car outfitted with optical sensors can detect methane at a range of 1,000 feet. "It will be available in 2022," says Wehnert. "We can put it on any vehicle out there."
As the R&D cycle and product iteration accelerates, the forecast calls for continued growth. "We continue to grow as we release new products," says Wehnert. "We've got R&D going on now for three or four different products we'll release over the next three or four years."
Challenges: Handling supply chain bottlenecks, but they've been mitigated by boosting inventory at the front end of the pandemic. "It's a daily process now," says Wehnert. "Our supply chain folks every day here are looking at substitutions, they're looking at different vendors. When we find components that are available, we look to just grab them all, even if it's a two-year supply. We honestly haven't missed a beat."
Sitgreaves says hiring is difficult, especially in the 40-plus-state footprint of field services. "Each city and each region brings a different set of challenges when it comes to the labor market," he notes.
Opportunities: Sitgreaves says he sees more opportunities on the upstream side of gas production, in large part due to more stringent state and federal regulations. "Now you're starting to see more emphasis on oil and gas operators closer to the wellhead," he says.
Adds Wehnert: "Colorado and California are probably the two most stringent states in the U.S., particularly on the upstream side."
Needs: Beyond additional employees, Sitgreaves says Heath Consultants needs "focus" going into 2022. "There are so many opportunities, there's all kinds of new technology, so having an 88-year history, we have a lot of people coming to us with new technology. It's about being able to sort through it and focus the business to stay on track."