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Gray, Gray & Gray 2019 Energy Industry Survey Results

Gray, Gray & Gray, LLP Certified Public Accountants, of Canton, Massachusetts, has released the results of the firm’s 2019 Energy Industry Survey. The survey, which has become a benchmark for heating oil and propane retailers over the past 28 years, was distributed to retail fuel oil and propane dealers throughout the U.S. and collected data from April 2018 through March 2019.

“Our purpose in conducting this survey has always been to provide a benchmark against which companies can compare their own performance while always looking for ways to provide better, more relevant information for the respondents and the industry as a whole. We added a couple questions around fleet management and billing rates…” said Marty Kirshner, CPA, MSA, chair of Gray, Gray & Gray’s Energy Practice Group. “It is an important way to measure progress and to make sure you remain competitive and profitable and develop best practices.”

As the official Media Partner for the 2019 Energy Industry Survey, Oil & Energy assisted in promoting and distributing the survey to potential participants. “It has always been a pleasure reading, reviewing and re-publishing the annual Energy Industry Survey,” said Samuel Diamond, Editor of Oil & Energy. “This year, it was an honor to play another role in the process as the official Media Partner for the survey, and we are once again very excited to share the results with our readers.”

Some of the highlights from the results of the 2019 Energy Industry Survey include the following:

There were no significant increases in wages of employees, which is surprising given the difficulty companies are having in finding qualified service technicians and drivers.
With a 5% increase in companies looking for an acquisition and companies with leadership looking to retire, we expect to see increased activity in the M&A market over the next 6-7 months.
Margins are up across the board, the result of favorable price fluctuations during the season, and good purchasing practices from experienced dealers.
More emphasis has been placed on effective and smart marketing: one in every three respondents attributed increases in customer list to effective marketing techniques. Also, average salaries for sales staff are higher, and there is heavier reliance on e-commerce and relationships with real estate agents to drive new business.
There was an increase in companies using prompt pay discounts, which can lead to better cash flow. We believe the better margins are allowing for the increased prompt-pay offerings and activity.

The overall 2019 Energy Industry Survey results appear below and on the following pages. Complete Energy Industry Survey results, including a breakdown by company size, are available on Gray, Gray & Gray’s website at gggcpas.com, or by calling 781-407-0300.

In what state does your company primarily do business?
38% Massachusetts
9% New York
11% Pennsylvania
17% Connecticut
9% New Hampshire
2% Vermont
2% New Jersey
2% Wisconsin
6% Maine
2% Virginia
2% California
2% Missouri

Are you a family-owned business?
97% – Yes 3% – No

If “Yes,” how many generations? 3

Total number of employees: 36

Are your employees unionized?
3% – Yes 97% – No

Number of service technicians (full-time equivalent): 8

Number of delivery drivers (full-time equivalent): 8

Do you own a bulk plant?
69% – Yes 31% – No

Capacity of your largest bulk plant for fuel oil?
111,154 gallons

Capacity of your largest bulk plant for propane?
64,377 gallons

What is the average HOURLY rate you pay:
Delivery Drivers $23.00 per hour
Dispatchers $23.00 per hour
Customer Service Representatives $20.00 per hour
Accounts Payable/Receivable Staff $22.00 per hour
Service Technicians $26.00 per hour
Service Manager $36.00 per hour
Controller/Accounting Manager $34.00 per hour

How do you compensate Sales People?
38% – Straight salary
(Avg. amount: $73,513)
48% – Salary plus commission
(Avg. amount: $69,386)
14% – Commission only

If you use a fleet management software program, which one do you use?
26% – Blue Cow Ignite Mobile
17% – Digital Dispatcher
11% – Silent Passenger
11% – Verizon
5% – Fleetmatics
5% – Linxup
5% – Spireon
5% – Samsara
5% – Total Energy
5% – Other
5% – TDS

Which fuel management software program do you use?
44% – Blue Cow
16% – Other
11% – DRM
11% – Total Energy
5% – ADD Systems
5% – Taurus
4% – Destwin
2% – Cargas
2% – TerraOil

Which accounting ledger system do you use?
78% – QuickBooks
11% – Other
4% – Great Plains
5% – Sage Intacct
2% – PeachTree

Are you considering any of the following? (check all applicable)
59% – Acquiring a company
41% – Transitioning to the next generation
27% – Selling your company
24% – Retiring
22% – Developing a new bulk plant
19% – Conducting a business valuation
14% – Upgrading a bulk plant
8% – Converting to S Corporation
8% – Converting to flat rate billing
3% – Refinancing
3% – Merging into a joint venture

How do you intend to exit the business?
68% – Transition to the next generation
30% – Sell to an outside party
2% – Merge

How many active fuel customers did you have as of Mar. 31, 2019?
(Note: An active customer is defined as having received a delivery within the last 18 months.)
Fuel Oil – Full Service Residential: 2,179
Fuel Oil – On-Demand Residential (COD, will-call): 1,455
Fuel Oil – Commercial: 97
Propane – Full Service Residential: 2,856
Propane – On-Demand Residential (COD, will-call): 955
Propane – Commercial: 211
Other: 513

What percentage of your total fuel volume (gallons) does each customer type represent?
Fuel Oil – Full Service Residential: 21%
Fuel Oil – On-Demand Residential (COD, will-call): 21%
Fuel Oil – Commercial: 19%
Propane – Full Service Residential: 12%
Propane – On-Demand Residential (COD, will-call): 11%
Propane – Commercial: 11%
Other: 5%

How do you see each segment of your fuel business changing in the next three years?
Fuel Oil – Full Service Residential:
35% – Increasing
17% – Decreasing
48% – Same

Fuel Oil – On-Demand Residential:
51% – Increasing
20% – Decreasing
29% – Same

Fuel Oil – Commercial:
12% – Increasing
35% – Decreasing
53% – Same

Propane – Full Service Residential:
84% – Increasing
4% – Decreasing
14% – Same

Propane – On-Demand Residential:
56% – Increasing
7% – Decreasing
37% – Same

Propane – Commercial:
48% – Increasing
0% – Decreasing
52% – Same

Other:
22% – Increasing
0% – Decreasing
78% – Same

How many gallons of fuel did you sell during the heating season that just ended?
Fuel Oil – Full Service Residential:1,540,768
Fuel Oil – On-Demand Residential (COD, will-call): 481,155
Fuel Oil – Commercial: 144,594
Propane – Full Service Residential: 1,349,251
Propane – On-Demand Residential (COD, will-call): 489,808
Propane – Commercial: 274,821
Kerosene: 86,258
Gasoline: 777,655
Diesel: 372,662
Biofuel: 1,310,326

What was your average margin for fuel sales during the heating season that just ended?
Fuel Oil – Full Service Residential: $0.81 per gallon
Fuel Oil – On-Demand Residential: $0.70 per gallon
Fuel Oil – Commercial: $0.56 per gallon
Propane – Full Service Residential: $1.36 per gallon
Propane – On-Demand: Residential: $1.38 per gallon
Propane – Commercial: $0.69 per gallon
Kerosene: $0.85 per gallon
Gasoline: $0.20 per gallon
Diesel: $0.44 per gallon
Biofuel: $0.74 per gallon

How has the change in oil prices affected your business?
44% – Better margins
18% – Lower margins
38% – No effect

In comparison to this time in 2018, how has your customer list changed?
73% – Increased
9% – Decreased
18% – Remained the same

To what do you attribute the gain or loss of customers?
35% – Gained due to better or more effective marketing
3% – Gained due to an acquisition
29% – Gained due to better use of the internet or e-commerce
12% – Gained due to other
0% – Lost to competitor with similar pricing
7% – Lost to competitor with lower prices
10% – Lost to gas conversion
4% – Lost due to other

Please provide percentages for the following sources of new customers (between 4/1/18 and 3/31/19):
16% – Sales team
19% – Customer referrals
18% – Traditional advertising (print, radio, tv, direct mail, etc.)
17% – Digital marketing (email, pay-per-click, social media, website, etc.)
13% – E-Commerce customer platform
11% – Real estate agents
6% – Other

Which of the following do you offer to RETAIL customers?
53% – Fixed pricing
42% – Tank monitoring system
63% – Price cap
49% – Tank protection plans
93% – Budget plan
86% – Equipment service
84% – Service contracts
86% – Heating system service
12% – Free oil for new customers
86% – Heating system installation
23% – Free service for new customers
88% – Prompt Pay Discount
14% – Temperature monitoring
58% – Online ordering

What percentage of receivables fall into each date range?
26% – Less than 30 days
25% – 30-60 days
26% – 60-90 days
23% – Over 90 days

Do you use a third party for receivables collection?
21% – Yes 79% – No

What percentage of active customers use a budget plan? 24%

What percentage of active customers use a price protection plan? 25%

Do you charge retail customers for price protection?
24% – Yes – For Fixed Price $0.10 per gallon
43% – Yes – For Cap Price $0.19 per gallon
33% – Yes – For Down Side $0.22 per gallon
35% – No fee

How many deliveries did your drivers make in the last 12 months?
24,457

What is your average RESIDENTIAL drop (gallons per stop)?
165 gal.

What is the average renewal price you charge for a service contract?
$268

How many PAID service contracts do you have?
1,140

What is the average HOURLY labor rate you charge for service:
Oil Service: $106.00 per hour
Propane Service: $114.00 per hour
Air Conditioning: $120.00 per hour
Plumbing: $110.00 per hour
Pipeline Gas: $122.00 per hour

How many total service calls were made last year?
5,625

What is the average number of years an account has been a customer?
11 years

Have you acquired another company in the past three years?
21% – Yes – Retained gallons
5% – Yes – Cash at closing
74% – No

Are you planning to add alternative sources of revenue?
Already Offer Plan to Add
Service Gas Equipment: 24% 3%
Sell Propane: 22% 1%
A/C Installation & Service: 32% 0%
Plumbing Services: 9% 1%
Solar Installations: 1% 0%
Energy Efficiency Services: 3% 1%
Other: 2% 0%

2019