Advanced Drainage Systems Inc. expects to “benefit significantly” from the fracking boom in the U.S.
The newly public company makes plastic pipes for construction and agriculture use and says some natural gas found in shale formations, including Ohio’s Utica, contain large amounts of ethylene used to make plastics.
“We’re not predictors, but we truly believe our industry and ADS will benefit significantly from the shale gas phenomenon that’s going on,” CEO Joe Chlapaty told investors at a conference this week.
Chemical plants that dot the Gulf Coast were being closed down only five years ago, Chlapaty said, because of high natural gas prices. Now that problem’s been reversed.
“(There’s) more gas right now than they can process, and so several of the major petrochemical companies have announced very significant plant increases,” he said.
It will take several years for the plants to be built, but Chlapaty expects a 30 percent increase in ethylene and polyethylene capacity, “which we believe will bode well for our basic material costs going forward.”
Advanced Drainage (NYSE:WMS) raised $232 million with an initial public offering in July.
Pipelines taking gas from the Utica and Marcellus shale plays to the Gulf Coast are helping spur loads of new pipelines.
Chlapaty and CFO Mark Sturgeon said at the same conference hosted by RBC Capital Markets that they’re seeing an increase in nonresidential construction that hasn’t showed up yet further down the construction cycle.