Corporate 100: Long-established CountryMark experiences fast growth

CountryMark’s prudent and timely investments in crude oil production and innovative changes in production equipment helped lead the company to a major increase in refining capacity and oil production and significantly higher revenue in 2022.

That growth landed CountryMark, founded in 1919, on IBJ’s list this year of the 25 fastest-growing private companies in the Indianapolis area.

It’s a rare feat for an established company to nearly double its revenue in one year—from $1.3 billion in 2021 to nearly $2.2 billion in 2022. That revenue ranked the company as Indiana’s sixth largest private company, according to IBJ research.

CountryMark President Matt Smorch has been with the Indianapolis-based company for 22 years, working in operations, refinery management and marketing. A chemical engineer, he became president in 2020 and has spent his entire career in the oil refining industry.

He recently delved deeper into the reasons for the farmer-owned cooperative’s swift growth and answered IBJ’s questions about CountryMark’s future.

What factors led to CountryMark’s fast growth?

We increased our crude refining by 21% above our historical capacity and refined 2 million more barrels in 2022 than any time in the past.

The phenomenal growth we’ve had stems back to 2020 during the pandemic and then to 2021 and 2022. CountryMark sells gasoline and diesel. We sell the volume we produce, but the market controls the price. If you price it too high, you will not sell it. If you price it too low, you’ll sell way too much. Being a supply cooperative, our first mission is to ensure adequate fuel supply for our members. We manage the company to make sure they have adequate supply. But we sell to them at market prices.

In 2020, with the pandemic, demand was drastically reduced, and the prices were extremely low. Our revenue was historically low in 2020. In 2021, demand for us came back to where it was previously, but the price was lingering as the global demand was slowly increasing. As more people were traveling and driving, demand started going up more. In 2022, demand started to outpace supply in a lot of areas, which caused prices to be historically high, more than $4 a gallon at the pump.

We had three abnormal years—a low year where we lost money in 2020, then slowly came back in 2021 and then had a near-record year in 2022. Some of that came from fuel markets, as demand picked up and pricing of fuel increased because demand was higher than supply.

Were there other contributing factors?

The other reason is, we made some decisions from an investment standpoint in 2020 that affected our profitability in 2022. We had a major capital project we were pursuing—a $50 million project to increase capacity at the refinery in Mount Vernon [in southwestern Indiana]. But when demand crashed in 2020, [we] decided to not pursue that project. We actually allocated that capital to make a purchase of some crude oil production in West Texas when crude price was low.

We’re an integrated oil company. We produce oil in the Illinois basin … and that oil goes to our refinery. We also have oil production in Texas, which may or may not go into our refinery, but it’s another avenue to make money. We can sell that crude oil to other refineries. We made that investment, so when crude prices rose in 2021 and 2022, our production side of the company made substantial revenue by selling that crude. That was a significant portion of our revenue growth.

When we canceled the investment at the refinery, our engineering and operations team took that as a challenge, and by using innovation and looking at the operation, they came up with some smaller investments—changes to key pieces of equipment—that we could install and still increase the capacity of the Mount Vernon refinery. We did that expansion in late 2021, and as a result, in 2022 we increased our crude refining by 21%. … Instead of spending $50 million, we spent only $5 million and got the same capacity increase.

Our refinery was able to run at 98% of capacity in 2022, which is defined as the highest average during a 30-day period. For our industry, that’s very high. That compared to an average 91% refinery utilization across the country for the year. CountryMark reduced unplanned maintenance outages and improved its ability to have products where and when customers needed those products, which increased product sales and revenue.

It was a great success story for our refinery team to be able to do that. It was something to be extremely proud of. I’ve been here 22 years, and we’ve expanded quite a bit. But it’s been organic growth. Having that amount of capacity increase, for the minimal investment we made, was really transformational from a company standpoint.

In 2023, we’ve had both scheduled and unscheduled maintenance we’ve had to do. So, we’re not at the capacity we were at in 2022 since we’ve had to shut down part of the refinery to perform repairs.

What future do you foresee in demand for your products, and do you expect to expand soon?

We refine 35,000 barrels a day of crude oil since 2022, an increase from 30,000 barrels a day. In our business, we should be able to sell more products if the demand is there. Increasing capacity is helpful from a revenue standpoint, and we always aim to supply it better, more efficiently to customers.

We will focus our efforts on finding ways to refine 38,000 barrels of crude oil per day, up almost 10% from the 35,000 barrels of crude oil we refine today, within the next couple years at Mount Vernon. We will invest in infrastructure to increase the reliability of oil production and refining assets, as well as seek opportunities to invest in skills, processes and technologies to increase production efficiencies.

We’re going to end up investing in capacity that will allow us to produce more diesel fuel. That will give us the capability to run renewable feed sources, such as soybean oil, to produce diesel fuel. We don’t do that now.

What kind of future do you foresee in the demand for biofuels? How will that demand impact corn and soybean farmers in Indiana?

Liquid fuels, including renewable fuels, are being threatened because policies are trying to restrict use of the internal combustion engine. We want to go to more of a renewable, lower-carbon fuel, but if we’re going to get rid of the technology that uses that input, then obviously the demand will go down.

An example is California, which wants to ban the sale of the internal combustion engine by 2035. Other states follow California’s rules, so it would impact 40% of the car market. Another example, is the EPA just proposed new emission standards for vehicles and trucks. Those proposed rules would require 70% of all new light-duty vehicles and autos to be electric by 2032, which basically is a mandate to get rid of internal combustion engines.

CountryMark has been advocating for a better gasoline standard that would raise the octane level of gasoline, which will allow auto manufacturers to produce higher-efficiency cars. That would have a positive environmental impact. We are working with agricultural groups, other refining groups and even talking with legislators in Washington, D.C., to change the gasoline standard to make vehicles more efficient. That would make them competitive from an environmental standard to electric vehicles. We already have the liquid fuel infrastructure in place, and we can start making positive environmental impacts today with a change in the fuel standard.

If gasoline use goes down, ethanol demand decreases, too. Since 40% of the corn crop in Indiana goes to ethanol, that won’t be good for corn farmers. … I can see the demand for renewable diesel could have some positive impact for soybean oil and farmers because there’s still going to be demand for diesel fuel. Using renewable diesel resources will lower carbon impact of diesel fuel and improve the environment.•