How to Start an Oil Field Service Business

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Starting a business in the oil field services industry is an exciting and challenging venture that provides tremendous opportunities to entrepreneurs who have the technical and field knowledge of industry operations, with the ability to provide efficient cost-effective services. The oil field services industry is diverse and ever changing through innovative technological advances, new drilling techniques and new oil and gas discoveries. If you have industry knowledge, a good business plan/model, industry contacts and the necessary startup capital, you are on your way to building a profitable business.

Obtain a good oil and gas business attorney. Your attorney will assist in legally forming your company and filing for the company's EIN. In addition he, will be invaluable in drafting your contracts to ensure that they contain the appropriate legal caveats to protect you and your company.

Research your competition. Review the annual reports, websites and basic information on the major players in your business. Then look at your immediate competitors. Do your due diligence to locate any information that will benefit you in developing your pricing for services and identify potential customers and other pertinent information. Use the websites of similar companies as a template to design your website.

Develop your business plan. Be sure to cover your products and services section in detail. Start by outlining your business. Use business plan writing software that incorporates financial projection modeling. Use the outline to develop a two-page executive summary and 20-slide power point. These two documents succinctly illustrate the essence of your company for investors, whereas your business plan is your road map to developing a successful company.

Develop you financial projections. Financials are important to investors because it indicates how and when they are going to be getting their investment back. Complete a three- to five-year revenue projection that includes the balance sheet, income statement, profit and loss statement (P&L) and statement of cash flows. Within the financials you need your annual expenses, taxes, cost of goods sold (COGS), working capital (monthly burn rate) and use of funds.

Develop your industry contact list. Use any of your resources to develop business. Attempt to obtain commitment letters for services. If possible, sign actual contracts with potential customers and use these as leverage to raise capital. Contact suppliers and vendors to structure deals and lock in pricing.

Research hedge funds, venture capital, angel investors and private equity funds that are sources of capital for your company. Do not use the "shotgun" approach in speaking with investors. Be selective and go to those capital sources interested in oil and gas projects. Use the executive summary and power point for introductions to potential investors. Predetermine the structure of the investment as debt, equity or a combination. Ask yourself how much of the company you are willing to give up to get funded.

Launch operations. Once you have capital, you need to first ensure that you have your insurance coverage and key employees in place and take a look back at your immediate competition. Perhaps you located a solid company that you can acquire.

Tips

  • It may be cheaper, and certainly easier, to acquire an existing company that needs operating capital, has good management and a strong customer base. Understanding and expert knowledge in your area of expertise in the oil field sector is a must when discussing the opportunity with investors. If investors think for a moment that you do not know what you are talking about, you will not be funded.

Warnings

  • Do not form this company as a sole proprietorship, because you are personally liable for all debts and expenses. In addition, you open yourself to lawsuits whereupon your personal assets are at risk, even if your company is the one being sued.

References

Resources

About the Author

Grant Houston has been writing since 2000, covering various political, business and market events. With a Bachelor of Arts in economics and political science, he has written articles for "Political Economic Review," UmarKit, LLC and Shadow Company. Houston has also authored business plans and consulted with companies on capital acquisition strategies.

Photo Credits

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