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Lessons from the oil and gas industry

By Younas Chaudhary

  1. Look before you dig

Know your terrain well before you decide to drill a well. Think through all the angles, preplan and pay attention to all the required tasks. A few years ago, I knew an operator who was drilling 2 new wells, a deep well and a shallow well, in close proximity. One lease was depth-restricted. As they neared completion, they suddenly realized that they drilled a deeper well than they were allowed under the lease. So … pre-plan and think hard before you dig.

Younas Chaudhary

2. Control costs

Closely monitor all your costs and expenses on a daily, monthly, and annual basis and be frugal. I dealt once with a large oil company that went broke. They wasted so much money on plush carpets, teak paneled offices, paved roads on stripper wells, and so forth. The high-rolling public oil company did very well for a while, and its stock price was sky high, but as soon as the oil price dropped, it filed bankruptcy and was liquidated.

3. Think long-term

The oil industry is volatile, like a roller coaster ride. Sometimes the exhilaration and the thrill of being in the business is great, while at other times it is like a ride to hell.

So in the energy business, for any decision you take, try to think and envision long-term. For example, to access stripper wells you only need dirt or gravel roads. There is no need to build paved roads to stay profitable. If you plan to be a day trader who banks only on short-term gains, the oil and gas industry is not for you. I started small four decades ago, always thinking ahead, preparing and planning for the future.

4. Be your own person

Do not rely on examples from other businesses and their successes, especially oil and gas majors. They have substantial investments in different sectors at various countries. If oil prices go down, they can offset their losses by focusing production outside the country or by selling assets. When you are on your own, take time to foresee different scenarios and settle for the one that you feel will be a prudent business decision.

5. Deal with lenders well

I learned a painful lesson joining in with private investors in the ’80s, and thereafter I decided to go alone, seeking funding only from lenders. This has helped my businesses substantially. Several wealthy people often approached me to be joint investors, and each time I advised them that the risks and rewards in the oil business are hard to predict. I also advised them to buy real estate, since it offered more predictability. Always be honest and straightforward with your lenders, as they will stay with you during tough times, provided you are diligent in paying back all your obligations.  

6. Be consistent

A consistent, solid work ethic will keep you on task.  Likewise, be punctual and keep your word in all your dealings. Consistency and thorough practice will make you stronger and bolder. It’s always good to have a consistent work attitude that focuses more on logic than emotion when taking decisions.

7. Take risks

You will not succeed until you learn how to make bold, calculated risks, and based on my experience, doing so is critical for the growth of your business.

8. Be ethical

There is no excuse here, and being ethical is the only choice you have. I feel that this is the main reason why we have stayed in business for over 40 years.

9. Stay involved, touch and feel

In the oil business, we play with probabilities for what’s underground, so keep your legs firmly planted on the ground, stay involved, and understand your properties, talk to pumpers and field staff, and provide support daily to all your ground crews.

10. Be humble: What you see may not be what you get

Despite innovation and the availability of the latest technology, none of us can accurately predict what lies beneath the earth. Your best projections may return empty. So be humble, feel blessed, and be grateful.

Disclaimer

The views, thoughts, and opinions expressed in this article are my own and do not represent the opinions of any entity with which I have been, am now, or will be affiliated. Further, I make no warranty regarding the accuracy or effectiveness of my recommendations, and readers are advised to consult other advisors as well as their own judgments in making business decisions.

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