By Younas Chaudhary
- Saying no to private investors
In the 1980’s, I purchased and managed oil and gas wells with a group of investors in Wichita, Kansas. This worked well when oil prices were high, but when oil prices fell in the mid-1980’s, the investors ganged up and blamed me for their losses. This led to a lawsuit against me. To settle it, I convinced their lender that I would take over their loans along with their assets and return the full amount they claimed was owed to them. I took a calculated risk, cleared all my debts, oil prices went up, and I made good money. That is when I decided not to take money from any investors into my businesses.
Oil is a volatile commodity that is $84 per barrel today but, in the not-so-distant past, oil prices crashed on April 20,2020 to negative -37.63!
Oil and gas is not the place for investors who want short-term gains and do not have the strength to wait and play the long game.
Advice: Oil prices are volatile and, if you take on investors, high risk will always be there.
2.Crafting a business plan
In my early days in business, I did not have a written business plan and I did not even know what that meant! Once I got into oil well production, I was like a scatterbrain. I had oil fields in California, Wyoming, Louisiana, and Kansas and had difficulty managing them efficiently. This strategy, without a clear business plan, was not cost-effective and did not give me the Return on Investment (Roi) I expected.
Advice: Always start with a written business plan and act on it.
3. Drilling wells rather than selling leases
In the early years, I spent more time buying and selling leases in Kansas than getting into actual oil well production. It took me some time to figure out that an oil well producing 365 days a year meant better and consistent cash flow. I should not have wasted early years simply buying and selling oil leases, instead I should have gone straight into oil well production.
Advice: Always focus on a consistent cash flow!
4. Diversify into real estate
Real estate was dirt cheap in Houston and Kansas in the 1980’s but I didn’t have much holding power. I realized eventually that real estate could offer stable income that would counter the sudden volatility of oil prices. So, I purchased real-estate assets.
Still, I always felt a thrill in the oil and gas business that I rarely felt in real estate investments, which is more dormant cash flow. Every time I drilled an oil well, within few weeks I would know whether it is going to do good or bad in the long run.
Advice: Diversify early in a fairly low risk business to counter the effects of being in a risky and speculative business.
5. Investing in stocks
I should have started investing into high growth and dividend paying blue chip stocks earlier in my life, as they have yielded good returns even though I started late.
Advice: Look for a balanced portfolio early in life and invest prudently.
6. Not purchasing drilling rigs
I lost a lot of money buying several drilling rigs hoping that they could service my oil and gas production business. They require a lot of maintenance and manpower, and when they remained unused I lost a lot of money. So, I shut down all my drilling rigs.
Advice: Always outsource to local experts if it does not make business sense to buy and own.
7. Hoarding has its disadvantages
I confess I am a hoarder of land. Whenever I could find land at an affordable price, I would purchase or lease it. The difficulty of letting go of land has made me sustain some losses at times. But, overall, I have made good profits whenever I sold it.
Advice: Learn to let go of items when you feel it is wise.
8. Time with family
In the race to establish and build my business, I could not find much time to spend with my two oldest children. Later I was able to raise my two younger ones as I had settled by then and had more time to take care of family. Looking back, I feel I should have invested more time with my two older children.
Advice: Family matters, so divide your time appropriately. You will get more dividends later compared to living a busy life just making money.
9. Enjoying nature more
I should have paused and enjoyed nature more during my younger days. Instead, I was busy investing most of my time running my businesses, so I lost a good part of my early life not being with nature.
Advice: Enjoy the outdoors and the simple natural pleasures in life.
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.