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Want to expand? A few things to know.

By Younas Chaudhary

I started my oil and gas business as a two-man show with my brother. But after a year it was just me. Right from the start, I wanted to keep the business private and expand with a conservative, low-risk approach  focused on maintaining cost effective operations rather than reckless growth..

Should I expand my business in the current market?

In the early 1980’s, a chance meeting with a preacher at his Oklahoma home, opened the door to buy oil and gas wells from Sun Exploration Company. I started bidding aggressively and my business grew organically at a slow and steady pace.

By the late 1990’s, my one-man enterprise had grown to over 200 employees and contractors. This growth created responsibility, nervousness, and discomfort.

Am I growing too fast? Am I moving too slowly? Will I continue to secure money from banks? Eventually, I concluded we were going at the right pace. I purchased wells, drilling rigs, workover rigs, oilfield trucks, equipment, machinery, and added vendors and subcontractors. We built a team in accounting and engineering and retained several local consultants. We focused on growing more in areas with existing operations. For instance, we expanded in West Texas, South Texas, and Oklahoma, buying more wells and drilling new wells so that we could own and share resources in the most cost-effective manner.

Using a commonsense approach, I did not rely on sophisticated calculations and seldom overanalyzed issues. I knew all along that I was dealing with a highly volatile commodity whose prices are influenced by global events. When oil prices fell, I managed and controlled costs, maximized efficiency, and sought opportunities to buy more wells and oil companies that could not withstand the slump. When prices surged, we held tight and focused on growing the business.

We have been blessed to secure loans from banks. In my bid to expand, I never went overboard to grab opportunities just for the sake of expansion. Everything is done in a methodical, precise manner whereby costs are closely planned and monitored.

Despite that I had my share of blunders and failures. Once, in a haste to expand, I purchased a few high-pressure deep gas wells without much due diligence. This led to a massive oil well blow out and millions in losses. We failed to perform a thorough field inspection and grabbed the deal without looking at it closely.

When thinking about growing your business, pay close attention to your cashflow, costs and budget, consider all risk factors and return on your investment. Without attention to details along with timely payouts, you can be doomed. Stay Blessed.

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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