Starting an oil and gas business requires a lot of work. There are a lot of things that should align and work well to make it a success. If you are interested in this industry, you might be wondering; how can one start an oil and gas exploration company?.
I am glad that you are asking yourself that question, because I have also been wondering the same.
This has made me go into research, to find out more about how to start an oil and gas exploration company. I will share this information with you to ensure you can easily get into oil and gas business.
Now, I am not looking to scare you away from entrepreneurship. However, I just want to keep things realistic, while telling you that it is 100% possible to start your own business.
It is going to take time, effort, and potentially a few setbacks, but you can do it.
11 Steps on How to Start an Oil and Gas Exploration Company
In order to be successful at starting an oil and gas company today, you should consider the following steps;
- Decide where you want to invest.
- Get your funding.
- Hire a team or talent.
- Get licenses and check regulations.
- Make a business plan.
- Identify your investors.
- Get the right equipment.
- Form a legal entity.
- Get to the ground.
- Prepare for growth.
It is good that you are looking into investing in the oil and gas industry. The sector has proved to be a lucrative sector. It has produced great wealth for entrepreneurs and investors alike.
Let us discuss this further.
How can one Start an Oil and Gas Exploration Company Today?
If you are wondering how you can build an oil and gas exploration business, the following tips and ideas are going to prove very helpful;
Starting any business starts with research.
You should spend time to research on the business that you are interested in. Understanding the oil and gas industry, market conditions, and projected growth of the sector is important.
You should also spend time researching and gathering intelligence on potential places you can invest.
An oil and gas exploration company should have clear objectives. You should research on the best locations and regions in the world where to set up your business.
Decide where you want to invest
Before you fully start an oil and gas exploration company, you should know or decide where you want to invest.
This will be informed by the research you did.
This covers a number of issues like in which region or country to invest in. You should understand yourself, and your risk preference.
This is because investing means you are taking a bit of risk. Knowing your appetite for risk will help you to make the right decision on where to invest.
The amount of capital needed for getting into the oil and gas industry exploration can be high, and very difficult to fundraise.
Therefore, you need to determine what exactly you should put your money into. It will depend a lot on your skills, previous professional experience, and your expertise.
Before making any detrimental moves, you should analyze your motivation for investing in this field, and assess your strengths and your talents.
The assessment of capital needed to start this kind of venture can help you make your choice wisely.
Get your funding.
The upstream oil and gas business requires a significant investment from the start. This means you should be clear on how and where you shall get your funding.
Raising capital is one of the main things you will do as entrepreneur. It will not be easy, and you will face rejection.
Starting an oil and gas exploration company is not one of those things you can do on a shoestring budget.
Small deals are about $50 million, and medium deals can be between $50 million to $350 million.
Billion dollar deals are also common in the oil and gas industry.
You should have a way to access financing on a continuous basis.
Once you start building capital, it becomes easier to obtain more. In addition to angel funding and private equity, banks can be amenable to funding a start-up, especially in regions where oil is a way of life.
For example, when you go to a community bank around Texas or Louisiana or Oklahoma, they understand what you are trying to do. It is therefore easy to get financing in such a place.
I talked to a friend of mine who has built an oil and gas exploration company. I sought him out so that he can share some insights with you.
Based on the work he did to build his oil and gas business from scratch, his insights are going to be very helpful as you start your journey.
Hire a team or talent.
In your journey of building an oil and gas exploration company, having the right team in place is very important.
It is argued that the people you put together is more valuable than the money you get.
In the eyes of private equity lenders, it is important for them to see you have a team with right experience.
Additionally, the team should have the smarts and ability to understand the technology behind oil and gas operations.
You do not have to start with a large team to be successful. We have seen very small and nimble oil and gas companies delivering superb results.
All in all, your company will start with its people, and outside your company, having solid industry networks will count in your success.
Get licenses and check regulations.
Before you get your business going, you should check all the regulations, licenses, and permits, which are relevant for the field, as well as your tax identification number.
If you have previous experience in this area, you are probably aware of some of them, but it is always best to seek the advice of a business or tax attorney when handling legal issues.
Getting into the oil business may take much more effort than starting a company in any other field, but it can also bring much more profit.
If you have the talents and skills needed, enough financial and human resources, as well as a detailed business plan, you may soon see your investment returning.
Make a business plan
Once you have a clear notion of what you want to focus on, you should make a detailed business plan, and list all your resources and your liabilities. Your business plan has to incorporate all the projected operating costs, including insurance, permits, licenses, salaries, and ongoing expenses.
Think of your business plan as a framework for running your business. Also, if you are thinking about applying for a loan, or you want to convince investors to invest in your company, your business plan will be a resourceful tool.
If you don’t have any previous experience in creating a business plan, you can find templates you can download.
Identify your investors.
As I mentioned above, and based on the research I have undertaken, identification of your investors is the next critical thing you need to do.
This is part of your efforts to ensure you have enough funding. The capital you need should cover your capex and operational needs.
To start an oil and gas exploration company, a significant amount of the capital is needed from the very beginning. It is therefore a fair chance you will be looking for investors.
Angel funding and private equity are the usual types of investments in the oil and gas business, but banks can also fund start-ups in this industry.
Get the right equipment.
To ensure and protect your business and your investment, be sure to use top-notch equipment.
This is of great importance when it comes to working directly in the oil production business, as you will have to be sure that all your piping, control, and measuring units, as well as your fire fighting systems, are in order.
If you are thinking about a procurement and supply company, make sure your offer includes first-rate general equipment, such as valves, pumps, and generators, as well as personal safety equipment.
Providing your customers with high-quality tubulars, as well as other drilling and well-head equipment will make you stand out from your competitors as a reliable and conscientious supplier.
Form a Legal Entity
In this journey, and as you start an oil and gas exploration company, you will need to register your company.
This is the legal entity that will undertake the business of oil and gas.
There are several forms of company registration. You should be sure and confident of the type of the company that will work for you.
I would advise that you talk or seek advice from your lawyers or attorneys on how this work in your country.
You will want to consider shielding yourself and also other shareholders from personal liability.
Options include forming a limited liability company (LLC) or an S corporation.
LLCs are flexible entities with elements of both partnerships and corporations. S corporations elect to pass income and losses on to shareholders for federal income tax purposes.
Register the entity with the state and obtain the required business license. If the entity is a corporation, issue shares to the stockholders.
Get to the ground.
Thinking about starting an oil and gas business is one thing. Turning it into a reality is a different thing altogether.
You can do all desktop planning you want, but the real test of your business will come from the work done on the real site.
It is therefore important to move from planning to actual work. You can do this in stages. However, you will need to set up at the location where you have decided to start your business in.
Prepare for growth.
In business and whether you are starting your first oil and gas business or in your fourth business, you should expect to make some mistakes along the way.
It is common and inevitable.
The beauty with that is you can use those mistakes to improve your processes and help in your decision making.
This means going back to your business plan and going over your numbers, your strategy and create forecast for upcoming months.
This is a simple way to keep track of performance and actively make decisions based on actual results.
So, rather than reacting to bad situations, you are preparing for them and facing uncertainty with certainty.
Having this kind of an elaborate way to deal with issues is a great way to prepare and plan for your growth.
I am sure you have the aspiration to start the oil and gas exploration company and grow it to higher levels of success.
As I conclude on this subject, I do hope that you have found it to be of value in your research.
Starting an oil and gas exploration company is not easy, but it is doable.
By seeking this knowledge, it clearly shows you are keen to succeed and build a great oil and gas company from scratch.
You should ensure you have done your research, make a decision on where to invest in, put together a team, secure your funding and form a legal entity. This is how you start an oil and gas exploration company.
Frequently Asked Question
How much does it cost to start an oil company?
Starting an oil and gas oil company will cost anywhere between $50,000 to $300,000 for a small cap-sized company.
This amount increases for medium-sized oil and gas company, and larger oil companies.
It is important that you be very clear on the type or the kind of oil and gas exploration company that you want to start.
How can I invest in oil with little money?
If you have some money, I know you might be wondering if you can invest it in the oil and gas industry.
The simple answer is that yes, you can invest in the oil and gas industry.
There are a number of ways in which you can do this and they include;
- Starting an oil and gas exploration company.
- Buying mutual funds or oil and gas stocks.
- Become a consultant in the oil and gas industry.