John Redmond and NGP present on Starting your own oil and gas/ energy company

John Redmond, who has a Master’s Degree in Petroleum Engineering from the University of Tulsa, has been CEO of three different explorative oil and gas companies and wished to share his methods used from starting in the industry and the progress made to owning his own company.

Redmond has worked in the in the oil and gas industry for more than fifteen years. He offered his expert advice on career paths and decisions to make after graduation when entering the workforce. Redmond said, “If [you’re] interested in owning your own oil company, you need to head up the [business] path.”

He also highlighted the idea that technical training is important when he said, “You must get as much technical knowledge as you can before starting your own company.” He emphasized not losing technical skills while taking on business assignments, as those skill sets are not actively utilized.

Another essential factor to entering the oil industry is access to capital. He outlined three different sources to obtain capital, the first being friends and family. The benefits of obtaining capital from this method is owning more of your venture, but the drawback is often being under-capitalized. The second form of obtaining capital was from banks, the benefits being a clear deal and adequate funds, while the drawbacks involve loss of control.

The last form of capital Redmond described was private equity. Companies such as Natural Gas Partners (NGP) raise funds from universities, foundations, and insurance companies which are redeployed into smaller ventures. A representative from NGP spoke on what private equity firms look for in potential ventures, and pointed out a few key points. He said, “Your edge may be I know this basin better than anyone else, or I have more contacts,” the NGP representative defined the edge as something that you can highlight as your strengths over other starting capitalists.

“We were lucky, luck does factor into all of this,” said Redmond as he spoke on his Axio Natural Resources venture. Redmond started with $22 million in capital and sold the company in 2003 to Chesapeake Energy for $145 million. The ratio of profit to start-up costs was 9.2, and though Redmond realizes luck in exploration is a factor, he focused on having a strong management team.

Redmond pointed out that there is never a good time to start an oil and gas company, but that time is one of the most important factors in starting a company. Misuse and waste of time can be detrimental to the start of prospective company.