?aurice Storm, founder, president and chief executive of Tulsa-based Crow Creek Energy II LLC, spoke at “Energy Capital—The Workshop: Starting and Building an E&P Company”?in Houston in June, hosted by Oil and Gas Investor.
Crow Creek is Storm’s second successful start-up, and he was?a lead in the sale of Barrett Resources Corp. in 2000 to?The Williams Cos. prior to founding Crow Creek I.
Here?is some of his advice to fellow start-up executives and individuals who seek to join the league.
• If you just have “C” players on your management team, it’s not going to go well. There’s a lot of work that’s going to need to be done. You’ll be spread too thin. In most start-ups, you don’t have the capacity to hire professional management. You’ll have to do it yourself, so your core team members must be experts in their work, and be focused and committed.
• To hire a lead engineer, you’ll have to offer a big option position, so whoever runs engineering should be someone who can take on most of the work himself. The engineer is probably the key piece in your team, as much as he loathed admitting that. (Storm’s academic and?industry?background is that of a geologist.)?
Private equity will back a business plan without good engineering. But, engineers are considered the watchdogs of the oil field. And top engineers are in high demand. You’ll be giving them a big piece of your company, so choose a hard-working, committed?engineer.
• Keep good track of your assets. Everything you do for this start-up is so you can sell it, and you’ll need good data on all of your assets when you put them up for sale.
• Getting the wrong partners is a huge problem. Having to part ways with a partner can be incredibly disruptive and incredibly expensive.
• In evaluating deals, you can’t do everything; you don’t have the money.
• Get a high-powered financial guy on the team. You can get by with just a senior accountant, but be careful to not give him CFO-level dollars and equity. One day, as you grow, you’ll need a CFO and you won’t be able to afford the senior accountant and the CFO.
• You probably don’t need a business-development guy. “Most of you can probably drink and play golf all by yourselves. That probably wasn’t fair. No, that was fair.” (Storm was head of business development for Barrett, so he’s done lots of BD on the golf course.)
• Managers shouldn’t meddle in other areas. The landman shouldn’t tell the engineer, “You fraced it wrong.” When this happens, then “it’s on,” and the fight spills over into a distracting melee. People need to respect each other.
• You’ve got to keep weak people off the team.
• A good team will cost. Bigger companies have tired of seeing their best talent flee to start-up E&Ps where they’re getting a piece of the action, so they’ve upped their offerings to these individuals. Your offer has got to be about more than money. Offer recruits “freedom from excessive management.”
• Avoid bringing into the group the “fearful, worrying types.” These are people who shudder suddenly about being on their own—outside the haven of the large, corporate entity. They weren’t ready to leave. These people can really be a headache.
More start-up and upstream capitalization insight was offered during Oil and Gas Investor’s three-day Energy Capital program. See “NewsWell” in this issue and OilandGasInvestor.com for more insight from the speakers.

Comments