Funding the Impossible: How a Start-Up Oil and Gas Field Machinery Company Generated $10 Million in Capital
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Background
Our client, an Oil and Gas Field Machinery and Equipment Manufacturing company, was in need of startup capital to launch their operations. Despite having a solid business plan and a strong market demand for their products, the company struggled to find traditional funding sources such as bank loans or venture capital.
Problem
The problem was two-fold. Firstly, the oil and gas industry is known for its high capital intensity, with large amounts of money required for equipment and infrastructure. Secondly, the company was a new entrant in the market and, as such, had no track record or existing revenue streams to secure financing from traditional sources.
COUNTERTRADE SOLUTIONS
To generate the necessary capital, we employed a combination of multiple countertrade mechanisms:
SOLUTION #1.
Framework Agreements: We worked with several oil and gas companies in the country and abroad to establish framework agreements, which are long-term contracts that set the terms and conditions for future business transactions. These agreements included upfront payments for the manufacturing of equipment, which provided the necessary capital for the client to launch their operations.
SOLUTION #2.
Offsets (Direct and Indirect): We negotiated with government entities and oil and gas companies to include offset provisions in the framework agreements. Offsets are trade-related mechanisms that require the client to invest a portion of the revenue generated from the contract into the local economy, such as through the purchase of goods and services from local suppliers. The client was able to generate additional revenue from these offset provisions, which they used to expand their operations.
SOLUTON #3.
Industrial Compensation: We also negotiated industrial compensation agreements with several oil and gas companies. These agreements included the client manufacturing equipment for the companies, and in return, the companies would purchase a certain amount of the client’s products in the future. This provided the client with a guaranteed revenue stream and the necessary capital to expand their operations.
SOLUTION #4.
Joint Ventures: We also established joint ventures with several oil and gas companies, where the client would provide their expertise in manufacturing equipment, and the companies would provide the necessary funding. This allowed the client to enter new markets and expand their operations.
Result
RESULT
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The Framework Agreements, Offsets, Industrial Compensation, and Joint ventures generated over $10 million in upfront payments and guaranteed revenue streams for the client.
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The client was able to launch their operations and secure the necessary capital to begin production and sales.
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The client was able to expand their operations and enter new markets, thanks to the revenue generated from the countertrade mechanisms.
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The client’s products were in high demand, and they received many requests from oil and gas companies to purchase their equipment, which resulted in multiple new orders and contracts, and the company was valued at over $100 million.
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The client’s success attracted the attention of other businesses in the same industry who were looking for similar solutions to launch their own operations, and the client became an industry leader and a sought-after consultant for countertrade mechanisms.
RESULT
The use of multiple countertrade mechanisms allowed our client to overcome their lack of startup capital and successfully launch their multimillion-dollar oil and gas field machinery and equipment manufacturing company. They were able to secure upfront payments and guaranteed revenue streams, enter new markets, and attract the attention of other businesses in the same industry. The client’s success serves as an example of how countertrade mechanisms can be used to generate cash revenue and overcome the challenges of starting a new business.
HOW WE CAN HELP YOU
ACHIEVE SIMILAR RESULTS
FACING CHALLENGES?
We have a team of experts in countertrade who can help businesses in the oil and gas industry or any other industry facing a lack of startup capital find creative solutions to secure funding. We understand the unique challenges and high capital intensity of the oil and gas industry, and we are dedicated to helping our clients find alternative ways to generate the necessary funds for their ventures.
Based on our extensive experience and knowledge of countertrade mechanisms, as demonstrated in our case study of the Oil and Gas Field Machinery and Equipment Manufacturing Company, we can help you find the right solution for your business. We will work closely with you to understand your specific needs and goals and then propose a combination of countertrade mechanisms that will work best for your situation.
Just like our client, we can help you set up framework agreements with oil and gas companies, both in the country and abroad, to generate upfront payments for the manufacturing of equipment and secure the necessary capital to launch your operations. We can also help you negotiate offset provisions in the framework agreements to generate additional revenue, and industrial compensation agreements to establish a guaranteed revenue stream. We can also help you establish joint ventures with oil and gas companies, where you can provide your expertise in manufacturing equipment and the companies can provide the necessary funding.
Our team will guide you through the entire process, from negotiating the terms of the agreements to implementing the mechanisms and managing the relationships with oil and gas companies. We will work with you every step of the way to ensure that the countertrade mechanisms we propose will help you achieve your goals and secure the necessary funding for your business.
If you’re an entrepreneur in the oil and gas industry looking to start a business but facing a lack of capital, we can help you achieve similar results as our client. Contact us today to learn more about how we can help you secure funding for your venture.