The oil and gas sector is not for the risk adverse, and that goes for the industry itself as well as for the oil and gas financing institutions that support it. The subject of risk, among other topics, was brought to light at the recent Platts Pipeline Development and Expansion conference in Houston. During the conference panelists discussed how new sources of funding were needed to complete massive-scale infrastructure, transportation and digging projects.
Lack of sufficient oil and gas project financing is hampering excavation in North Dakota, Texas and other locations across the country where shale oil deposits have been found. Loans are needed to cover the costs of:
- The actual drilling, fracking and excavation process itself.
- Payroll for drillers, roustabouts, engineers, truck drivers, pipe fitters, inspectors, surveyors, and more.
- Transportation of the oil itself as well as the water and other liquids required as part of the hydraulic fracking process.
- Licenses, permits and other related regulatory applications needed in order to drill.
- Infrastructure, equipment, laying of pipes, and sometimes even the paving of roads.
Oil and Gas Factoring Accepts the Risks Associated with Fracking
The above listing just touches on all the different elements that must come together for a successful drill. Sufficient and oil and gas and transportation funding are required in order to make this happen. Yet the risks of such project financing can be considerable causing some financial institutions to stay away.
Invoice factoring companies, which are accustomed to taking on higher risk business endeavors, are availing themselves to these drilling, production and excavation companies. Oil and gas factoring, for instance, can work with contractors to support the extraordinarily high costs of pipeline construction. Though the payoff for such an investment won’t come for many months, invoice factoring companies are comfortable working with such terms.
When Banks Hesitate, Oil and Gas Factoring Companies Deliver
Banks may shy away from investing in pipeline construction because it comes with the risk that the drill will come up short leaving an empty and costly pipeline laying out in the middle of nowhere. Yet oil and gas factoring companies accept this risk and understand it is part of the cost of doing business when working in the boom or bust sector.