Start-Ups Find Strength in Being 'Nimble"
With so much money pouring into upstream oil and gas, start-up companies have discovered the practice of investor shopping.
ReoStar Energy Corp. of FortWorth decided to shop in Europe.
European investors “tend to have a longer time horizon than the Americans who are looking at the next quarter. They’re looking at a timeframe of three to five years,” said Scott Allen, the company’s chief financial officer.
ReoStar was founded earlier this year as an acquire-and-develop operation with production and acreage in the Barnett Shale, holdings in the Fayetteville Shale, a Corsicana enhanced recovery project and a gas gathering system.
It’s now a publicly traded, OTC-listed company. Allen estimated ReoStar’s assets at about $75 million.
Going public gave the start-up a way to raise capital for new opportunities, he said.
“There’s a tremendous amount of money being put in place in the oil and gas business,” Allen said. “The challenge is to differentiate yourself from other companies that are just going out and buying acreage, and then finding out you’ve drilled a $50 million dry hole.”
While other start-ups outsource everything possible, ReoStar is looking at the opposite choice as a cost-savings measure.
The company is “investigating insourcing what has traditionally been outsourced to the service companies,” going so far as to buy its own workover rig, according to Allen.
It’s also keeping tight control on costs and being selective in new investments.
“One of the analogies we have around here is that it’s a lot like sitting at a bus stop,” Allen said.
An opportunity is like a bus that shows up, and the company has only a short time to decide whether or not to take it.
“Our strategy is to be nimble,” he said, “so we can get on the correct bus when it comes along.”