Maurice Storm, founder and chief executive of Crow Creek Energy II, spoke at "Energy Capital--The Workshop: Starting and Building a Successful E&P Company" in Houston this week, hosted by Oil and Gas Investor. Storm is on his 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: -- If you just have "C" players (on your management team), it's really 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 must be experts in their work, focused and committed. -- To hire a chief 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 to your team, as much as it (loathes me) to admit that. (Storm's academic and industry background is that of geologist.) Private equity will back a business plan without good engineering. Engineers are considered the watchdogs of the oil field. The biggest problem is that 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 them freedom from excessive management. -- Avoid bringing into the group the "fearful, worrying types." These are people who freak out 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. The Start-Up Workshop was videotaped and a DVD will be available soon. E-mail me to request a copy, as well as a copy of the special report, "Starting Your Own E&P Company 101." The Workshop presentations are also online, at www.HartEnergyConferences.com (click on "Past Presentations"). –Nissa Darbonne, Executive Editor, Oil and Gas Investor, A&D Watch, Oil and Gas Investor This Week, www.OilandGasInvestor.com; firstname.lastname@example.org
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