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The oil and gas sector is a highly regulated industry. A well-structured oil and gas business plan can help navigate these complexities.
According to a survey by EY, inadequate business planning is one of the top reasons oil and gas projects fail to achieve target profitability. “Firms that take a comprehensive approach through integrated business planning are better positioned to withstand market volatility and capitalize on opportunities,” notes Herb Listen, EY’s U.S. Oil & Gas Leader.
In this article, we’ll outline the key elements of an oil and gas business plan along with an oil and gas business plan template. By the end of this article, you’ll understand what it takes to develop a robust oil and gas drilling business plan.
What Is the Business Plan for an Oil and Gas Company?
A business plan for the oil and gas industry is a professional document that:
- Outlines the company’s goals
- Specifies strategies
- Details operational plans
- Exploring
- Extracting
- Producing oil and gas resources
The oil and gas station business plan serves as:
- A roadmap for the company’s operations
- A tool for securing financing from investors or lenders
Here are some key components typically included in an oil and gas business plan:
- Executive Summary: A concise overview of the business, its objectives, and the key elements of the oil and gas development business plan.
- Company Description: Details about the company, its history, ownership structure, and legal form.
- Industry Analysis: An assessment of the current state of the oil and gas industry, including market trends, competition, and regulatory environment.
- Operations Plan: A description of the company’s operational processes, including techniques, methods, processes, and logistics.
- Marketing Plan: An outline of the company’s plans for marketing and selling its oil and gas products, including target markets, pricing strategies, and distribution channels.
- Management and Organization Team: Details about the company’s management team, organizational structure, and key personnel.
- Financial Projections: Detailed financial forecasts, including projected financial statements, supported by assumptions and analyses.
The oil and gas company should tailor the oil and gas startup business plan to their specific goals and circumstances, and they should regularly update it to reflect changes in the industry, market conditions, and operations.
Why Do You Need a Business Plan Sample for an Oil and Gas Exploration Company?
There are a few key reasons why you would need a solid business plan, like the biodiesel business plan when starting your own oil and gas business:
- Attract Investment: The oil and gas industry requires significant upfront capital for exploration, drilling, equipment, and operations. A detailed oil and gas upstream business model and plan demonstrates to potential investors a viable strategy for generating returns.
- Guide Operations: An oil and gas field business plan serves as a roadmap for executing exploration and production activities. It lays out key milestones, timelines, capital expenditures needed, regulatory requirements, and operational plans.
- Analyze Economics: Thorough market analysis, cost projections, pricing forecasts, and breakeven modeling allow testing the economic viability of prospects before committing major resources. The oil and gas exploration business plan quantifies potential returns and profits based on various scenarios.
To illustrate the importance of a sample business plan, let’s walk through the key sections of an oil and gas business plan template for a fictional oil and gas exploration firm called TX Energy:
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Executive Summary
Business Overview
TX Energy is a newly formed independent oil and gas exploration and production company headquartered in Houston, Texas. Our mission is to become a leading operator in the Gulf of Mexico region through the acquisition and development of high-quality offshore prospects.
Management Team
With a seasoned management team that has over 100 combined years of experience in the offshore Gulf, we plan to leverage our deep industry knowledge and technical expertise to build a portfolio of attractive assets.
Business Strategy
Our initial focus will be on identifying and acquiring undervalued offshore leases with proven undeveloped reserves and executing low-risk, high-return drilling programs.
Financing
We are seeking $75 million in equity financing to fund lease acquisitions, drilling operations, and general working capital needs during our start-up phase.
Financial Projections
Financial projections show the potential for strong growth and returns, with estimated revenues of $50 million by Year 5.
Company Overview
TX Energy is an independent exploration and production company in the Gulf of Mexico. We were founded in 2024 by a team of seasoned industry professionals with a successful track record in this region.
Location
Corporate headquarters: Houston, TX
Operating region: U.S. Gulf of Mexico
Business Concept
Leverage management’s expertise to:
- Identify and acquire undervalued offshore leases
- Optimize development plans for discovered resources
- Execute low-risk, high-return drilling programs
- Rapidly build a diversified portfolio of producing properties
Industry Analysis
The U.S. Energy Information Administration expects the demand for oil and natural gas will grow in the coming years. Some key industry statistics and forecasts:
- The oil and gas market size is projected to increase from $7,625.82 billion in 2024 to $9,347.9 billion in 2028, with a CAGR of 5.2%. (Source – The Business Research Company)
- The global oil demand is forecasted to rise by 1.7 million barrels per day (mb/d) in the first quarter of 2024. The expansion pace might slow down from 2.3 mb/d in 2023 to 1.3 mb/d in 2024. (Source – IEA)
Key Industry Drivers and Trends:
Business plan for investors
- Rapid adoption of subsea tiebacks and multi-well platforms to reduce costs
- Increased interest in re-developing legacy fields using advanced recovery techniques
- Growing regulatory oversight and focus on safety/environmental practices
- Persistent workforce shortages requiring investment in training pipelines
Customer Analysis
Our primary customers will be midstream companies, refiners, and utilities purchasing our crude oil and natural gas production. We have identified the following key players as potential off-takers in the Gulf region:
- Mid-Continent Oil Pipelines (Crude oil transport)
- Kinder Morgan/BP (Natural gas processors)
- Marathon Petroleum (Refiner)
- Southern Company (Utility)
As a non-integrated independent producer, we will aim to establish long-term sales agreements and strategic relationships with creditworthy counterparties. Our go-to-market strategy will focus on:
- Leveraging management’s industry network to engage top prospective customers early
- Ensuring adequate takeaway capacity ahead of new wells coming online
- Negotiating favorable pricing terms based on our high-quality offshore crude
- Bundling gas production with crude offtakes where possible
Competitive Analysis
Large integrated operators such as Chevron, Shell, and BP, as well as several large independent companies, dominate the upstream market of the Gulf of Mexico. Fewer mid-sized players focus solely on exploiting stranded/bypassed reserves on the shelf. Our primary competitors include:
Our primary competitors include:
| Competitor | Strengths | Weaknesses | Market Share |
| W&T Offshore | – Largest holder of offshore Gulf leases- Diversified portfolio across shallow/deepwater- Low operating costs | – Mature legacy asset base- Capital constraints- Limited exploration exposure | 10% |
| Renaissance Offshore | – Backed by private equity- Recent M&A to build scale- Focus on Gulf of Mexico shelf | – Relatively high-cost structure- Lack of proprietary technical capabilities- Reliance on third-party services | 5% |
| Byron Energy | – Public company with Gulf focus- Strong recent growth via drilling- Experienced technical trading team | – Small oil and gas company- Heavily concentrated asset base- Higher cost of capital | 2% |
Relative to these competitors, our key advantages are:
- Unrivaled management experience and technical capabilities specific to shelf opportunities
- Exclusive focus on low-risk, quicker cycle time development projects
- Simple value investment proposition vs. diversified multi-regional operators
Other competitive strengths include a projected low operating cost structure and established relationships with service companies active in the region.
Marketing Plan
TX Energy will position itself as the premier low-risk, low-cost developer of shelf oil and gas resources in the Gulf of Mexico. We will pursue a commodity-focused strategy, marketing our high-quality crude and gas production to maximize netbacks. To support this, we plan to hire pitch deck consultants to help with investor presentations and attract financing.
Pricing Strategy
As a non-integrated producer, we will pursue a commodity marketing strategy focused on achieving maximum netback pricing for our offshore production. Specific tactics include:
- Crude oil – Secure term marketing agreements with refiners or marketers, pricing based on regional benchmarks like LLS or WTI
- Natural gas – Pursue portfolio-based sales to LDCs, utilities, and marketers at Henry Hub+/- basis pricing
Sales & Distribution Channels
We will employ two primary sales and distribution channels:
- Crude oil production – Pipeline connections from offshore platforms to main corridor pipelines like LOCAP and NGPL
- Natural gas production – Subsea tiebacks into regional gathering systems and interstate/intrastate pipelines
Strategic Partnerships
Establishing strategic relationships across our supply chain will be a critical success factor. Key partnership areas include:
- Offshore drilling contractors
- Subsea construction and installation contractors
- Pipeline companies and midstream providers
- Supply boat and support vessel operators
Marketing Programs
Our key marketing initiatives will focus on building brand awareness and establishing TX Energy as a trusted and preferred supplier to Gulf Coast off-takers:
- Investor marketing/participation at industry conferences and events
- Working interest/royalty owner marketing of upcoming development projects
- Direct outreach to commercial teams at potential customers
- Development of professional digital marketing materials
Operations Plan
Oil & Gas Leases
Our lease acquisition strategy will initially target offshore shelf properties with the following characteristics:
- Water depths < 600 feet
- Located near existing infrastructure to minimize upfront capital costs
- Proven undeveloped reserves between 10-50 million BOE
- Technically reasonable development plan via subsea tiebacks or platform drilling
We have already identified a pipeline of potential acquisition targets fitting this criterion. Once leases are acquired, we will conduct geologic and reservoir studies to high-grade the most attractive drilling opportunities. This aligns with our EB2 business type that requires the expertise and technical skill of our management team.
Drilling & Completion Activities
We will utilize jack-up and submersible rig types commonly used on the shelf For relatively shallow drilling targets. We will use the best available techniques and technologies to drill all wells and to ensure maximum production rates and recoverable reserves.
Production, Facilities & Maintenance
Depending on the size and scope of each project, we will utilize either:
- Subsea tiebacks to existing third-party infrastructure
- New-build production platforms designed for unmanned operations
Environmental & Regulatory
We are committed to operating at the highest level of environmental, safety, and regulatory standards in offshore space. This includes comprehensive SEMS programs, oil spill prevention and response plans, and other mandatory policies/procedures.
Key regulatory bodies overseeing our operations include:
- Bureau of Safety and Environmental Enforcement (BSEE)
- Bureau of Ocean Energy Management (BOEM)
- U.S. Coast Guard
- Environmental Protection Agency
Organization & Management Team
TX Energy has assembled a world-class team with unmatched technical and regional expertise in the offshore Gulf of Mexico:
- John Watson, Chief Executive Officer – John has 30+ years of offshore engineering and operations experience. He is a former VP of offshore at a major energy company with expertise in subsea tieback developments and shelf production.
- Jane Litt, VP of Exploration – Jane has 25 years of experience in offshore Gulf exploration. She was previously a senior exploration advisor at a large independent oil company. She holds a Ph.D. in Petroleum Geology from Rice University.
Additional key hires planned for Year 1 include:
- Drilling Manager
- Production Engineer
- HSE/Regulatory Specialist
- Land/Legal Counsel
- Accounting/Finance support
As we grow, certain additional functions like HR, IT, and engineering teams may be built out internally rather than fully outsourced. This is aligned with our efforts in meeting E2 visa business plans requirements for key personnel hiring and business expansion.
Financial Plan
Based on our phased development plan and production ramp-up schedule, we are seeking $75 million in equity financing to fund TX Energy’s start-up and growth over the initial 5 years period:
Use of Funds
- Offshore lease acquisitions: $25M
- Capital expenditures (drilling/facilities): $30M
- Operating expenditures: $15M
- General working capital: $5M
Projected Profit & Loss Statement
| ($ in millions) | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
| Revenue | |||||
| Oil sales | $8.0 | $34.0 | $62.5 | $76.0 | $82.5 |
| Gas sales | $1.5 | $6.0 | $12.0 | $18.0 | $19.5 |
| Total Revenue | $9.5 | $40.0 | $74.5 | $94.0 | $102.0 |
| Operating Expenses | |||||
| Lease operating expense | $5.0 | $15.0 | $20.0 | $22.0 | $24.0 |
| General and administrative expense | $3.0 | $3.5 | $4.0 | $4.5 | $5.0 |
| Total OpEx | $8.0 | $18.5 | $24.0 | $26.5 | $29.0 |
| EBITDAX | $1.5 | $21.5 | $50.5 | $67.5 | $73.0 |
| DD&A | $3.5 | $10.0 | $17.5 | $20.0 | $22.5 |
| Net Income Before Tax | -$2.0 | $11.5 | $33.0 | $47.5 | $50.5 |
Projected Balance Sheet
| ($ in millions) | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
| Assets | |||||
| Cash | $20.0 | $15.0 | $12.5 | $17.5 | $26.0 |
| Accounts receivable | $2.5 | $10.0 | $18.5 | $23.5 | $25.5 |
| Property, plant & equipment | $50.0 | $110.0 | $185.0 | $215.0 | $222.5 |
| Accumulated DD&A | -$3.5 | -$13.5 | -$31.0 | -$51.0 | -$73.5 |
| Total Assets | $69.0 | $121.5 | $185.0 | $205.0 | $200.5 |
| Liabilities & Equity | |||||
| Accounts payable | $2.0 | $8.0 | $15.0 | $17.0 | $18.0 |
| Debt | – | $20.0 | $45.0 | $40.0 | $20.0 |
| Equity | $67.0 | $93.5 | $125.0 | $148.0 | $162.5 |
| Total Liabilities & Equity | $69.0 | $121.5 | $185.0 | $205.0 | $200.5 |
Projected Cash Flow Statement
| ($ in millions) | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
| Operating Activities | |||||
| Net income | -$2.0 | $11.5 | $33.0 | $47.5 | $50.5 |
| DD&A | $3.5 | $10.0 | $17.5 | $20.0 | $22.5 |
| Change in working capital | -$2.5 | -$10.0 | -$15.0 | -$12.0 | -$11.0 |
| Cash from Operations | -$1.0 | $11.5 | $35.5 | $55.5 | $62.0 |
| Investing Activities | |||||
| Capex | -$50.0 | -$70.0 | -$92.5 | -$50.0 | -$30.0 |
| Cash from Investing | -$50.0 | -$70.0 | -$92.5 | -$50.0 | -$30.0 |
| Financing Activities | |||||
| Equity | $67.0 | $26.5 | $30.0 | – | – |
| Debt | – | $20.0 | $25.0 | -$5.0 | -$20.0 |
| Cash from Financing | $67.0 | $46.5 | $55.0 | -$5.0 | -$20.0 |
| Net Change in Cash | $16.0 | -$12.0 | -$2.0 | $0.5 | $12.0 |
Overall, these projections in the coal mining business plan illustrate TX Energy’s ability to rapidly grow production, revenue, and cash flow in a capital-efficient manner and achieve strong economic returns for investors.
Partner With OGSCapital for a Professional Oil and Gas Business Plan
Over at OGSCapital, we understand just how crucial it is for independent oil and gas outfits to have a really solid, well-polished business plan. Whether you need to win over investors or secure financing from lenders, our team has got your back.
With more than 15 years of expertise in aiding both startups and established businesses in crafting thorough and persuasive business plans such as the renewable energy business plan and logistics business plan, we’re well-equipped to assist.
Contact us today to learn more about our business plan consulting services and how we can help you.
Download Oil and Gas Business Plan Sample in pdf
Frequently Asked Questions
Is oil and gas a good business?
Yes, because the oil and gas industry is one of the largest sectors in the world, generating over trillion in global revenue as of 2022. In 2024, the industry is expected to have solid growth.
How to start your own oil and gas company?
Starting an oil and gas company involves several steps:
Step 1: Do market research.
Step 2: Decide your geographical location.
Step 3: Build a team.
Step 4: Create an oil and petroleum business plan.
Step 5: Set up a legal entity (LLC, Corporation, etc.)
Step 6: Seek funding.
Step 7: Get the equipment.
OGSCapital’s team has assisted thousands of entrepreneurs with top-rated, consultancy and analysis. They’ve helped thousands of SME owners secure more than $1.5 billion in funding, and they can do the same for you.
