(BAND TOGETHER OR DIE)

“The player that makes the team great is better than a great player” – John Wooden

Strategic Alliances (SA’s) have been utilized in the oil and gas industry for many years, out of necessity for survival and/or to increase efficiency and maximize profits.  SA’s are increasingly necessary for the small independent in this age of limited opportunities in mature geologic provinces and intense competition.

The most effective SA’s include diverse disciplines of talented, creative, hard working people with common goals.

The synergies of a compatible group of experienced professionals are obvious.  Ours is a volume business and many prospects and acquisition opportunities must be screened in order to locate viable deals.  Once a project is targeted for drilling or acquisition, it may be impossible to acquire. It’s a simple and frustrating process and generally follows the fundamental law of quail hunting:  More coveys = more birds in the pouch.

It is important that the SA be very flexible.  A business plan which focuses on the types of prospects and acquisitions that best fit the SA’s experience and financial capabilities should be developed; however, economic opportunities almost anywhere in the world are fair game for the creative entrepreneurship necessary to prosper in the current environment.

A project can often have a completely different final outcome than originally planned and strategies may change several times during the course of evaluation and acquisition.

The effective SA should have a “facilitator” that keeps the team focused, informed via frequent meetings and/or communications, monitors progress and devotes most, if not all, of their time and energy to the SA.

The SA should have an exit strategy which may differ for each project.  You cannot have a member of the SA with a one-sided mentality (“I’m a buyer, not a seller”).  A tunnel vision member of the SA can undermine the opportunity for the SA to take profits when the timing is right.

An old mentor of mine offered this valuable advice as I embarked on an independent oil and gas career in 1971:  “Never try to take all the nickels off the table”, which simply means to be fair in all dealings and attempt to structure deals that are equitable to all parties.  This trait must be prevalent in all members of a successful SA.

Some SA’s fail because participants won’t or can’t stay focused on their role, i.e. it is inefficient to have a geologist with talent for finding oil being distracted from prospecting by unnecessary involvement in operational matters.  The most effective SA’s involve team players doing what they do best and trusting in the other member’s ability to pull their weight. Accountability of the SA members to each other is vital to success, and of course, the SA must come before egos, personal agendas, etc..

An example of a recent Strategic Alliance consisted of two petroleum engineers, two landmen and one financial partner.  The SA set out to acquire acreage in a developing horizontal drilling play in East Texas.