Investment Summary
Blitz Well Solutions, LLC (“Blitz” or “the Company”) is a provider of rentable downhole tools to the oil and gas industry in Texas and Oklahoma. The company is now eyeing to benefit from the increase in demand for oil exploration tools by infiltrating the competitor’s market space as a cost leader in the downhole tool rental space. We are planning to provide services to our customers at fair market price, unlike our rivals that are following the opposite direction and are providing the tools at high prices. Therefore, charging half of what some competitors charge, Blitz will be able to quickly gain market share and customer loyalty through providing quality service at a low cost.
As a part of this expansion, we are willing to accept investment of $3 million, where in addition to manifold payback of 1.5 times, investors will also be offered 20% share in the final net cash flows every year. Moreover, at the time company decides to sell any well, investors will also be paid 20% of the sale proceeds. Further financial details of investment follows in the subsequent section.
Investment Description
The company seeks to purchase the in-demand six fully equipped downhole tool rental trucks from the proceeds raised from the investment. While each 24 hour truck rental period will be staffed by two tool hands, each serving a 12 hour shift, we have also planned web marketing activities that will be focused to (a) educate the customer base and (b) create excitement around the launch. Trade shows and conferences will also serve as an integral part of Blitz’s marketing strategy, raising user awareness of the Company’s services and offerings and ensuring success of the company and the investors
Industry
Blitz Well Solution operates in the oil and gas field services industry where the core operations of the industry includes providing support services to companies that perform oil drilling or gas extraction. Important to note, the oil and gas exploration industry has rebounded efficiently from the nightmares of the financial crisis and since then, the oil and gas exploration industry, and the dependent industry, i.e. oil and gas field service industry has witnessed sustainable growth in the revenue figures. As per the data issued by IBISWorld, the oil and gas field services industry grew from $66 billion in 2009 to $113 billion in 2013, representing cumulative annual growth rate of 14.4% . The $47 billion revenue increase over four years is directly correlated to the rebound of the oil drilling and gas extraction industries. IBISWorld expects growth to continue, projected to reach $139 billion in revenue by 2019, representing 3.5% CAGR.
Summary
We, at Blitz Well Solution believes that aggressive expansion and market infiltration at the point when demand for rental tools for oil and gas exploration will be well received by the customers. Moreover, with our rival companies charging ferociously high rental charges, offering services at half of the cost leaves us with no doubt that our company will operate with competitive advantage, benefit our investors as well. Moreover, with the natural gas and oil extraction industry, and those associated with it, are expected to flourish in the coming years, the forecasted growth projections are also enticing.
Financials
It is anticipated that at present, the demand for oil field trucks is at peak and to gain a competitive edge in the market, we need to add them in our portfolio which will cost $3 million to the company. However, the investment is expected to be off-set by positive cash flow projections ad positive ROE for our investors. The forecasted details are stated below:
