Texas boasts one of the world’s largest energy economies and a dense concentration of oilfield service companies, equipment suppliers, chemical suppliers, and support businesses that trade on commercial credit terms.
The impact on the finances of a customer in the oil and gas supply chain can be significant when they are delinquent in payments. Hence, the adoption of a specialized oilfield collection agency is becoming increasingly common among more energy companies to safeguard cash flow and their receivables.
Why Oil and Gas Receivables Are Particularly High-Risk?
Oil and gas is a business that is always cyclic. A steady paying customer can easily turn into a delinquent account, when commodity prices rise or fall, drilling activity slows down and project delays arise. Oilfield service companies are particularly prone to giving credit to operators and contractors that might be waiting on them for payment from a higher point on the chain.
Several factors make oil and gas debt collection uniquely challenging:
- Invoices are frequently tied to large equipment rentals, chemical treatments, or field services, meaning even a single unpaid account can represent significant exposure
- Operators and smaller drilling companies can be difficult to locate or contact once activity slows or a project ends
- Payment disputes may involve complex questions about service completion, equipment condition, or contract terms
- Boom-and-bust cycles mean creditworthy customers today can become high-risk accounts within a matter of months
The Cost of Delayed Action
Many oilfield service companies don’t want to bother with collecting more, because they think they can eventually catch up with a slow paying operator. A wait-and-see policy can be expensive in a “one and done” business. When a company reduces its operations or sells off or ceases a project completely, it is more difficult to find out who is responsible for the payment and to retrieve it. One of the best ways to maximize the chances for recovery on oil and gas receivables is through early intervention from a professional.
How an Oilfield Collection Agency Approaches Recovery?
Collecting oil and gas collection requires a more than generic collection process. It involves knowledge of the industry, such as the dynamics of operators, service providers and equipment suppliers, and documentation that is inherent in energy industry deals.
At Enforced Debt Recovery Solutions, our oil and gas debt collection process is built around the realities of this industry:
- Detailed account review, including service tickets, master service agreements, purchase orders, and invoicing history
- Skip tracing and location verification, particularly important for operators or contractors who have relocated or scaled down operations
- Professional, direct negotiation aimed at securing payment while preserving any ongoing business relationship
- Escalated demand and legal referral for accounts that require formal legal action to resolve
We deal with collections for commercial and B2B accounts; one thing we know is that we don’t use a one size fits all approach to collections like you would for a consumer, because it could harm relationships and result in poor outcomes.
Serving Houston and the Broader Texas Energy Corridor
The operators in the Permian Basin, Eagle Ford Shale and the Gulf Coast markets regularly have to extend credit on the jobs they do to oilfield service companies, chemical suppliers and equipment rental companies in Houston. A collection partner with real expertise in this field will be familiar with the industry jargon, contract structures and payment cycles specific to the oil and gas industry and can act swiftly when cash needs to be raised from a customer.
Protecting Cash Flow in a Volatile Industry
For CFOs, controllers, and credit managers in the energy industry, the challenge of managing receivables risk is constant and constantly changing, depending on commodity prices and drilling activity. A proactive collections strategy and good credit practices with new business helps maintain working capital and minimizes write-off exposure when market conditions turn sour.
Very often the case is that people delay oil/gas account collection efforts to no avail. When an account crosses the due date, a professional oilfield collection agency has a higher chance of recovering the debt and allows your staff to concentrate on your operations instead of collecting the debt.
Building a Recovery Plan Before You Need One
The strongest oilfield service firms don’t consider collections until a bill is way behind. They develop a recovery plan from the beginning of the credit process, communicating with new operators on a clear basis regarding payment terms, paying close attention to their aging receivables during difficult times, and maintaining a relationship with a trusted collection agency in advance of a crisis. When an account goes sour, your staff can take action right away, instead of looking for a partner when lots of money is already on the line.
Carrying past due oil and gas receivables? Enforced Debt Recovery Solutions is a professional debt collection firm that offers third-party oil and gas debt collection services in all of Texas including the Houston energy corridor. Give us a call today for a complimentary consultation!
