Winter Lull is Expected in Gas Field Development, But It’ll Likely Just Be ‘The Calm Before the Storm’
The Daily Jeffersonian December 2, 2011
Officials say the coming winter months will be accompanied by a lull in shale oil and gas development under way. But that will provide businesses the opportunity to ready themselves for the coming explosion.
The Guernsey County Energy Coalition met Thursday to hear from a trio of experts in the field. Among them was Michael Sikora of Cambridge-based Sikora and Associates Ltd., speaking on the six major steps companies must take to prepare for a spike in demand for products and services.
"When's the best time to borrow money? When you don't need it," Sikora said.
Establishing a line of credit provides a pool of funds in advance of needs, such as emergency equipment purchases or additional manpower.
Business owners must know both the shelf life of the products they sell and how long the ordering and receiving process takes. They might want to consider lining up more than one supplier, and should ensure the quality of the products they sell.
Suppliers often operate on a "2/10 net 30" basis. If paying a bill in full within 10 days a two percent discount applies. Otherwise, the full amount is due within 30 days. This can result in significant savings.
"The ideal situation would be to have an item you ordered last week arrive this morning, sell it this afternoon and pay for it within seven days," Sikora said.
Inventory control is also critical. The use of scanners and bar codes provides an accurate method of doing so, and can speed customers checkout.
Staff must be prepared as well. They must know the products they sell. Additional training might be needed to hone telephone skills and review policies.
Successful business owners understand and apply the concept and supply and demand.
"In a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers at current price and the quantity supplied by producers at current price equal each other, resulting in an economic equilibrium of price and quantity," Sikora said.
Finally, service to customers must be exemplary.
"That is service with a capital 'S,'" Sikora said.
These six steps and a dedication to service will help prepare businesses for future prosperity.
"This is an opportunity for everyone to prepare for their own 'Black Friday,'" he said.
John Brody and Andrew Sonderman of Columbus-based Kegler, Brown, Hill + Ritter, discussed the basics of master service agreements (MSA).
What is an MSA?
"It's an agreement between someone who wants good or services and someone who supplies goods and services," said Brody.
An MSA is not a contract giving specific costs, dates and amounts, however. Rather, it forms the foundation upon which contracts are built.
Before agreeing upon an MSA with an oil/gas developer, business owners must scrutinize the document thoroughly. When doing so consult with legal counsel, bankers, accountant and insurance carriers, Brody said.
"Be aware of what you're signing," he said.
Sonderman advised business owners to ensure that employees with access to MSA and contract information be aware of any confidentiality agreements in place.
Other issues to be aware of include: Which party is responsible in case of accident, negligence or "acts of God;" if a disagreement occurs how will the issues be resolved; and, given that many oil/gas companies are based out-of-state, under the laws of which state will issues be resolved.