Stephen Humbert

Sidney, MT (USA)
Role(s):
Founder/Owner/Principal

Darwin Industries

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Location: Sidney
Industry: Energy
Year Founded: 2011
Number Employees: 1-10 people
Business Stage: Creation/Idea
Entity Type: Not Incorporated
Description: 1.0 Executive Summary 1.1 Objectives 1.2 Mission 1.3 Keys to Success 2.0 Company Summary – Crude Oil hauling is big business in Montana and North Dakota right now and there is every indication that this trend is just in its beginning stages. Bakken Shale seems like any “gold rush” situation. There has been a large influx of people, equipment, and new business in a community that has been historically very small. In all probability, when the pumping stops, the businesses and people will most likely move on, but that will only be after some 4 billion barrels of oil have been hauled. The climate and hauling conditions in the region of Southern Saskatchewan, Western North Dakota, and Eastern Montana are such that in the winter months, adverse conditions cause hauling to slow. Because of the challenges, dangers and lack of housing, many people to leave, and this in turn slows oil production. The right strategy could potentially bring in drivers with longevity, and provide an advantage for us in the conditions there. 2.1 Company Ownership – The Company is a partnership between Stephen Humbert and Nathaniel Humbert. It will be set up as a Limited Liability Partnership, and will own all business assets, while personal assets will remain with each party. 2.2 Start-up Plan – The business will begin as individual effort by each partner, and thru several stages of growth, will become a fleet operation with the primary source of income being crude oil transport. Stage One consists of individual efforts in gaining hauling experience, and oilfield experience, stage two starts the owner/operator phase of the partnership, Phase 3 involves the purchase of equipment and hiring of additional drivers. Phase 3 also includes land purchase, and man-camp setup. Camp housing will be built as needed instead of up-front. This should reduce the initial overhead. Both partners will continue as drivers for the company, along with managing the business. Funding will come from individual sources, and the partnership may or may not be split to include investors, although any investor would be silent. For the moment, plans do not include outside investors, but will be adaptable to them should the opportunity arise. Phase 4 is the final partnership phase, where operations are grown to a level that will support incorporation. During this phase, both partners will take a leadership role in the company versus an operator role. 2.3 Company Locations and Facilities – Eastern Montana and Western North Dakota is where the majority of activity around the oil boom is taking place. Currently Steve is working in Sidney Montana, and there is ample land available in the surrounding area. Most likely the man-camp and home facility will be located somewhere north and west of Sidney Montana, possibly near Richey Montana. An exact location has not been selected yet, as the business will be mobile until phase 3. 3.0 Products and Services – The products and services offered will be centered on oil field hauling operations. This will include crude oil hauling, water hauling, and eventually a wrecker service. 3.1 Product and Service Description – Crude oil hauling is specialized and requires additional insurance, training, and handling. Drivers and trucks are currently needed to haul crude from the pumping stations to endpoints such as trains, pipelines, and refineries. Additionally, the equipment already owned by the business will be suited to the task of hauling water for the oilfields, either hauling away wastewater, or hauling in ballast water. It is also possible to haul other loads as necessary provided all that is needed is a tractor matching our equipment, but this type of work would be a low priority. 3.2 Competitive Comparison – Currently in that area, there is a huge demand for oil transport, and oil production is limited by how much can be hauled out of the well locations. There are more contracts than trucks, so although there are a large number of companies hauling, there is no competition for work at this time. As the oil boom matures, there will be a saturation point, and companies will start to compete for jobs, however that hasn’t happened yet, and based on housing and equipment shortages, it doesn’t look to be happening anytime soon. 3.3 Recruiting – The biggest problem facing haulers in the market today is keeping trucks on the road. Many drivers move to the area, only to find that the only place to live is their truck, and the demand is so high, that they don’t get home to their families enough. This causes them to leave in many cases, and their positions open up. Trucking companies are growing their fleets to meet demand, and the end result is a shortage of drivers. The challenge for the most part is convincing people to move to one of the coldest states in the US, and then haul one of the most dangerous loads a trucker can haul, in addition to asking them to haul it in some of the most adverse conditions found anywhere. Hauling crude oil in Montana in the winter is hazardous and stressful, and as a result, most drivers won’t consider it as a career choice. This job compares to hauling military equipment in the middle east, and ice-road trucking in Canada and Alaska. The solution to recruiting and keeping drivers is most likely to offer a package that allows for ample family time, additional compensation, and ready housing. If a driver has a place to live, time to see his/her family, good benefits, and plenty of take-home pay, the conditions begin to look less daunting. Because the business is growing, and the man-camp will be constructed after phase 2 is considered successful, the first few drivers will not be getting these options, and will be recruited locally, however we plan to quickly move to this paradigm as soon as it is possible to do so, opening our recruiting up to a national, or possibly international level. 3.4 Sourcing and Fulfillment – Sourcing and fulfillment in this business means delivering crude oil to the endpoint, and having the contract to do so. There are a few standards in place already, and one of the standards in this business happens to be sourcing. Oil hauling contracts are sourced by larger corporations, and are readily available to owner/operators and companies willing to carry out the contract. Oil is purchased from the pumper and sold to the processing plant, and the contracting company and the hauler split the difference, with the majority going to the hauler. The oil is invoiced to the hauler on pickup, and purchased from the hauler on delivery by the contracting company. This builds risk into the business, but also allows for substantial reward. 3.5 Technology – Technology requirements are fairly specific for this application. Trucks must be as light as possible while including the following specs • Truck must be rated as 13200 front, 44000 rear end. • tag axle or retractable third axle. • Sleeper must be included. Mid rise 60 inch sleeper is the maximum allowable, and again, the lighter the better. • Differential locking on all four drive wheels • Power Takeoff – This is to pump oil while loading. • Air Cleaner inside the hood • Split Windshield • Toolbox setup • Quad Axle tanker • 3 Separate Auxiliary functions for the trailer including a “hot line” • Load lights and a spot light • CB Radio is required for some routes. • Some companies require a 5 year-old or newer truck. • Must be able to be loaded to 105,500 LBS on normal roads, and 80k lbs on 5 and 6 ton roads. 3.6 Future Products and Services – As the fleet grows, it will be advantageous to have a mechanic on staff, and a wrecker capable of handling situations where trucks are stuck or disabled in the field. As such, Operations could grow to include a wrecker service, and possibly mechanic service, depending on projections at that time. 4.0 Budget – See Attached. 5.0 Strategy and Implementation Summary – As stated in section 2.2, The business will begin as individual effort by each partner, and thru several stages of growth, will become a fleet operation with the primary source of income being crude oil transport. This is a 5 stage plan, and during stage 3 of the plan, long-term business planning will be re-evaluated to match market conditions, and determine additional stages and steps. The business will be considered successful after the completion of stage 3, because at this stage, the business will surpass the break even point and begin generating positive return. 5.1 Stage 1: Near Term (Completed in 6 to 12 Months) - The Company startup planning is in progress. Steve is trucking in the oilfield now, and is positioning to acquire hauling contracts and creating relationships that will carry the business thru its beginning stages. Steve will do information gathering and fact finding in regards to all aspects of business operations, while gaining hands on driving experience, and learning the business from the inside out. These facts are continuously added to the business plan and incorporated into strategy. This gives the best possible chance to have enough knowledge before hand to successfully plan business going forward. This process must continue for 6 months so that Steve has enough time to qualify for hauling contracts from most major oil brokers. Once he has reached the 6 month mark, Steve will be qualified to haul contract loads with a company vehicle. Nat is in the process of getting licensed, and will be leasing a starter truck and driving for the requisite 6 months before moving to the oil fields. Once the truck reaches the oil fields, the owner/operator phase of the plan will begin. 5.2 Stage 2: Partnership Startup – The partnership will be drawn up, and the truck will be moved into the name of the partnership. The partnership will begin hauling crude oil for an oil broker, most likely Missouri Basin, although there are other options for hauling as well. The single truck will be used by both drivers in a “slip-seat” arrangement, providing for 24 hour operation. Regular maintenance schedules will be followed, for built-in days off and down-time during this period. Scheduling will be done at that time based on road and weather conditions. This phase will continue while drivers and trucks are added until there are 3 trucks and 5 total drivers. Once the funding for the man-camp becomes available, stage 3 will commence. The total timeframe from inception to stage 3 will not exceed 2 years, and can be as little as 14 months. 5.3 Stage 3: Growth stage – This stage is where the majority of business growth will take place. Trucks will be added to the fleet during this stage, and a man-camp will be established for driver living quarters. During this phase, housing in the man-camp will be constructed as the budget allows, and trucks, drivers, and staff will be recruited as needed, gradually building income, and re-investing all profits into the business. The transition from phase3 into phase 4 will be gradual, however once growth becomes business as usual and recruiting efforts will begin to ramp up. During this time, phase 4 will be considered to have begun. 5.4 Stage 4: Business stabilization - Continued growth will be part of this phase, and during this stage, both partners will migrate from a driver role into a management role. The projected size of the operation is 40 trucks and 70 drivers. This puts the man-camp size at about 3 acres, and 70 homes, with a motor pool of an additional acre. Office staff will be added for dispatch, HR, Accounting, and office management, and a shop and fueling facilities will be added to the property. An engineer will be consulted on the construction of the man-camp. Construction will come to completion, and recruiting efforts will be completed. At this stage, the business is stable and profitable. 5.5 Milestones • Job driving crude oil – Steve • Class A License – Nat • Truck lease or purchase – Nat • 6 months driving experience – Steve and Nat • Owner Operator LLP Formation • Operations begin – First contract • Purchase of 2nd truck and addition of 1 driver • Purchase of 3rd truck and addition of 2 drivers • Man-camp established • Office and shop established • Addition of staff • Migration to management only 6.0 Web Plan Summary – Initially, a very basic web presence will be established, including contact information, a brief company description, and some employment instructions. The page will have no more than 5 pages, and will be static. The page will not be advertised, but will be searchable on most search engines by keywords. The only business purpose for the website will be presence and information. The internet will be utilized for recruiting via online recruiting companies, but will not be augmented by our own site. Development will be done by the owners, who are experienced in this type of work, and hosted by Google. As the business grows, this area will be explored, however currently there are no plans to expand on this in any way. 7.0 Management Summary – The company will be owned and operated by the partners, and will grow to include employees over time. The organizational structure will remain relatively fixed, adding positions as needed within the structure. Steve will direct the operations side of the house, and Nat will direct the business side. Business strategy will be agreed upon by both parties, and decisions regarding business direction will be consensus based. Legal, accounting, and mechanic positions will be outsourced until the business can support an internal staff. 8.0 Financial Plan – The financial plan below will show (Budget A.)A conservative, near-worst case scenario, and (Budget B.) A more moderate, or realistic scenario. “Best case” will not be presented here. Budget A will be used for the purposes of financing applications and break-even analysis. Budget B will be used as the business goal. 8.1 Important Assumptions – • It is possible to haul 3 loads per day, per driver, however that is not the norm. Weather conditions in the winter make things difficult, and while some days a driver will get 3 loads, It is also very possible to not complete a load during a working day because of weather and environment-caused issues. For this reason, We will assume (Budget A) a 1 load per day, per driver rate in winter months, and a 2 loads per day, per driver in summer months. We will assume (Budget B) 1.5 loads per day, per driver in winter, and 2.25 loads per driver per day in summer. • Drivers will work 3 weeks @ 6 days per week, and rest 1 week on a rotating schedule. With Slip-seat driving and 2 drivers, this means that theoretically a truck can operate year around with the exception of maintenance days. Drivers will operate 234 Scheduled workdays per year, with one floating day off per week. This should reduce the impact of inclement weather. Driver’s day off will be either the first weather day, or Sunday. • Lost days – There will be days that it is not possible to haul cargo. Reasons for this would include weather, truck maintenance, and illness to name a few. The estimate of 1 load per day in winter, and 2 in summer is covering these situations, so there is no reason to reduce the estimated work days of any driver. Drivers will be paid a percentage of load invoice, so days worked has little or no bearing on employment expense.