How Oilfield Service Companies
Manage Cash Flow Through the Cycle
In oilfield, cash — not profit — decides who survives the boom and the bust. The four moves that keep a service company alive: a 13-week forecast, working capital set up early, fast billing, and real job costing.
Oilfield service companies manage cash flow by running a rolling 13-week cash forecast, lining up a working-capital line before the boom hits, billing the moment a field ticket is signed, and costing every job so they know which work actually pays.The income statement won't save you in this business — the gap between when cash goes out and when it comes back will. Here's how the companies that survive the cycle actually run their cash.
By Jason Anderson
Co-Founder, 406 Consulting Group
Big-firm tax background with a Six Sigma discipline for systems and job costing.
Why cash — not profit — is the number that matters
You pay crews weekly, fuel and rentals on receipt, and mobilization up front — then you wait 60 to 90 days for the operator to pay. The faster you grow, the bigger that hole gets, which is why oilfield service companies most often fail when they're busiest. Profit is an opinion; cash is a fact. (We go deep on that trap in Why Oilfield Service Companies Go Broke During a Boom.)
Run a rolling 13-week cash forecast
A 13-week forecast is the single most useful tool in a cyclical business. It projects cash in and cash out week by week, so you see the squeeze coming while you still have time to act — delay a purchase, pull on your line, push a collection — instead of discovering it on payday. Update it weekly. It becomes the dashboard you actually run the company from.
Line up working capital before you need it
The time to set up a credit line is the slow season, when you don't need it — not mid-boom, in a cash crisis, from a position of weakness. Lenders fund oilfield service companies that show clean financials, a real forecast, and a collectible receivables aging. Walk in early with that package and you'll have a line to draw on when the work shows up; walk in desperate and you'll get a no. Build the relationship before the cycle turns.
Bill the day the ticket is signed — and cost every job
Every day between finishing the work and sending the invoice is a day you're financing your operator for free. Tighten the field-ticket-to-invoice cycle so you bill in days, not weeks. And cost each job — actual vs. bid, including mobilization, rented equipment, travel, and standby — so “we're busy” becomes “we're busy on the work that pays.”
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FAQ
Why do oilfield service companies run out of cash when they're busy?
Because growth consumes cash before it produces it. Each new job means paying crews, fuel, per diem, and rented equipment up front, while operators pay in 60 to 90 days. The faster you grow, the larger the gap between cash out and cash in — so you can be very profitable and still unable to make payroll. A 13-week cash forecast and a working-capital line set up before the boom are what bridge it.
What is a 13-week cash flow forecast?
It's a rolling, week-by-week projection of the cash coming into and going out of the business over the next quarter. Unlike an annual budget, it's short-term and updated weekly, so it shows a cash squeeze far enough ahead that you can still do something about it — pull on a line, delay a purchase, accelerate a collection. For a cyclical, cash-intensive business like oilfield services, it's the most important report you'll run.
How much working capital does an oilfield service company need?
Enough to cover the gap between paying for a job and getting paid for it, with room for growth — which in oilfield can be 60 to 90+ days of operating costs. The exact figure depends on your payment terms, growth rate, and cost structure, which is exactly what a 13-week forecast is built to show. The key move is arranging the line in the slow season, before a boom forces the question.
General guidance, not advice for your specific situation. Confirm specifics with your advisor.
The bottom line
In oilfield, cash — not profit — decides who survives. A 13-week forecast, a line set up before the boom, fast billing, and real job costing are how you run the cycle instead of it running you.
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