8 Tips to Start an Oilfield Water Hauling Business

June 27, 2018

Starting an oilfield water hauling business takes work. It’s not always easy, but for some, the rewards of entrepreneurship far outweigh the risk as there are many benefits to being an oilfield water hauler. Here are some tips to help you succeed.

Tips to Start an Oilfield Water Hauling Business

1. Research

Before you even begin your venture, research is required to start a water hauling business. Here are just a few things you should think about and research:

• Which business structure is right for you?
• Do you have the time and experience to complete registration and the permitting processes?
• Do you have enough start-up capital to get going?

2. Operations

Water hauling businesses operate by bidding on and winning contracts. There are two ways water haulers acquire drivers to fulfill contracts; subcontracted drivers or owner-operators.

• Subcontracted Drivers: Using subcontractors to complete your water hauling contracts can help reduce start-up costs. Since your company does not employ the drivers, insurance costs and necessary equipment costs are less. However, having subcontracted drivers gives you less control and limits potential profitability.
• Owner-Operator Drivers: Having owner-operator drivers allows you to run your business and all of your operations. By fulfilling contracts with owner-operators, you will use your equipment, pay higher insurance, and take on the responsibilities of hiring a fleet of private drivers as employees. While there is a bigger investment, you’re able to keep control of your business and employees. This requires more start-up capital and has more operating costs, but the best potential for maximizing profits in the future.

One of the problems right now according to William J. from JKJ Transportation, LLC, is finding truck drivers.

“Most of your good truck drivers are taken. That’s the hardest part to this industry is finding the help, the employees.”

3. State and Federal Requirements

When you start a water hauling business, you’ll need to be sure to meet the proper federal and state requirements, as well as tax, license, and permitting regulations for the type of trucking industry you’re entering. Below are a few of the important requirements.

• Federal DOT Number and Motor Carrier Number: Learn the requirements and apply for certifications online at fmcsa.dot.gov.
• Heavy Use Tax Form (2290): Comply with tax regulations related to heavy use of US roads with the IRS Form 2290.
• International Registration Plan (IRP) Tag: Visit your state’s transportation website and their IRP portal for IRP tags.
• International Fuel Tax Agreement (IFTA) Decal: You can also get this at your state’s transportation website.
• BOC-3 Filing: Secure and maintain active operating status by using a processing agent and the BOC-3 filing sheet.

4. Insurance

When you oversee the operation of commercial vehicles, your insurance requirements typically cost more than other businesses. Visit the US Small Business Administration website to learn about what coverage requirements you need.

You may also be required to comply with health and safety standards and regulations enforced by the US Department of Labor’s Occupational Safety and Health Administration.

5. Equipment

If you’re operating your oilfield water hauling business with your private drivers, you’ll undoubtedly need at least once commercial vehicle. To finance equipment purchases, you’ll want to secure working capital to fuel your operations. You can also consider leasing versus buying the needed equipment to save some of your working capital.

6. Getting Started

The upfront costs of any business can be overwhelming, and water hauling is no exception. Securing large contracts from oilfield companies can be difficult and is extremely competitive. As a start-up company, you’ll have to work hard to build a reputation and secure your first master service agreement. You may have to start by accepting smaller contracts.

In a previous blog, we interviewed an oilfield foreman who gave this advice about building your reputation:

“Word of mouth travels fast around here, and we are not Googling these service companies in the Permian deciding if we will work with them or not. It is difficult and takes time to build a good reputation, but a bad reputation can start as quickly as after the first job.”

7. Securing Your First MSA

When you secure your first MSA with an oilfield exploration or production company, you’re essentially in business. MSAs are contracts that an oilfield company uses with their suppliers. Be sure to review your MSAs in detail to help ensure payment from your customer. By not complying or understanding your MSA completely, your customer could refuse to pay you. Be sure to understand invoicing and insurance requirements, and any conditions regarding liens or encumbrances.

William J from JKJ Transportation, LLC, says water hauling is a tough business and you need to watch and hustle it to get new contracts.

“Watching the drilling, seeing what they’re doing, where they’re at…”

Right now, he’s seeing the biggest growth in West Texas.

However, even though it’s a tough business, William stated that the demand is “real high, real high demand.”

8. Steady Cash Flow

Growing and operating a business requires access to working capital. Most oilfield service and exploration companies take 30, 60, or even 90 days to pay. When you need cash for payroll, equipment, fuel, and other business needs, you don’t have time to wait. Many oilfield water hauling businesses rely on invoice factoring to secure steady cash flow. Instead of waiting for customer payment, invoice factoring pays you the same day.

If you’d like to learn more about our invoice factoring programs, give us a call at (800) 707-4845 or fill out the form below. Our month-to-month financing programs provide companies the working capital they need to grow and succeed.