The budget year

The words

CapEx

The capital expenditure budget: equipment, projects, anything that gets depreciated. Planned a year ahead, line by line, and hard to add to once approved.

OpEx

The operating budget that keeps the lights on: rent, power, maintenance, services, leases. Spent through the year by the people who run the operation.

AFE

Authorization for expenditure, the internal document that approves a specific capital spend such as drilling a well. The show names it as a word an outsider has to know; it never pauses to define it.

Fiscal year

The company's budget year. For most oil and gas companies it is the calendar year, but not for all, and the exceptions stall deals.

PO

Purchase order. The document that means the money is committed. Until it exists, a yes is a plan.

The show's first lesson on money is that a buyer has two budgets, and which one you are sold from decides whether the deal closes this year or next. Capital is planned in the fall for the following year; if your product was not on the spreadsheet in October it is hard to buy with capital until the next round. The operating budget is spent as the year goes. The show's workaround for a buyer who wants the thing but has no capital line is to change which budget it lands on:

“you can take the same thing that normally they would buy and you can lease it to them and it will hit their operational budget”

Source: Educating your buyers and reaching the decision-making team, episode 4 of the Oil & Gas Sales & Marketing Podcast.

The rest of the year has a shape too, and it repeats. Requests are written in October. The new budget is released in January. The cash does not actually move until February. Late in the year, whatever is left in a budget tends to get spent rather than handed back. The month-by-month version, with the verbatim passages, is on the budget calendar.

More from the show

The January release and the February cash are two different events, and a deal that closes in the gap between them has been approved and not yet funded.

“Most companies' fiscal year runs along the calendar year. That money actually doesn't usually hit the bank account until February”

Source: Hitting the Ground Running for 2024, episode 39 of the Oil & Gas Sales & Marketing Podcast.

Not every buyer runs on the calendar. The show's own example is a sponsor whose year ends in June, which made May a month with no new spending, and the fix is a question the seller has to ask.

“Their fiscal year ended in June, and it starts brand new in July, which means that there was no new spending at the company in May”

Source: How to Accelerate Deal Closure in Oil and Gas, episode 98 of the Oil & Gas Sales & Marketing Podcast.

And the December rush is real, visible from the outside, and sellable into if what you offer can be paid for now and delivered later.

“I'm seeing a lot of holiday events and parties and tables like I'm getting invited to all this stuff because I think people are trying to use up all their budgets.”

Source: Ending the Year Strong Part 1 of a 2 part series, episode 59 of the Oil & Gas Sales & Marketing Podcast.

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