As a result of the price of crude oil plummeting below $27 per barrel at the beginning of 2016, energy employees across the Greater Houston area are taking their industry expertise and applying it to new ventures.
Neil Mendes has worked in oil and gas since 1989 and over the years has felt firsthand the effects of volatile barrel prices. In the midst of what he said is one of the worst downturns in industry history, Mendes and his business partner Jeremy Buc Slay opened Alpine Polytech LLC in The Woodlands in 2015.
“The oil and gas industry is not dead; it just feels like it is,” Mendes said. “It’s a cyclical business, and we know it very well. We know a lot of people in it, and we knew that there were some markets that weren’t being served well that we could fill. What we do is pretty specialized, so that’s why we wanted to stick with oil and gas.”
Headquartered in The Woodlands with a lab in Fort Worth, Alpine Polytech is deeply rooted in the business of energy. The company provides polymer material testing and consulting services to the oil and gas market as well as the chemical processing and refining market.
Although launching a startup in the middle of economic turmoil can be challenging, Mendes said it is beneficial in the long run.
“When you start in a downturn, your eyes are wide open,” Mendes said. “It’s been a rough road but the reality is that if the market was twice as good, as a startup, we probably wouldn’t have been able to take advantage of it. Though this was the worst cycle I’ve ever been through, when things do bounce back, they bounce back very strong so the people who make it through the cycle usually benefit greatly.”
Mendes is not the only one taking advantage of the downturn. According to the U.S. Small Business Administration, in fiscal year 2015 the agency approved 6,841 loans in the South Central region valued at $3.4 billion—an increase of 20 percent and 23 percent, respectively, over fiscal year 2014.
The South Central region includes Arkansas, Louisiana, New Mexico, Oklahoma and Texas. Houston is one of the largest SBA markets, second only to Dallas.
“Whenever there is a downturn, people tend to look to entrepreneurship as another path,” said Roberta Skebo, Small Business Development Center deputy director. “We’ve seen some people at our location who were along the Energy Corridor or were with foreign companies and now want to stay here and are looking at opportunities to start a company or buy a franchise. Houston has been through downturns before—and hopefully this time, the turnaround will happen faster—but in the meantime people do need to be evaluating other opportunities.”
The Texas Gulf Coast Network of the SBDC, which runs locally through the University of Houston and the Lone Star College System, provides free consultation services to small-business owners as well as to prospective small-business owners to help them succeed.
SBDC senior advisor Steve Hamilton, who works specifically in The Woodlands, said he, too, has witnessed this increased attraction to entrepreneurship.
“Our activity level kicks up really aggressively when the economy goes south,” Hamilton said. “It’s a challenging time for [oil and gas personnel] but a very active time for us because there are so many people who have been laid off from oil and gas or who have been affected by oil and gas and are wanting to start their own business.”
One of the reasons that small businesses, are surviving amid the current economic state is because banks have become more understanding of the potential value of small businesses, SBA Regional Administrator Yolanda Garcia Olivarez said.
According to Olivarez, 67-69 percent of jobs in the U.S. are created by small businesses and some of the biggest companies—such as Costco and Hewlett-Packard, were once supported through the SBA.
“There’s a lot more opportunity now to open your own business than there were 10 years ago,” Olivarez said. “There’s more capital to access because more banks understand the concept of small business and people are realizing that small businesses are the drivers of economic development and the job market. Not only are small businesses the job creators, but they are the inventors.”
Gary Henderson, senior vice president and SBA manager for Allegiance Bank, the largest community bank in Houston, is one of those lenders who said he understands the value of small businesses.
“With the most recent oil and gas crash, what we’ve seen in Houston is that people like [Mendes] will take their savings and experience in the industry and start their own company,” Henderson said. “I’ve noticed that the customers we have from oil and gas are better prepared for the downturn and have done a better job of preserving their cash so that they can weather these storms—the majority of them have learned their lessons to not overextend themselves.”
In addition to better access to resources and savvy business sense, Henderson said Houston’s diverse economy is a contributing factor to small-business success.
“I’ve seen a lot of ups and downs in Houston, and you just have to ride along with it. Everything is cyclical just like life, and oil is the same way,” Henderson said. “Houston is so big now that oil and gas no longer dominates the entire market like it used to. It’s an important piece, but it’s not the whole piece.”
“I would say that there isn’t anybody in the oil and gas business that’s not off a minimum of 50 percent,” Mendes said. “We expect our business to improve 30-40 percent above what the market is right now so it’s not as bad as other businesses who are off 60-70 percent—it’s very difficult to stay open if you’re down that much.”
Mendes said he expects oil to reach $60 per barrel by the first quarter of 2017, and with it, he hopes to see a 50 percent growth for Alpine Polytech, which would allow it to become a profitable and healthy business.
Despite the limitations of the market, Mendes said he is happy with his decision to open an oil and gas-related business in the middle of a downturn. He encourages others to do the same.
“Be a differentiator; don’t do the exact same thing as the guy down the street,” he said. “Have something that you’re doing better than anyone else or find some gap in the marketplace that you can take advantage of to meet those needs. If you do that, then you have a business you can hold onto even when the market doesn’t cooperate.”