CASE STUDY
The Client:
A contract drilling company providing comprehensive drilling services to energy producers primarily in the Permian Basin in Texas and Oklahoma oil fields, the business operates high-specification drilling rigs under contract complete with labor, servicing, and power generation based on daily rates. Operating in the capital-intensive and notoriously cyclical oil and gas services sector where rig demand, day rates, and operator profitability swing dramatically with crude oil prices and drilling activity levels, the company had secured substantial multi-year contracts with energy producers that provided revenue visibility and operational stability even as broader industry conditions deteriorated. With proven operational capabilities and established customer relationships with major energy companies, the contractor had invested in new drilling rigs with 10-month delivery timelines, anticipating that superior equipment specifications and contracted revenue would support continued growth despite industry volatility.
The Challenge:
As oil industry conditions swiftly deteriorated with commodity price declines and reduced drilling activity, bank support evaporated while the company awaited 10-month delivery of mission-critical drilling rigs essential to fulfilling contract commitments. Despite having three-year “pay or play” contracts in place that provided revenue certainty and downside protection—contracts where customers were obligated to pay regardless of actual rig utilization—ownership felt they had ample room to adapt to changing market conditions, but bank pressures told a different story. Traditional lenders imposed new controls around the company’s revolving credit line, dramatically restricting access to capital precisely when equipment financing was needed to take delivery of the new rigs. Banks were requiring the operator to adjust their cost basis downward to match the market’s downturn, effectively demanding asset write-downs and operational cuts that ignored the revenue protection provided by the pay-or-play contracts. This forced the company to seek alternative funding sources, but traditional equipment lenders were equally spooked by declining oil prices and rig count reductions, viewing the entire contract drilling sector as untouchable regardless of individual company contract positions or operational performance.
Solution:
First National Capital recognized that cyclical industry downturns create opportunities for disciplined lenders willing to underwrite individual company fundamentals rather than painting entire sectors with broad risk brushes, and that pay-or-play contracts provided genuine revenue protection that traditional lenders were ignoring. FNC moved beyond the issues that crippled most lenders and delivered over $14 million in financing for the mission-critical drilling rigs, looking past industry sentiment to evaluate the actual contract commitments and operational capabilities that would support debt service. The ultimate financing structure and requirements were complex, requiring First National’s team to work through numerous challenges over several months as oil market volatility continued and bank pressures intensified, but FNC remained committed to delivering the financing rather than retreating when conditions became difficult. First National ultimately delivered the financing to the customer on the rig delivery date, ensuring no operational disruptions or contract penalties from delayed equipment commissioning. The drilling rigs immediately went to work and broke production records, revealing that the financial limitations and risk assessments imposed by traditional bank lending were fundamentally unwarranted—the equipment performed as expected, the contracts generated revenue as promised, and the company’s operational thesis proved correct despite the banks’ pessimistic sector view. In times of extreme industry volatility when traditional capital sources retreat, the customer trusted First National to deliver—and FNC got the deal done, enabling the drilling contractor to fulfill contract commitments and capitalize on superior equipment while competitors constrained by bank limitations struggled.
It All Begins With A Conversation
We listen. We live out-of-the-box. We solve problems. And we get deals done. Let’s do this.
