Larry and Tim Neal are tapping into the archaic yet lucrative oil rig servicing market in North America. In January 2017, the father and son launched an online marketplace that provides 200,000 parts and supplies for rig management.
Tim, 28, spent the past five years building oil rigs and managing equipment in Houston and Beijing. He discovered how outdated and cumbersome it was for contractors and manufacturers to buy replacement parts. So, he teamed up with his father, Larry, 56, to found Expedi. Larry, who has spent more than two decades in the financial services industry, was most recently CEO of Platts, McGraw-Hill’s energy and commodity information business.
The Texas-based startup wants to eliminate many of the inefficiencies that exist for oil rig managers, and deliver everything from mud pumps to shale shakers as quickly as possible.
While the Neals are laser-focused on expediently delivering the right parts, they have also identified unique ways to woo potential clients — delivering food, mainly barbecue, to rig workers.
“Much of this industry has been reactive. Many of them still order via phone or email, and they don’t know their usage. Now, we’re changing that reactive purchase environment to a proactive one. We know how long parts should last. It’s a catalyst for discovery,” Larry told Yahoo Finance. “By cataloguing all of their parts, we can help identify bottlenecks and expenditures. That’s been huge for us.”
The $20 billion industry is dominated by one major player — DistributionNOW (DNOW), with most other business going to mom-and-pop supply shops, according to Larry. Expedi has headquarters in Houston and a storefront in Odessa, the latter located in west Texas, where the oil rigs are concentrated. Expedi currently has nine customers, serving more than 25 rigs across Texas.
In addition to the promise of a streamlined, tech experience where folks can order all their parts online, the Neals recognized that most business deals in the industry were deeply rooted in longstanding personal relationships.
“Rigs are basically coordinates on dirt roads. While it’s important for us to introduce innovation, it’s vital to have the human element. We cook barbecue for folks working on the rigs – we call every rig on Christmas. They work two weeks on, two weeks off,” said Tim. “They love the human element. We have to treat the guys right. That builds brand loyalty. It’s about showing people we care about them, their families and showing them a little hospitality.”
BBQ is key to business and winning over rig operators
Expedi’s COO Jonathan Hamilton runs all the day-to-day operations for the company and happens to be an avid cook. He first came up with the idea to barbecue for the clients.
“Smoking meat is a talent and a passion. Anybody who does it is passionate about it. It takes me three days to prepare the meat and then it takes 18 hours to 20 hours to smoke it,” he said. “It’s very tedious and long. I’ll usually start that in the middle of the week and then I do all the smoking on the weekend, then we’ll deliver it that Monday.”
Typically, rig operators work 12-16 hours a day, and subsist on frozen pizzas, ramen noodles and sandwiches. So, workers are appreciative of a home-cooked meal. Because of its popularity, Hamilton said he plans to drive a trailer outfitted with a barbecue over the coming weeks to be able to serve the meat piping hot.
Hamilton, 36, who has worked in the oil and gas industry for over 13 years, said he understands the difficulty of being away from family for such long stretches of time.
“They don’t have time to make gourmet meals. They eat what they can and keep working. I was on that side of the business and so I understand that a hot meal from time to time can really make a difference.”
And word has quickly spread about Expedi’s offering. “When we went to one of our first clients, 50 pounds of meat were gone within 20 minutes. Now, as rigs are planning their first order, they ask us if they can have barbecue first,” explained Tim.
‘People aren’t buying from their father’s supplier anymore’
In addition to appeasing clients, Expedi’s innovative business model has caught the attention of investors. New York-based Bowery Capital is the lead investor in Expedi’s $2 million seed round, citing Tim and Larry’s complementary skill sets and forward thinking.
“Expedi, a family business itself, is benefiting greatly from changes in the oil and gas business where people aren’t simply buying from their father or their grandfather’s supplier anymore,” said Michael Brown, managing partner at Bowery. “Buyers are looking for alternatives, and a lot of this change was spurred in 2014 when the oil market took a downturn, causing buyers to tighten up their spend.”
“Going rig by rig, they’re following a similar model to Amazon which started with books and expanded to many other product lines” Brown added. “They expect that they can introduce many more product lines and become the one stop shop for the oil and gas industry, both upstream and downstream.”
Melody Hahm is a senior writer at Yahoo Finance, covering entrepreneurship, technology and real estate. Follow her on Twitter @melodyhahm.