In the early 1990s, Helen Du left her hometown in China in search of higher education in the United States. She found herself settling in Dallas and has remained there for the last 26 years. Prior to founding her business, Du found herself in the world of technology and supply chain management. She had ventured slightly into the world of entrepreneurship, starting a few small ventures that were more for a hobby than actual business.
Between 2004 and 2005, while visiting with friends from back home, Du came to a realization about the oil and gas industry. At the time there was one dominant force in the production of drilling equipment that was doing its manufacturing in China. The company was known as Weatherford International and would become a competitor for Du down the road. She learned that there was an immense amount of money that could be saved by manufacturing in China and then importing products into the U.S.
Founding a business
Come 2006, Du secured an initial investment of $250,000 from her business partner and set out to develop JD Rig & Supplies Inc. The goal was to use the manufacturing industry already in place in China and sell to stateside clients. While the product was ready to ship, Du found herself struggling to actually find clients.
There was a massive market for her to sell to, but no company wanted her product. For reference, the entirety of oil production in both the U.S. and Canada use the same products for drilling and production of oil and gas. Du found that companies did not trust the products that were made in China with no cause.
For the next year and a half, Du had her nose to the grindstone. “I used every type of media,” said Du in regards to marketing. She attended every trade show possible, sent hundreds of emails and made endless cold calls across the U.S. She proved to her potential clients that the products they were using were made in China and simply branded U.S. products, yet no business would invest in her products. All of this effort was put forth and Du did not have a single client to sell to.
After traveling extensively in search of a client, Du struck a deal outside of the U.S. with Mexico-based Pemex. In essence, it was more of a test than a deal. Pemex would take a limited supply of product to test out and if they liked the product, they would consider making full purchases.
The product worked perfectly and production costs were anywhere from 10% to 12% less than her competitors. With plans to sell stateside, Pemex would open endless doors for Du. Thanks to existing clientele in Texas, Du found her products to suddenly be a desired commodity. Numerous companies that she had previously contacted with no success began reaching out with business inquiries.
At the time, oil prices were on the rise and the industry was struggling to have enough equipment to keep up with production. For a company starting out, it was a good problem to have. Du saw her company producing drilling equipment at maximum levels and still not being able to keep up with demand thanks to the influx of clients. Her first customer could not have been a more ideal client, yet the boom that the industry was seeing would be short-lived.
Adapt to survive
2008 saw financial collapse around the world as the housing bubble burst. This economic downturn saw the oil and gas industry struggling alongside the rest of the world. By 2009, drilling rigs had hit an all-time low of around “300, maybe around 370 in the United States,” according to Du. This number was down from approximately 1,500 drills in the previous years. The drilling equipment that her company was producing was no longer a viable option for her market.
Du decided the company needed to transition and abandoned the production and import of drilling equipment. “The company totally changed its focus, but the name stayed the same,” Du said. Instead of drilling equipment, as they had been producing for the first three years of business, the company would make oil production equipment. These products work as artificial lifts that bring oil to the surface rather than drilling down to gain access to oil.
This new business model created products that would create recurring clients. With drilling equipment, once oil is found, the drill is no longer useful and loses its purpose. The new artificial lift products that Du’s company was making could be used throughout the lifecycle of an oil well. Du describes the products as being smaller in scope and easier to manage. The technology itself has been around for 40 years, remaining relatively unchanged.
The change in product focus saw Du traveling extensively again. She visited oilfields throughout West Texas. Here she visited with small business owners to get their take on the products that were currently on the market and how they could be improved. To her surprise, many of the people she spoke with were happy with the products on the market. When she approached them with new ideas, they would largely ignore modernization attempts. Du said:
“I saw this as an opportunity. I saw the cost difference. I think that my customers can just accept it, but actually I was wrong. They are very stubborn and like what they are used to. So the first couple of years I tried to show them the product that they were never really familiar with. It's the same thing, but it's designed differently. I thought I could make a difference and I thought the product design was more modern or more up to date. But the big lesson learned is that the customer is god and especially that everyone has a way of using those tools and equipment and I have to change my mind and my way of thinking to adopt what they want.”
It was this adaptation and dedication to her customers that would set Du apart from the rest of the industry. She was providing a quality product that would suit the needs of the customer without trying to sell them on extra bells and whistles. In turn, the business saw massive growth.
Expansion: risk vs. reward
Between 2010 and 2012, business would see its production and revenue triple every year. By the end of 2013, the company was importing just shy of 6,000 pump jacks to its stateside clients. Du recounts one customer alone doing a test buy of 40 pumps one year and then asking how many they could supply the next year. “I asked, 'How many do you want?' And he told me, 'Probably 700,'” Du said. The third year with the client saw an order of 1,500 pump units. While the massive growth for the company dictated a success, it would also come alongside struggles and even failures.
“Starting out, I didn’t know the risks and I didn’t really think too much about the risks,” Du said.
She described one of her biggest mistakes has having put blind trust in the manufacturers overseas. While she spoke with them on a daily basis, there was no way to actually validate the products they were making for her. The expansion of her business saw manufacturers cutting corners to keep up with demand. In turn, these products eventually failed and led to large claims being filed against the company.
For an oil well, product failure results in production time decreasing. This equates to burning money. While monetary losses could be significant, Du recalls one incident that truly shocked her. A piece of equipment at one well failed and the piece actually fell off of the machine it was attached to. Upon landing, it killed a nearby cow. “I was really upset and lost sleep because that could happen if there were people around,” Du said.
While every business sees ups and downs, Du had created a very successful business that was creating a disruption in the industry. JD Rigs & Supplies had become one of the top two suppliers in the U.S., with approximately 37% of industry sales coming under their name. This success saw Du planning multiple expansions for her production, seeking new locations in Mexico and the U.S. The business was raking in profits and she was very happy with the work she was doing.
Such a disruption in the industry would not go unnoticed. By 2012, companies began to approach Du with the intent of acquiring her business. As she was clearly content and successful in her work, she began to reject the offers they were making. The offers were not satisfactory as they largely ignored her plans for expansion and focused almost solely on the existing supply chain she had created and her manufacturing in China. With these aspirations in mind, it would take the right words for Du to be convinced to sell.
The company that would eventually win her over would be Schlumberger Ltd. (SLB, Financial), a titan in the oil and gas industry. As it was the largest and most well-known company to approach her, Du began to embrace the idea of selling, yet remained hesitant. At this time, Schlumberger began to acquire her actual clients. These companies had been around for 40 years, some even approaching 60, and they had agreed to sell. Du found herself in a tough position, still wanting to do things on her own terms. “They told me, ‘Well you know, kid, you know the business. Its up and down. So when it's up you think about the downturn. So why not?’ And that was the click,” said Du.
JD Rig & Supplies was officially acquired by Schlumberger in August 2014. At the time, oil was at an all-time high. Schlumberger was at a market cap of almost $150 billion. Within two months of selling, oil prices crashed once again. “I got out at the perfect time,” Du said.
Still to this day, Du remains as the vice president of SLB Lift Solutions, managing the supply chains for Schlumberger. She finished her contractual obligation with the company this year after helping it streamline its supply chains. The knowledge she had gathered over the years benefitted Schlumberger greatly, yet due to oil price downturn, the aspects of the company that she has been involved with have struggled to turn a profit.
Du plans to continue to be involved in the oil and gas industry as she believes it is still a viable option. She is open to the idea of starting a new business, but is not actively pursuing one, instead putting her money toward investing in other businesses.
Question and Answer
GuruFocus: What was something that you did right over the years?
Du: I developed a team in China as on-site field inspectors, so they’re all engineers. They are all dedicated and very hard workers. Very passionate about the job. I sent them over to my suppliers' side. They were there 24/7 for me, looking after the product quality and the progress of the project.
GuruFocus: Where do you look for inspiration?
Du: That’s my mom actually. She’s always pushing. My dad is really a nice guy and never says much. Then my mom, ever since I was young, me and my brother... she’s truly a tiger mom. She’s a doctor and I learned a lot from her. Like the execution. She’s very passionate. She always has some plans in mind and she executes. So the older I get, and after I start the business, sell the business and get all these dealings with the difficult world, I think my mother has a lot of impact and influence on me.
GuruFocus: As money is no longer an issue, what makes you happy at this point in time?
Du:Â Good question. I’m a happy person. Now I get to spend more time with my daughter. That's a good thing. I’m very happy, but I still need to be excited about doing new things. So I think I still need more challenges to keep me happy. Learn new stuff, like start running, and keep doing new stuff to challenge myself.
Du’s advice for entrepreneurs
“The way to get started is to quit talking and start doing.” -Walt Disney
For Du, this quote was a way to execute her goals in life. She found that any time she had an idea, it was better to go ahead and give it a go. As an entrepreneur, it is all too easy to fall in the trap of theory. To talk all day about the incredible plans you have without actually giving one a go. Regardless of what may happen, the only way to make your dream a reality is to actually do something. It does not take leaps and bounds. Baby steps will work. Find something you can execute in a day and you will be on your way to success.
Don’t be afraid of failure or risk:
Compounding on her first piece of advice, Du said that failure and risk is going to happen. There is not a single business out there that has not had a failure in some form or another. There is no reason to fear this failure. There always will be risk and failure. You have to accept this and give things a try anyways. If you can do this, then you will be well on your way to success.
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