Oil and gas services are paid for work performed at a site, days or weeks after the work was done, against a document signed by someone who has since moved to another location. The invoice depends entirely on that document.
How a field invoice is built
A service company is engaged under a purchase order or a master service agreement. Work is performed, and a field ticket records the hours, equipment and materials used. The customer's representative signs it. Back in the office, the ticket is matched to the rate sheet and turned into an invoice.
Every step is a chance for the invoice to stall. A missing signature, a rate that does not match the agreement, a charge for equipment the customer says was not on site: each one turns a straightforward receivable into a conversation.
Why receivables build up
- Labour, fuel and equipment are committed before a ticket is signed.
- Tickets travel from remote sites to an office before invoicing begins.
- Purchasers review invoices in batches, often at month end.
- Work concentrates into short seasonal windows, so billing does too.
- Subcontractor and supplier costs fall due regardless of customer payment.
Winter and the drilling cycle
Much of the field activity in western Canada clusters into the colder months, when frozen ground allows equipment to move. Service companies hire and mobilize before that window opens, then invoice heavily as it closes. The result is a large receivable book forming in a few weeks.
For a business in this position, the question is not whether the work will be paid, but whether it can fund payroll and equipment until it is. Factoring shortens that interval rather than changing the season.
How factoring is used
The service company sells invoices once tickets are signed and matched to the rate sheet. Under a notification arrangement the customer pays the provider directly. Because the customer is often a substantial producer or a large service company, the credit question is usually straightforward and the documentation question is not.
Sector cautions
The first caution is documentation. A service company that invoices from memory, or that lets tickets accumulate until month end, will find both its own collections and any factoring arrangement slower. The second is the identity of the contracting party: work at a site may be contracted by a joint venture, a contractor or the producer itself, and the provider needs to know which one owes the money.
The third is concentration. A service company working for two or three producers has a revenue base that mirrors the fortunes of those companies, and a provider will price and limit accordingly.
Questions to ask a provider
- Which documents do you require alongside a field invoice?
- How do you treat invoices with unsigned or partially signed tickets?
- Will you buy invoices from my largest customer, and to what limit?
- How do you handle invoices for equipment and materials as well as labour?
- Is the arrangement recourse or non-recourse?
Related guides
Provincial context sits in the Alberta guide, with city detail in Calgary and Edmonton. For the arrangement itself, read recourse and non-recourse factoring and how invoice factoring works.