[CAT® OIL & GAS] A Financing Partner You Don't Want to Overlook

Chris Berrie: Hi, I'm Chris Berrie, sales manager here at Caterpillar. Welcome to Cat® Power podcast, a series of podcasts focused on various subjects within oil and gas. It's a rare company that doesn't have to tap into financing at some point, either to acquire new equipment or to stabilize or grow their business. I'm joined today by Mitch Lemasters, who takes care of oil and gas industry for Cat Financial, and is here to talk about some of the ways in which his team can get involved in helping your operation meet its financial goals. Mitch, thanks for joining us today.

Mitch Lemasters: Thanks for having me, Chris. I really appreciate it.

Chris Berrie: Cat Financial is well known among Caterpillar's more traditional customer base, for example, those who buy heavy equipment, but some oil and gas operations may not be aware of who you are and what you do. Can we start by giving us a little background?

Mitch Lemasters: Sure. Cat Financial is a wholly owned subsidiary of Caterpillar. We were created in 1981. Initially, just to lease forklifts for our Caterpillar dealers. Shortly thereafter, the Cat dealers said, "you know what? We really need your help financing bulldozers and scrapers, and all the other wonderful products that caterpillar makes." And so by 1985, we had expanded to provide financing solutions for the entire Cat product line. Since then, we've grown to about $35 billion in managed assets. And out of that $35 billion, about $2 billion of those assets are associated with our specific group called Cat Power finance, which is focused solely on providing financing solutions for the oil and gas and electric power industries.

Chris Berrie: Thanks for the background there, Mitch. So when a heavy equipment customer buys a dozer or a backhoe loader, Cat Financial finances the entire machine. How does it work in an oil and gas industry where a Cat engine, transmission and/ or pump is just part of a bigger package?

Mitch Lemasters: That's a great question, Chris, and believe it or not, it's one that we get asked by customers all the time, because when they find out that we actually do provide financing for engines, they usually think we're just going to provide a solution for the engine itself. But we learned a long time ago that that solution's not going to be very successful. It's kind of like financing an elevator in a building or a windshield on a car. We really have to provide a solution for the entire product. So in the oil and gas industry, that typically is going to be a product that is packaged or manufactured by a Caterpillar OEM or a third party OEM.

Chris Berrie: Thanks Mitch. And another question we get asked here is, do you get involved in financing new and used oil and gas packages?

Mitch Lemasters: Yeah, we provide solutions for new and used. I would say if we're providing a solution for a new product, our length of financing or our amortization might be a little bit longer versus a used engine or package, but yeah, we absolutely provide solutions for new used and rebuilt or remanufactured products from Caterpillar.

Chris Berrie: Fantastic. And most oil and gas operations already have, you know, well established relationships with banks or other lenders. Why should they consider bringing Cat Financial onboard as well?

Mitch Lemasters: Chris, that's another great question. And I think, and you know, with what's going on in today's time is a perfect example of why Caterpillar has a captive finance company. In times where companies are faced with, you know, it could be a disaster or just a very difficult time, the main thing they want to do is preserve their liquidity and their working capital with their existing bank. And so what we provide is an additional source of capital.

Chris Berrie: Okay, Mitch, let's say you convinced someone to find out more about Cat Financial solutions for oil and gas, or want to bring you on board for their next big project. What are their next steps?

Mitch Lemasters: I'd say the first step is for the customer to work with their local dealer account manager. All the Caterpillar dealers also have finance personnel that work with our internal personnel. But you know, usually these projects are a little bit more complicated and the dollar amounts are a little bit larger. And so I certainly make available for any discovery conference calls, which, you know, really the goal of that would be to find out more about the customer's project and what kind of financing solution are they looking for. Instead of guessing what they need, We can have a conversation about it and try to tailor something that is more appropriate and fits their needs.

Chris Berrie: If I'm a customer and somewhat unprepared for this discovery call, what info should I bring to this meeting?

Mitch Lemasters: I would say just reflect on, you know, your company's financial needs and what you would require. The other things I would say is what are you allowed to do? What do your main lenders allow you to do? The other thing that I might mention, we get involved in syndicated loans or what could also be called a club deal where it's a larger deal led by usually the customer's main bank and their bank is looking for other banks or financial institutions to share in the exposure or the risk. We participate in quite a few of those situations. And most banks like having Caterpillar as part of their lender group for a couple of reasons. One, we're not after the customer's deposit accounts or ancillary banking business. And then two, sometimes I think they also see us as a very flexible and good partner that really wants to support the customer and make sure that they're successful.

Chris Berrie: Thanks, Mitch. Can you give me an example where Cat Financial has played a key role in supporting an oil and gas deal?

Mitch Lemasters: Sure. Here recently with the crash in the oil market, we got a call from a U. S.- Based bank who had a foreign bank pull out of a deal because they were concerned about the oil and gas industry and the U. S. at the time. And they needed somebody to share in their exposure. And so, it was several million dollars, involved several large Cat engines, and we were able to get the deal approved and actually provide a long term leasing solution for the end user.

Chris Berrie: Hey, that's awesome. Well, Mitch, thanks again for your time today and for taking the listeners and myself through Cat Financial.

Mitch Lemasters: Chris, thank you very much. Again, I appreciate the opportunity to get the word out and if you need anything, don't hesitate. Please call.

Chris Berrie: Thanks, Mitch. For more information about Cat Financial, please visit cat.com/oilandgas and follow us on LinkedIn or Facebook at Cat Oil and Gas. Thanks again. And see you soon.