Are you running an oil and gas business? Is your company facing headwinds in the volatile global business environment? If so, you need to learn how to scale your operations.
The Global Oil and Gas Exploration and Production industry face numerous challenges today. Over the last five years, declining prices have cut into profit margins. This has caused industry revenue to decline an annualized 8.1% to $3.3 trillion up to 2019.
However, the oil industry remains one of the most powerful branches in the world economy. Recent studies estimate the oil and gas drilling sector currently makes up something between 2% and 3% of the global economy.
The United States is among the world’s largest producers of crude oil, accounting for 13 percent of the global share.
Investing in this lucrative industry is thus still a smart move. A 2018 industry report by Deloitte forecast global oil demand would breach a million barrels per day (MMbbl/d) for the first time.
At the same time, natural gas continued expanding its share of key markets. Chemicals in the industry also experienced strong revenue growth.
To survive the volatility and boost growth, it is important to learn how to scale your business.
Myriad Challenges Facing your Oil and Gas Business
From global political uncertainty to a depressed global economy, things keep getting tougher for oil and gas production businesses.
Other challenges your business faces include fragile geopolitics, rig decommissioning, cash flow problems, and fluctuating prices.
The rising costs of production, negative industry perceptions, and increase in clean energy production are also major hurdles you’ve to overcome.
Amidst these challenges, there are still opportunities for growth for your oil and gas company.
Below are some of the effective strategies you should embrace to scale your business.
Unlock your Cash Flow Bottlenecks
Cash flow is one of the biggest challenges facing businesses in the oil and gas exploration and production industry (E&P). You require massive capital injection at all stages of the supply chain.
Without adequate financial resources, it’s easy for your business to collapse. This is where a reliable oil and gas financial partner comes in handy.
You should work with an industry-specific financier to fund your operations. Your business needs cash for research, explorations, new technology, asset purchases, distribution, among other things.
Working with a dependable oil and gas financial partner helps overcome most of the industry challenges.
With adequate financing, you can scale production to meet targets and increase your revenues. These credit facilities also help you access the best drilling and production equipment and technology.
Leverage the Latest Technology
Technology revolutionizes industries, and in oil and gas production, there’re trends to watch out for all the time. Adopting new production methods, for instance, can cut costs, boost efficiency, and build your company’s reputation.
It’s also easier to comply with increasing environmental regulation with new technology.
Some of these new technologies include:
Cloud-based platforms: To safely host business applications, sub-surface, land, and production systems.
Adoption of IoT devices and edge computing: Rise of effective data technology using sophisticated sensors. Use of edge computing devices allows better connectivity.
Data and data technologies: Big data in the oil and gas production industry is crucial. New technologies such as business analytics, blockchain technology, and AI system have improved efficiency in data governance.
Asset management software: There are new tools to manage oil fields and assets held by oil companies. Such software improves management of resources, reduces risks and generates invaluable data for decision making.
‘Smart oilfield’ technology: There’s more automation of processes in the oil industry. This technology seeks to sync all systems and assets across your company’s field of operations. It makes monitoring easier and provides great insight into every aspect of your operations.
Leveraging Data Analytics
Data is one of the most important assets for any business today. If you’re after oil business expansion, you’ve to create a strategy founded on data.
Your oil company requires incisive insight into the state of the market at all times. More importantly, you need real-time data on the performance of your equipment and all systems in your organization.
It’s also important for your field managers to access real-time data for quick and fast decision making. In oil and gas production, delayed decisions can cost your business.
Similarly, wrong decisions can lead to devastation akin to the 2010 Deepwater Horizon oil spill. To avoid such accidents and keep your business running, you need a solid analytics platform.
You can partner with the best software providers to create a custom analytics tool for your business. The best software developers offer managed services and run these data tools remotely. They deliver real-time analytics reports for your team.
Such data helps you comply with the stringent regulations in the industry. Using this data also gives you a competitive edge.
Embrace Cost-cutting Strategies
In a large industry such as this, most business owners feel the urge to spend more in research, personnel, new equipment, among other things.
For a long time, oil companies have survived through constant expansion and pushing the boundaries. The high demand for oil across the globe has always served as a cushion for poor financial decisions.
Things have changed and today, you need to embrace a tough cost-cutting strategy. The falling revenues, stringent regulatory guidelines, rise in offshore production prices, competition for alternative energy and geopolitics necessitate a rethink in the industry.
If you want to survive in the oil and gas production industry, you’ve to adopt new cost-cutting ideas. The idea is to get more oil from the ground at a lower price per barrel.
Some of the cost-cutting ideas include improving horizontal drilling techniques, drilling longer wells with more frac stages and super fracking.
Other cost-cutting strategies include staff cuts, new project postponement, optimizing operations, supply-chain collaborations, and new technologies to boost efficiency.
Supply chains in the oil and gas industry are complex behemoths. A lot of money goes into the business of running supply chains. As companies focus on research exploration and production, they leave everything else to third parties.
Outsourcing equipment and services to multiple providers can complicate your operations. You’ll have to deal with multiple suppliers which calls for more capital injections to manage their accounts.
The idea of vertical integration has gained traction over the last few years. This is an arrangement where your business takes ownership of the supply chain. It reduces coordination costs.
Adopting New Revenue Models
It is important to explore new ways of unlocking cash flow issues for your oil and gas company. New revenue models proposed by oilfield services and equipment (OFSE) companies have emerged in the industry. These include participation in project financing and performance-based contracts.
These new revenue models offer your company flexibility during lean economic times. The OFSE companies offer your business a lifeline to continue operating in a volatile business environment.
You don’t have to set aside cash during such times. It is easier to access equipment and services through these innovative revenue models.
Your business will never stop exploration or production due to cash flow problems.
If you want access to oil and gas capital, it’s important to talk to a reliable financial partner in the industry. Look at the financing options available and ask for tailored financing from the provider.
Look at the frequently asked questions (FAQs) page on their website to get a better idea of the services offered. This is where they address different concerns from clients.
Mergers in the oil and gas production are on the rise and for a good reason. Consolidating similar businesses is one of the best ideas for expanding a business. It creates the synergy necessary to survive in this industry.
You should consider looking for partners in the supply chain and merge to optimize operations. It is also possible to consolidate operations with other oil and gas producers to increase your market reach.
Coming together helps scale your businesses and boosts your new brand. It is one of the most effective ways of building capacity in a capital-intensive industry.
You need a lot of resources to operate and this can limit your growth. Merging unlocks your potential and improves the chances of surviving the volatility common in this industry.
The oil and gas production industry can swing from boom to bust in a few months. In such an environment, you’ve to think forward to ensure your oil and gas business survives.
Start by identifying risks and weaknesses in your operations. Cash flow issues are the major drawback in this business. Unlocking your cash shortfalls should thus be a priority.
Once you identify your cash requirements, choose a reliable financial company with experience in the industry. An oil and gas financing partner offers tailored solutions to suit your unique business needs.
At EnRes Resources, we offer custom finance options for businesses in the oil and gas industry. Our mission is to finance independent producers and unlock their potential through flexible oil and gas financing solutions.
Our team will assess your oil and gas production infrastructure and operations. This helps us to tailor a financial package unique to your business.
With 25 years’ experience in the petroleum industry, we appreciate the importance of quick cash flow solutions. We don’t ask for personal guarantees and can complete the entire process in 30 days.
Contact us today for an oil and gas financial arrangement that will help you scale your business.