Unfortunately, many oil & gas companies have gone bust within the past few years, while many others are now looking to make sustainable cost reductions to enjoy long-term profitability. To succeed in the industry, read the four effective strategies oil and gas businesses can utilize to cut costs, adopt new revenue models and improve the equipment and services.
- Optimizing Operations
Many oil and gas companies have been left reeling from cost inflation, which has resulted in the price per barrel rising from 5% to 15% every year, which is determined by both the geography and service. For example, the cost of extraction per barrel has more than doubled in the North Sea.
As a result, many oil and gas companies have been forced to file for bankruptcy due to mounting debt. Thankfully, there are ways to reduce overheads by raising productions and lowers the cost per barrel. Oil and gas companies can do so by utilizing horizontal drilling techniques, and can create longer wells with additional fracking stages. Optimizing business operations could, therefore, be a strategic step for long-term profit and growth.
- Replace, Refurbish or Repair
It is important to keep overheads low when running a business. With oil and gas companies facing rising per barrel costs, it would be wise to look for ways to reduce expenditure whenever possible. When the industry was booming, companies might have thought nothing of changing faulty equipment for a new alternative. Yet, not only would this be a waste of perfectly good equipment, but it is a complete waste of money, too.
Rather than disposing of machinery, consult the experts who can source replacement parts, refurbish machinery or repair any problems. If needed, they can also source new parts, systems or accessories on your behalf, whether it is industrial brakes, oil rig equipment or crane runway products.
- Consolidation
Oil and gas companies with similar types of businesses should seriously consider a merger, as it could be the key to their survival in the industry. As oil prices begin to stabilize, you can expect to see the consolidation of numerous segments across the oil and gas supply sector. In fact, many companies have already chosen to merge with their direct rivals, and are each a fraction of their former size.
- New Technologies
New technologies are transforming many industries, especially the oil and gas industry. With companies trying to be more efficient than ever to reduce overheads, new technologies can be a smart investment. For example, logging while drilling is a new form of technology that enables businesses to generate data throughout the drilling phase.
Boosting operational efficiency could, therefore, speed up productivity, secure customers, and could inspire new revenue and business models. Yet, the sector is yet to fully embrace the potential of technology to power their businesses, which could provide a struggling business with a unique opportunity to transform its operations and profitability, and could flourish while other companies aim to catch-up.
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