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Upstream Operators Seek to Weather Unprecedented Times, Balance Cost Cutting with Operational Improvements

March 25, 2020

Strategic Approach Needed to Survive Short-Term Challenges and Achieve Long-Term Sustainability

While these are clearly uncharted and extremely challenging times, we are reminded that the energy industry remains cyclical in nature. Oil supply and demand market forces and geopolitics have always comingled to drive boom and bust cycles. Now, with the COVID19 outbreak and OPEC-Russia price war combining to decimate the market, driving crude to unimaginable lows and inflicting economic pain of unprecedent proportion on the industry, what are operators to do?

To survive the current downturn, operators understandably look to cost cutting to maintain operational cash flow. While cost cutting is needed, there is also the need and opportunity to look more closely at operations and make cost cutting count for both the immediate business environment and prepare for the return to a level of normalcy. Intelligent cost cutting is sought after, though often difficult to achieve. Such cost cutting benefits from data and deep insight.

To help clients in these difficult times, Solomon can employ its data-driven cost optimization strategy service to help make confident decisions quickly and effectively. With a quick and short engagement, in as little as 1 week, our experts can assess and analyze your operations and assets and provide you advice on how to shape your 2020 budget and beyond to achieve cost efficiency and cost competitive performance.

Solomon’s years of experience working through previous boom-bust cycles provides insight to know which cost management strategies are sustainable. We not only can help customers control and cut costs with a typical return on investment of 100:1 but provide insight without disrupting operations or requiring a timely, expensive engagement.

Experience, Data, and Insight Identifies Opportunities for Upstream Companies to Make Prudent Budget Choices 

 Solomon’s three-step cost optimization strategy service is fast and efficient (refer to Figure 1). An operator simply needs to provide data on the technical configuration and financial information of assets, target production and budgets, and their current overall budget and latest financial accounts for 2019. Solomon will analyze the data to create a proposal for budget estimates on surface repair and maintenance, helicopter and boat logistics, personnel costs, chemicals, well service, and field general administrative and operational corporate costs based on empirical data.

Marginal Opex

                               Figure 1. Solomon Cost Optimization Strategy Service

The deliverable includes a detailed report describing the likely gaps and impact of the proposed budget supported by key performance indicators to help your team make prudent and necessary choices. Results can typically be delivered in as short as 7 business days from the receipt of data.

Regardless of the market environment, cost efficiency is always a robust strategy. In growth periods, it means greater profits. During a downturn, it could mean survival.

Contact us today to learn more about our data-driven decision support solutions.