Sustain Your Business During Oil Abundance
Since the decline in oil and natural gas prices since 2014, independent operators in the U.S. have struggled to find their footing. Thanks to the hydraulic fracturing technology that has opened up the doors to more-easily accessible shale oil, we’ve entered into an era of oil abundance. So how do you sustain your business when oil floods the market?
Ernst and Young ‘s recent report explains how operators can move with the market to protect themselves from a financial bottoming-out. We have no affiliation or ties to Ernst and Young, but I found the article interesting to see as a whole how the independent operators (our entire client base) is handling the rocky oil and gas climate today.
The three ideas for sustainability despite low commodity prices suggested were: operational excellence, aligned capital structure and building the right portfolio.
Operational Excellence
Low oil and gas prices affect everyone in the industry. Make your operations as agile as possible by looking at your office processes, systems and personnel. These three factors decide how fast you can make decisions, and what funds are needed to make your organization function.
Aligned Capital Structure
Manage how your cash flows and cover debt payments right now. To move forward into the future, operators will need to step away from mega-projects with high operational risks involved. Instead, focus on projects that require less capital and shorter payback periods to allow your company to move forward.
Building the Right Portfolio
Many operators are selling off assets in a larger scale to stay afloat. As more and more assets continue to enter the market, companies gain assets that will help them grow in the future and increase equity are the ones that will come ahead when the prices begin to rise once again.
Read the full article and it’s analysis.
4 Ways To Cut Costs During the Oil & Gas Downturn
With the price of oil below $40, everyone in the industry need to cut costs. Here are 4 quick ways to cut costs during the oil & gas downturn.
- Look at your credit card and bank statements to look for recurring charges that can be eliminated. You’ll be surprised by how many services or subscriptions you might have signed up for and forgotten. It might not seem like much but these charges add up quickly. Cancel all subscriptions and services you aren’t using or can do without.
- Cut back on company paid lunches and other special perks. You really don’t need to go out for lunch everday but you can if you want. Just don’t make the company pick up the tab. These meals can add up quickly to hundreds of dollars a month.
- Hold off on hiring new people until you find ways to justify and pay for them. Too often we hire because we think we see a need but don’t take into account what those wages will do to the bottom line. Will hiring increase efficiences and add to the bottom line? If so, go for it. Otherwise be hesitant to add overhead.
- Look at other high cost items you’re using that might have made economic sense during high prices, but now are a drain on cash. One of these could be your monthly software costs. If you’re using an Oil & Gas Accounting system that made sense during $80 oil but now isn’t giving you enough in return for it’s on-going maintenance costs, it might make sense to switch to a lower cost alternative that has the same functionality.
We’ve helped many companies switch away from their high cost oil & gas accounting software to SherWare. The benefits include lower yearly costs for maintenance and increased productivty for your current staff. This is a win/win because you can cut costs and avoid adding more wages!
Source: SherWare Blog