Photo: Michael Ciaglo, Staff / Houston Chronicle
The struggling oilfield service sector can earn $20 billion more in annual revenue, if companies make five changes to adapt to the new $50 per barrel market reality, a new report from Deloitte says.
Looking at the business models and financial performance of 70 oilfield service companies around the world, analysts with Deloitte have released a new report entitled, “Down But Not Out: Transforming Oilfield Services.”
Overseeing the consulting firm’s U.S. oil, gas and chemicals sector, Deloitte Vice Chairman Duane Dickson co-wrote the report, which listed dumping non-core business lines, improving margins on core products and services and embracing digital technology among the ways to improve earnings.
“This is not expected to be an easy lift,” Dickson wrote. “Many oilfield service companies rely on the same business models that worked for $100 plus per barrel of oil, which are stifling innovation and efficiency today.”
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With the service sector still reeling from July 2014 and Oct. 2018 crude oil price crashes, Deloitte reported that the 70 service companies in the study could earn an additional $20 billion in annual revenue by adjusting their asset portfolios, restructuring their pricing to improve margins, redesigning business models around their core businesses, breaking down silos within their organizations and expanding their digital products and services.
The oilfield service sector is broad with some companies specializing in services such as hydraulic fracturing while others offer services such as engineering, procurement and construction. Under their current business models, most oilfield service companies are hoping that volume and sales can make up for low prices.
“Doing more with less—or perhaps more accurately in many cases, doing more for less—is negatively impacting balance sheets,” Dickson wrote.
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Founded in 1845 and headquartered in London, Deloitte is a global accounting and consulting firm.
With more than 312,000 employees around the world, the company reported $43.2 billion of annual revenue in fiscal year 2018.
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