The energy industry is very cyclical and, while companies should take advantage of economic ups and market changes that give them an edge, it is imperative to keep in mind that a downturn will follow. It is easy to focus on growth without having a Plan B, which causes concern as companies depend heavily on commodity prices and market factors that fall outside their realm of control.
During the most recent downturn of 2020, we have been in the trenches alongside oil and gas leaders as they scramble to stay profitable. While production scales back, highly successful and industry-leading operators are altering their strategies and shifting their mindset with a determination to crush costs, streamline operations and re-evaluate their technology landscape.
Our consulting and back office/IT outsourcing firms, EAG Services and EAG 1Source, were founded on the premise of alleviating unique business challenges upstream and midstream oil and gas companies inevitably face. We’ve been in the business for 17+ years and have served as a “source of relief” to our clients, weathering the highs and lows of multiple economic downturns, transforming businesses to thrive after bankruptcy, and effectively collaborating with leadership to maximize human capital, all while working within parameters in respect to life’s most precious commodity – time.
We know every corner of the oil and gas business through firsthand exposure, examining hundreds of unique business cases and various business structures during distinct periods of the economic cycle, in addition to gaining deep knowledge of industry-leading systems and best practices. As we help more clients reach their goals, our team observes and reflects on the key factors that drive the most favorable outcomes. In its simplest form, having the right technology, processes and people in place contribute to the highest levels of long-term success, despite unpromising industry changes.
It is a common fear that, in the midst of a downturn, investing in technology uses company money frivolously, could be extremely time-consuming to implement, and comes with a significant learning curve, resulting in additional stress on an already struggling organization. Although these fears are valid, they can cause industry leaders to shy away from adopting new technology (or postpone until later) and instead focus on short-term, survival-mode fixes. However, EAG challenges this line of thinking, along with addressing the common concerns associated with adopting technology. As industry leaders and experts, EAG encourages companies to lean-in to technology so that they can survive any industry change and position themselves for long-term success.
Common Concern #1: Technology is Too Expensive
It only seems natural that a company’s first inclination during an economic downturn is to stop spending completely. While there is a dire need to shrink spending, playing it too safe can end up costing companies more in the long run. The secret to survival is streamlining operations with better technology that offers automation and integration so that precious time is channeled toward more productive activities.
Oftentimes, employees within oil and gas companies do not have the expertise or bandwidth to diagnose all the operational pain areas and, even if they do, chances are they do not consider all the implications and risks associated with potential outcomes. Instead of being focused on their roles, they end up wasting valuable time assessing, researching and planning.
Companies need a third-party to deeply evaluate their current operations, technology landscape, organizational structure, long-term goals and budget, considering all moving parts, and then offering a solution that provides the best fit. The right solutions recommended in a fraction of the time can save companies thousands of dollars up front, and once the system(s) is implemented, the technology will significantly improve operations with automation, integration, data accuracy and consistency.
Common Concern #2: Implementing New Technology Takes Too Long
Historically in the oil and gas industry, completing software implementations and integrations was like pulling teeth. However, we are now living in a time where a slew of resources is available to provide support and expertise from project start to post-implementation support. Oil and gas leaders should select resources that have a proven track record of delivering successful implementations and integrations over several years (and during various economic cycles) that have both the technical and functional knowledge needed to extract data from legacy systems (despite the form, e.g. spreadsheets, access databases, etc.), cleanse the data, and seamlessly convert it to new systems.
Additionally, prior to beginning a new project, leaders must understand the project plans in detail with outlined responsibilities of each party. An important Key Performance Indicator (KPI) in measuring success is how well time, which becomes even more scarce during an economic downturn, is being managed. Teams must commit to a timeline and go-live date with daily status updates showing tangible progress and ensuring milestones are being met.
With the right plan and partner, employees in oil and gas companies only need to contribute a fraction of their time to project activities versus having to dedicate hours every week with the risk of not finding the right solution, selecting the wrong vendor or not addressing every aspect of their business leaving gaps in their long-term plans and goals. This will eventually cause greater work and additional spending in the future. Although there is some upfront cost required in a partnership, the cost of inaction is greater than the cost of change.
Common Concern #3: There is a High Learning Curve Associated with Adopting New Technology
It is rather difficult to change the behavior and habits of one person in an organization, so envisioning an entire organizational change in a short period of time seems like a large feat. Oil and gas leaders must be aware of this phenomenon and skillfully analyze and take personal interest in the entire organizational structure, zooming into what a “day in the life” looks like for their employees.
In the initial phases of a software implementation project, all current business processes should be mapped out as the “current state” and then, as the teams discover additional pain areas, desired “future state” processes should be outlined. Once legacy data is migrated to the new selected system(s), employees should participate in User Acceptance Testing (UAT) which will allow them to get their hands into the new system(s) and validate that their data is accurately displayed.
Companies also should take advantage of vendor demonstrations offered by software companies, which give employees the opportunity to ask questions and collaborate with other members of their organization well before the projected go-live date. Employees and stakeholders should also ask for “staging” access to the system(s), giving them plenty of time to become familiar and test before go-live. This strategic approach in engaging employees at every point of the implementation project is key in reducing the learning curve as they will become naturally proficient in using the system(s) by go-live.
Proactive not Reactive
EAG Services and EAG 1Source guide oil and gas leaders to take a proactive rather than a reactive approach to industry changes by leveraging technology and industry best-practices. By leaning-in to technology, companies benefit in two-fold by cutting costs while becoming more resilient during a downturn and positioning their companies for scalability and future success.
Elizabeth A. Gerbel founded EAG Services in 2003 with a vision to establish a unique consulting organization, one with deep industry knowledge to effectively partner with oil and gas clients and provide superior and cost-effective services.
Founder and current chief executive officer of EAG Services and EAG 1Source (a full-service IT and business process outsourcing firm), she is responsible not only for the company’s strategic leadership and vision, but also for providing guidance, direction and expertise to clients and team members.
Gerbel has over twenty years of ERP, land management, production management, and custom IT solution design experience working with Fortune 500 and mid-size E&P independents. She often acts as a thought leader on EAG’s engagements assisting with innovation strategy, delivering presentations on technology trends, and keeping abreast of innovations to support client initiatives.
Under Gerbel’s direction, EAG has grown to become the trusted, independent business and technology solutions source for the energy industry.
Oil and gas operations are commonly found in remote locations far from company headquarters. Now, it's possible to monitor pump operations, collate and analyze seismic data, and track employees around the world from almost anywhere. Whether employees are in the office or in the field, the internet and related applications enable a greater multidirectional flow of information – and control – than ever before.