20151201-Bain-Beyond_Cost_Cutting_The_Opportunity_for_Oilfield_Services_and_Equipment_Companies_8页_1mb

Summary of Oilfield Services and Equipment Company Response to Low Oil Prices

Industry Challenges

Oilfield services and equipment (OFSE) companies faced significant revenue declines due to low oil prices, with some segments experiencing up to a 20% revenue drop. Key issues included oversupply, pressure to reduce costs, and economic unviability of high-cost plays like deepwater and Arctic developments.

Company Strategies

Leaders are shifting from short-term cost-cutting to sustainable, long-term strategies. This includes optimizing portfolios, engineering cost reductions through just-in-time supply chains and value-engineering, and focusing on efficiency gains, such as in North American tight oil, where breakeven prices have fallen.

Strategic Imperatives

OFSE executives should pursue three strategic focuses:

• Short-term action: Reduce internal costs dramatically via better productivity and engineering.
• Medium-term action: Lower customer costs through collaborative innovation, modern technologies, and targeted acquisitions.
• Long-term action: Optimize portfolios by repositioning to lower-cost segments and exiting high-risk areas.

Market Outlook

The industry may face a prolonged downturn, with recovery contingent on efficiency-driven adaptation. Winners will emerge by integrating these changes, leveraging data analytics, and aligning incentives with customers and market conditions.

Conclusion

Companies that proactively adapt by combining cost efficiencies with strategic portfolio moves will be well-positioned for recovery during market volatility.