2018年-普华永道全球_Sustaining_the_gains_with_capital_efficiency_6页_986kb

Enhanced Profit Recovery Summary

Core Content

The document discusses the concept of capital efficiency in the oil and gas industry, emphasizing its importance in sustaining profitability amid market volatility and price fluctuations. It outlines how leading companies have shifted their capital investment strategies from focusing on reserve replacement and production volume growth to prioritizing capital efficiency in order to lower breakeven points and improve financial resilience.

Main Views

• Shift in Investment Strategy: The oil and gas industry has moved from traditional growth-focused capital strategies to more efficient ones, especially in the wake of significant price drops from 2014 to 2016. This shift is driven by the need to survive in a low-price environment and maintain profitability as prices recover.
• Capital Efficiency as a Key Driver: Capital efficiency is defined as the ability to select, deploy, and manage capital investments to maximize shareholder value. It is not a one-size-fits-all approach but must be tailored to each organization's strategy, asset mix, and risk appetite.
• Importance of Portfolio Management: To sustain capital efficiency, companies must engage in active portfolio management, demand management, and dynamic capital allocation. These practices help optimize capital use and ensure alignment with corporate strategy.
• Integration of Systems and Tools: Capital efficiency requires the integration of front- and back-office systems, as well as the use of predictive analytics and emerging technologies, to support bit-to-boardroom decision-making. This integration is essential for maintaining transparency and accuracy in capital allocation.
• Continuous Improvement and Benchmarking: Continuous improvement initiatives and external benchmarking are critical for identifying inefficiencies and improving performance. Internal and peer benchmarking helps organizations understand their capital spending effectiveness and identify areas for improvement.

Key Information

• Capital Efficiency Framework: A structured approach to managing capital investments includes:

  • Defining a clear corporate capital investment strategy.
  • Optimizing the portfolio to align with the strategy.
  • Developing internal processes and capabilities for project execution.
  • Establishing how value is measured.
  • Enabling technology that supports these initiatives.

• Twelve Elements of Capital Efficiency: These elements span the entire asset lifecycle, from strategy through execution. They include:

  • Capital investment strategy.
  • Portfolio optimization.
  • Project lifecycle management.
  • Value measurement.
  • Risk management.
  • Cost control.
  • Schedule management.
  • Quality and safety management.
  • Supplier and third-party cost visibility.
  • Integrated reporting and analysis.
  • Cross-functional collaboration.
  • Dynamic capital allocation.

• Data Granularity and Transparency: Achieving high capital efficiency requires sufficient granularity of data (cost, schedule, safety, quantity, quality) and integrated reporting and analysis tools. This ensures that capital allocation decisions are based on accurate real-time data, reducing subjectivity and improving decision-making.

• Measuring Capital Efficiency: While each organization may define capital efficiency differently, common frameworks such as the PwC capital efficiency framework help benchmark performance and establish a fit-for-purpose operating model. These frameworks provide both quantitative and qualitative measures to assess capital spending effectiveness.

• Sustaining Gains: To maintain the gains made during the downturn, companies must continue to focus on capital discipline, cost reduction, and schedule optimization. These efforts must be embedded into standard operating models and supported by processes and tools.

Challenges

• Market Volatility: The unpredictable nature of oil prices and market conditions requires strict capital allocation policies, frequent monitoring, and real-time reporting.
• Cross-Functional Collaboration: Capital efficiency is not owned by a single function and requires collaboration across departments to ensure alignment with strategic goals.
• Balancing Innovation and Discipline: Companies must balance the need for innovation with discipline to ensure that capital is used effectively and efficiently.

Conclusion

Capital efficiency is essential for oil and gas companies to sustain profitability and maximize shareholder value in an uncertain market. It requires a holistic approach, integration of systems, continuous improvement, and cross-functional collaboration. As the industry continues to evolve, companies that embrace capital efficiency will be better positioned to thrive in the "leaner for longer" environment.

Contact

• Anthony Caletka
  CP&I Energy Leader | Partner
  (347) 574-2285 | anthony.caletka@pwc.com

• Reid Morrison
  US Energy Advisory | Partner
  (713) 356-4132 | reid.morrison@pwc.com