The past 3 years have been brutal to the oilfield supply chain, from the havoc caused by COVID-19 to the war in Ukraine and massive inflationary pressure that sent consumables and equipment prices through the roof. Accenture estimates that these disruptions placed more than 20% of the energy sector’s CapEx growth plans at risk and inflated the lifting costs of a new well at least $15 per barrel.
Effective supply chain management (SCM) under such extreme conditions is critical but more akin to holding on to dear life while being tossed and turned on a raft in white water rapids. Under calmer conditions, SCM may appear less urgent, but still waters can hide many risks that threaten financial health and even regulatory compliance.
SCM pays for itself many times over by unlocking new efficiencies and cost savings through process and controls. Those energy companies who do it well see more revenue growth on average than their peers and can cut costs by 12% through supplier performance management. Add to these cost savings the revenue that is locked up in surplus and overstocked oilfield inventory.
With extensive knowledge gathered from hands-on experience optimizing the oilfield supply chains of our clients, Stonebridge SCM experts find that at least 5% of inventory is surplus, assets that decrease in value each day and create risks. Stonebridge’ Consulting’s SCM practice combines cost reduction and surplus sales opportunities to drive more free cash flow, enabling energy teams to redeploy capital and return more value to shareholders. Calculating the net present value of the assets and capital locked up in inefficient supply chain management, the decision to engage with an SCM leader like Stonebridge is even more urgent – the NPV math just makes sense.
Benefits of skillful SCM include:
- Continuously optimize CapEx and OpEx
- Make AFEs and LOE more predictable
- Identify variances to drive consistency
- Enforce contract terms and invoicing controls
- Increase spend visibility and optimize field costs
- Monetize surplus drilling materials
- Monetize surplus production equipment
For example, a leading Permian producer wanted to reduce capital expenses on new wells by 25%, ensure AFE actuals vs budgeted through consistent execution, and create cost and contract compliance controls. Stonebridge combined spend analysis, market intelligence, and SCM best practices to target cost reduction opportunities while a new RFP and invoicing process ensured lowest bid, spend visibility, execution, and pricing compliance. The producer exceeded its goal to reduce drilling and completion costs by $6M with a verified 35% CapEx reduction, providing consistent and repeatable results over multiple wells with KPIs to increase spend visibility.
Poor spend visibility, unenforced supplier contracts, underutilized technology, and even the types of equipment or materials sitting in your yards all inject unwanted risk into your supply chain. And the risks can extend into the energy back office as well where surplus inventory and inefficient SCM often thrive, but in unlikely places.
Consider an energy company’s digital oilfield supply chain. Many E&Ps hold more energy software and data licenses than they need or even know about. In a recent engagement, Stonebridge reduced an operator’s technology costs by 30% by auditing its digital ecosystem, rationalizing applications, and renegotiating licenses with its vendors. Digital supply chain management is even more crucial following a merger or acquisition where duplication of software and data licenses is almost a certainty.
Whether your team is in need of a physical or digital oilfield supply chain expert (or both), Stonebridge is best positioned to help you redeploy the capital that is trapped among inefficient processes and assets you don’t need. Because of our deep expertise and 100% energy focus, your team gains a proven playbook for best-in-class SCM, process accelerators, and reusable project IP to cut cycle times in half, getting your team to leaner operations and fully optimized supply chains that much faster.
Please reach out with any questions or to start a conversation on your SCM goals.