Every oil and gas company across the nation – the globe – will remember 2020 as the year that changed everything. Industry leaders began the year in a state of urgency, faced challenges that have been building for years, and finished it with more questions than there were at the start. In short, the past year has been a sorely needed wake-up call for the industry. It not only highlighted the fragility of certain models and mindsets, but also the need to shift focus and embrace new tactics and technologies.
A recently released, year-long analysis by Heidrick & Struggles identified some of the top issues the industry will face over the next decade: capital discipline (72%), energy transition (52%), balance sheet flexibility (40%), and environmental, social and governmental (ESG) compliance (39%). The study ultimately concluded that oil and gas leaders need to embrace a new mindset for their companies to survive and thrive.
“Countless CEOs and directors have told us that they are concerned whether they and their teams are prepared to meet the challenges of the next decade – to navigate the energy transition, to be best-in-class on ESG performance, to innovate and seize opportunities for growth,” says Les Csorba, Houston-based partner with Heidrick & Struggles.
“The oil and gas industry demands a new kind of leader, creating a unique opportunity for progressive, agile, and innovative leadership.”
Whether you are a new oil and gas entrepreneur or an established service provider, adopting a new mindset will enable your business to radically change today for a successful tomorrow. Our team here at Security Business Capital has put together these tips to help you get started:
Embrace New Technology
Directional drilling and hydraulic fracturing are perfect examples of how the adoption of new technologies can boost efficiency, increase yields and transform an entire market. However, when it comes to leveraging other advanced digital technologies, artificial intelligence, big data, analytics, etc. there is a lot of untapped potentials.
The oil and gas industry has been lagging behind other industries when it comes to reaping the full benefits of new digital skills. In truth, remaining competitive and successful has less to do with the technology itself and more to do with oil and gas leaders being open to thinking, how can we do things differently?
Unravel Cash Flow
One of the biggest challenges oil and gas companies face today is cash flow problems. In the past, many businesses in the industry massively outspent cash flow in order to grow at a faster pace. Many oil and gas companies have recently begun embracing the concept of capital discipline and the need for free cash flow (FCF) generation. While the unforeseen challenges of 2020 have delayed the impact of these positive cash flow changes, this shift will likely be evident in future reports.
To thrive going forward, oil and gas companies will need to maintain this newer mindset focused on allocating capital wisely and utilizing industry-specific lenders who help increase and stabilize cash flow.
Adopt Cost-Cutting Tactics
Along with unraveling cash flow, industry experts predict that the next decade will also require further cost-cutting tactics. Oil and gas companies that have been the king of cash flow accomplished this through significant belt-tightening and cuts to capital spending. Cost-cutting endeavors might include less staff, new technology, and optimizing business operations.
According to the Heidrick & Struggles study, rising to the challenge will also involve investment in “a different frontier basin closer to home: the discovery, exploration, and production of a new breed of leadership.” A new mindset focused on the relentless pursuit of improving efficiencies across the board to lower costs.
Reimagine Roles and Models
For many years, oil and gas companies have successfully built their business models on a foundation of assets they own and resources they can pull from the ground. However, the expectations of today’s customers are on the rise, and oil and gas leaders are taking notice.
Optimizing supplies and efficiency through advancements in technologies has long been the sole focus. Now, they are realizing they need to shift their mindset and become much more society- and customer-focused. The future will be about identifying the most promising customers, optimizing the buying journey, delivering solutions that meet consumers’ needs, and addressing societal concerns.
Security Business Capital Invoice Factoring Services
While the world will be using oil and gas for decades to come, the oil and gas companies that thrive will be the ones that embrace new ways of thinking to meet the challenges of our time. Is your oil and gas company one of the many working hard to improve cash flow and manage these uncertain times the industry faces?
Are you pushing your business to its limits and experiencing tightened access to capital? If so, consider the many benefits of flexible, alternative funding options like invoice factoring.
Oilfield factoring allows oil and gas companies to use their unpaid invoices to generate cash in as little as 24 hours – without adding a burden of debt. Because the oilfield industry has its own unique set of challenges, billing processes and cycles, terminology, and practices it is critical that you choose a factor that understands your needs. Located in the heart of the Permian Basin, Security Business Capital has built a dedicated team of individuals with years of expertise in providing oil and gas companies flexible cash flow solutions.