I’ve always heard that you never know how strong you are until you’re faced with adversity. If that’s the case, companies in the oil and gas industry, as well as businesses that provide services to them, have had plenty of opportunities to demonstrate their strength lately. Time and time again the oil and gas industry has been faced with serious challenges and has always emerged stronger and more competitive.
I’m sure you’ve been keeping a close eye on the daily developments in the industry – the price of a barrel of crude oil, in particular. But it’s also helpful, I think, to take the 30,000-foot view from time to time, and examine the industry at the macro level. With a slightly different perspective, two major trends appear, and from those trends come suggestions for using this slightly slower period to strengthen your ability to respond to the challenge of the next boom market.
Trend #1 – Revenue Volatility
The world is watching the price of crude oil and wondering if it has hit bottom, but the consequences are being and will be felt here at home in the following ways:
Trend #2 – Increasing Regulation and Evolving Policy
Regulation in the U.S. continues to play a major role in the oil and gas industry. Here are three of the top consequences of this regulatory environment:
The oil and gas field services industry has a low level of market share concentration, with the four largest operators accounting for less than 30 percent of industry revenue. With such a diffuse market, businesses have a relatively easy entry into the field. Staying there, however, is more difficult because of fierce competition.
The good news is that the price of oil is forecasted to increase at a steady clip during the next three years, and although the market is down, companies have the ability to prepare for the future. Players in these service markets win when they anticipate their customers’ needs and position themselves to react quickly as the market improves. Some opportunities to consider are:
Opportunity #1 – Competitive Advantage through Differentiation
Differentiation is key to winning new business in this highly competitive market. What makes your company and its services the best choice for your customers?
Opportunity #2 – Strengthening Your People
Opportunity #3 – Upgrading Technology and Processes
Conclusion
The good news is that, based on historical evidence, we will see brighter days ahead. While you wait out this slower time period, housekeeping can be done to position yourself for maximum benefit when the prices and demand start to soar. Now is the best time possible to plan for the future so that when the time comes, you can act quickly and intelligently.
The HORNE PMM team is available to help. This is the first blog dedicated to the energy industry, and we’ll share our perspective and best practices to help you prosper. Of course if you need anything from a short consultation to a in-depth analysis, just give us a call.
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