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For Oil & Gas Companies, the Time to Cut is Now

July 30th, 2010 | No Comments

The latest issue of the Oil & Gas Financial Journal offers some interesting insight into the near future of oil and gas spending. According to the magazine, which cites the HIS Herold 2010 Global Upstream Capital Spending Report, spending on exploration and production, excluding acquisitions, “is expected to rise 8% to $353 billion in 2010 among more than 110 of the largest publicly traded oil and gas companies.”

Although this is good news – and a vast improvement over last year’s 22% decline – the picture is far from rosy. The Deepwater Horizon disaster has put everything into question and oil and gas companies are bracing for an impending wave of new regulations and taxes. The article goes on to say that increased safety and regulatory guidelines will undoubtedly lead to higher operating costs.

These increases are expected to occur gradually, over an extended period of time. That means the time to develop your containment strategy is now. Oil & gas companies that start cutting costs now will have the flexibility and capital reserves to grow in an uncertain future.

It’s been said that good businesses only focus on the things they can change. In today’s oil & gas, it seems there’s more and more things that are simply out of our control. From the price of oil and consumer demand to government regulations and environmental disasters, oil and gas companies are at the mercy of many moving targets.

One of the few dials left that we do have control over is cost containment. How much unmanaged money is going out your door every day? How much inventory sitting unused in dusty warehouses across the country? How many budgets get overrun from poor planning and a lack of accountability? How many of your contracts are actually being honored by vendors?

Nobody was asking these questions when oil was over $150 a barrel. But now, oil & gas companies are finding out that it’s cut or die. But if we start getting answers to these questions now, we’ll be ready for the future, regardless of the climate.

Tehseen Ali Dahya
President & CEO
Verian Technologies