Oil and gas companies are in a competitive field. To continue to grow and stay ahead of their competitors, they often need to find ways to reduce expenses. Reducing expenses allows them to grow their profit margins, which they can then invest in methods that will grow the business. If you’re in the oil and gas industry, below are some simple strategies you can explore to help reduce your expenses.
Limit Pump Downtime
One of the first things oil and gas companies should look to do is reduce downtime from their pumps. The more resources that a company can extract, the more revenue it can generate. At the same time, when a pump experiences downtime, it costs money to repair the issue and get the pump back online. Therefore, if they can limit the amount of downtime from their pumps, they’ll increase revenue and cut expenses.
There are several ways that companies can look to limit downtime. For example, an ESP oil & gas company might instill a monitoring system on their electric pump that alerts them when there is a drop in production. They can then investigate the issue and perform maintenance right away, rather than waiting for the pump to break, which would result in increased downtime. Every oil and gas company should make it a top priority to have their pumps running as often as possible.
Automate More Processes
Another way to reduce expenses is through automation. Automation is when you use technology to complete a task that you would otherwise have to do normally. This can free up time or allow you to work with a smaller team, both of which help to cut expenses.
Practically every business can benefit from some automation, whether it’s automating email replies or automating part of the manufacturing process. For oil and gas companies, there are a number of things that they can look to explore. This includes business-side activities like payroll or marketing messages, along with production-side activities like pump monitoring. Think about which tasks within your company take the most time, then explore possible ways to automate that process to cut expenses.
Negotiate Contracts Based on Performance
Oil and gas companies commonly work with vendors and contractors to operate. They may work with pump vendors to rent the pumps they need or contractors to perform maintenance on these pumps. When working with contractors, try to create a payment structure that’s based in part on performance.
For example, you can negotiate with a pump vendor a contract that pays them more if the pump lasts longer than average. This encourages the vendor to provide you with the best possible products and services, as they now have a financial incentive for your success. By negotiating contracts based on performance, you can reduce the amount of money you spend on sub-pay performances throughout the business.
Offer Employees Telecommuting
One strategy that many businesses are using, not just oil and gas companies, is to offer employees the option of telecommuting. Telecommuting allows your employees to work from home, which many of them would prefer. If enough people work from home, you can lower many expenses associated with running a physical office location. For instance, you may be able to downsize to a smaller location or only open your office on certain days of the week, reducing your utility bill. Transitioning to telecommuting takes some effort but it may result in lower costs and happier employees, making it a worthwhile investment.
Invest in Research and Analytics
Finally, to cut expenses in the long term, you often have to spend money in the short term. Two areas you should consider investing money are in research and analytics. By investing in research, you can learn about technological innovations related to oil and gas extraction. Implementing these innovations within your business may then allow you to cut costs in the future.
The other area to invest money is analytics. Analytics is the collection and analysis of data within your organization. Through analytics, you can learn things like where and when you should drill for optimal efficiency. The more data you have, the smarter decisions you can make, which will ultimately lead to cutting costs in the best possible ways.
Reduce Costs Without Sacrificing Quality
Just because you’re cutting costs doesn’t mean you have to negatively impact the performance of your business. There are many ways to cut costs that will actually make your business more efficient and help you generate more profits. We hope the simple suggestions above will help get you started and that you’ll be able to find some cost-cutting methods that work for your organization.
