Your firm has experienced a few good months recently. Maybe you’ve successfully acquired additional wells, finally have a smooth land administration process or efficient transportation strategies. Yet – when viewing your most recent quarterly reports, you notice the margins appear tighter than forecasted – thanks to inadequate controls on your operating expenses.
Businesses spend lots of money in many different ways. From paying employee salaries and benefits to creating an actual product and everything in between, funds constantly flow in and out.
Oil and gas companies must contend with such concerns more than your average business. Not only can margins depend upon whether you’re a production or services company, but your industry operates on a global level, which introduces even more volatility.
Luckily, you have control over several critical cost centers, all of which can help you reduce your spending. Commonly abbreviated as OPEX, your operating expenses include:
Often thought of as back-office processes, these expenditures collectively concern the day-to-day costs of running your company.
It’s important to understand that OPEX does not include the costs of physical assets. Your actual equipment and tangible resources are known as capital expenses or CAPEX.
The difference between them lies in their names:
Ultimately, successful businesses learn how to strike a keen balance between the two that keeps everyone happy, motivated, and in fine working form. It starts with finding every opportunity to lower OPEX.
This suggestion might sound like we’re recommending that you spend money. And we are! But we also believe that making investments in quality technology will lower your costs in the long run. Specifically, the right tools will help you reduce human error by streamlining manual operations, such as:
The more rudimentary work you can take off your employees’ hands and give to computers, the more time they will have for deeper analysis and application.
Even before the COVID-19 pandemic changed the course of the modern workplace, many employers had started encouraging some personnel to work from home. Even the oil and gas industry made vital adjustments to its collective work habits by adopting video technology, digital file-sharing, and cloud computing.
Shifting more of your staff to a semi-permanent work from home arrangement lowers your OPEX because you can reduce your office space needs. Lowering your monthly rent payments means you have available funds to invest in the technology we mentioned earlier.
While “going green” might feel like a trendy move for any office environment, it helps the earth and offers several ways to reduce your expenses.
You might like the third-party companies you’ve worked with for several years, but you also might have seen their prices increase. While you can negotiate lower prices in exchange for a new contract, you can also pursue different relationships. Such options include:
Your search for new vendors could even unearth improved services you might not have experienced by staying with the old ones.
One of the more overlooked aspects of cost reduction involves employee care. Much like one of your customers, it’s cheaper to invest in a current employee and retain them than it is to search for a new one.
Your people contribute directly to the health of the company, so they deserve your care and support. Active and engaged employees will do what’s best for the company, which means they will want to help you lower costs while increasing growth.
By investing in some of the tips mentioned above — including technology to improve their work and benefits to make them feel appreciated — you can lower your OPEX by providing an environment where your people can succeed.
Now, we can hear you say, “What you’re proposing sounds much more complex than we pictured. We’re an oil and gas company, not a human resources firm.”
That’s an understandable response. Most businesses can’t do all of these things at once. They rightly invest most of their energy and resources into the core goods and services their customers need. Thankfully, an answer to your problems already exists: outsourcing.
By partnering with a comprehensive third-party outsourcing company, you will work with experts who can do that work for you. Typically for the price of a single in-house employee, you gain access to an entire team of experts who help you with all of your OPEX reduction projects.
As a leader in both information technology and back-office outsourcing for the oil and gas industry, EAG stands ready to assist you with improving your essential business processes. We put our expertise to work for you so that you can take care of your core business functions without distraction.