Basic Energy Services Inc. implemented changes to its organizational structure on May 27 that reduced its number of operating regions in the U.S. as the oilfield service provider continues its fight to preserve liquidity.
Similar to its peers in the service sector, Basic has made moves over the past several months to protect its balance sheet as oil and gas operators slam on the brakes on activity to survive historic drops in oil prices.
The Fort Worth, Texas-based company has already announced furloughs and headcount reductions in response to the market volatility that it estimated will result in $20 million cost savings. The operational consolidation announced May 27 is expected to tack on another $20 million of additional cost savings, according to Keith Schilling, Basic’s president and CEO.
“Given the extraordinary challenges facing our industry, we continue to act quickly and decisively to improve our operational structure, with a goal of reducing G&A materially as a percent of revenue,” Schilling said in a statement. “We believe this right-sizing of our company structure will afford Basic the benefits of scale and preservation of liquidity that will allow us to reinforce our commitment to our customers as a leading production services company in the U.S. and industry consolidator of choice.”
Schilling added that the $17 million of targeted synergies from Basic’s recent acquisition of C&J Well Services should be fully realized by June 30.
The reorganization and consolidation of Basic’s operating structure reduces the number of operating regions from five—previously Permian Basin, Central, Rocky Mountains, California and Agua Libre Midstream—to three.
Basic said the streamlined structure will operate on a “hub-and-spoke model” and comprise:
- Central, consisting of operations in the Permian Basin, Gulf Coast, Louisiana, North Texas and Oklahoma;
- Western, consisting of operations in California and the Rocky Mountains; and
- Agua Libre, which is unaffected by this reorganization.
In conjunction, Basic also made the following personnel changes:
- Adam Hurley, vice president and chief integration officer, is promoted to executive vice president of operations and will lead the three regions and four PSLs;
- Jim Newman, senior vice president of region operations, is named senior vice president of Agua Libre Midstream;
- Brandon McGuire, vice president of Permian, is named senior vice president of the central region; and
- Jack Renshaw will remain senior vice president of the western region, overseeing the same geography but with a reduced cost structure.
Additionally, Basic expects its new operating structure to allow for the removal of a layer of general and administrative costs by removing yard-level P&Ls, increasing operating leverage and flexibility through the business cycle, according to the company release.
Basic provide wellsite services in major U.S. onshore oil-producing regions with a significant presence in the Permian Basin, Powder River Basin and the Bakken, Eagle Ford, and Denver-Julesburg shales. In total, the company provides services to a diverse group of over 2,000 oil and gas companies.
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