HOUSTON—Lower commodity prices have forced oil and gas companies to focus on the basics and meet fundamental needs, according to panelists who spoke at an energy briefing on Oct. 14.

Ten years ago, when the price for a barrel of oil was $100, people couldn’t go wrong by investing in an industry that returned 15% to 25% on average, sometimes higher, said Natalya Brooks, vice president, head of strategy and portfolio, for Statoil. But the cost structure has changed significantly, partly by the complexity of the projects undertaken. She added that three years ago the typical breakeven was $100 for some areas.

But “we cannot be in survival mode when prices are $100 a barrel. What are we going to do when prices are suddenly $50 to $60 per barrel or lower?” she asked. “We have to go to the basics.”

That could mean pursuing simpler projects instead of more complex ones, deferring onshore projects for offshore ones and becoming more flexible, Brooks said. This involves more planning and at times thinking in terms of value instead of volume, and determining what it will take for long-term survival. “The questions that we are asking in this profession are a lot more diverse than before.”

Her words during the BMI Research briefing came as the oil and gas industry continued to endure lower commodity prices, the result of a supply-demand imbalance that has caused companies to cut back spending, reduce drilling activity and seek out technologies to become more efficient.

But the fundamental needs of E&Ps have not changed although today’s market conditions may have caused priorities to shift, according to Claude Durocher, vice president of marketing for Weatherford International. He identified five fundamental necessities: minimizing drilling and completion costs, minimizing and mitigating operational risks, maximizing production, maximizing recovery and discovering and maximizing reserves.

“Clearly minimizing costs has risen up there, but the reserves picture has come down dramatically,” Durocher said, pointing out continuity in the fundamental needs, but shifted priorities.

As the sector moves further into the downturn, coping mechanisms have shifted from trimming visible excess fat by cutting back operations and postponing expansion plans to finding more structural ways to improve efficiency to realize cost savings. Service companies are being called upon to help operators improve techniques, tap new technology and lower costs for their services and products. And some service companies have obliged despite their own economic struggles.

By some estimates operators have averaged about 20% in cost savings from service companies, said Marina Petroleka, head of energy and infrastructure research for BMI Research and panel moderator. She asked how much lower can oilfield service companies go and whether these types of reductions are sustainable.

Being cautious not to speak for the entire industry, Durocher said that there is still tremendous opportunity for productivity and efficiency gains whether it is in the area of drilling and completing wells, rig productivity or improving interfaces between silos.

However, Durocher said he thinks the sector is nearing the end of upfront total reductions in product and service prices. “It’s going to have to come from better application technologies but also looking for the efficiencies,” he said of savings.

In January, when oil prices fell to some of their lowest points of the year, top executives for service companies spoke to the need for R&D. BMI highlighted comments from Baker Hughes Inc. and Schlumberger.

“We must adapt to a new reality of sustained lower commodity prices. A major element in this new reality will be technology,” Baker Hughes CEO Martin Craighead said in January. “And to that end, we are continuing our investment in fundamental research and product development because our customers’ need for innovative new products is more critical than ever before.”

Schlumberger CEO Paal Kibsgaard spoke about how the company is helping its customers find ways to generate savings, while the company progresses toward its goal of reducing nonproductive time, doubling asset utilization and lowering support costs. During its latest earnings call, Kibsgaard said customers are “more and more starting to buy into the fact that we have technologies and work flows that can create more value.”

A message that Weatherford is getting from its customers is a request to focus on innovation to improve their core business—such as drilling optimization and improving field performance—versus the frontiers, Durocher said, noting well abandonment is another area of interest.

In the past, complacency was among the barriers to companies embracing innovative technology, he added. But some companies have changed their attitude.

“Today we’re seeing a lot more openness to trying new things and experimenting,” he said, noting customers have more confidence, understand the range of potential outcomes and realizes risks can be managed. “That is helping a lot.”

In addition to new ways of thinking, the downturn has also brought opportunities. But those opportunities must be cost-effective, Brooks said.

“For a lot of businesses, especially the margin-driven business like U.S. onshore, for example, where every penny counts, you have to be able to account for the cost of acquisition if you want to grow,” she added. “So an opportunity to acquire something at a lower price will be able to help you move forward.”

Statoil, one of the world’s biggest deepwater operators, is still investing money in the U.S. The company has reduced its exploration budget but its expenses are steady and exploration continues with international focus on the U.S., Brazil, Angola and Canada, she said.

Velda Addison can be reached at vaddison@hartenergy.com.