[Editor's note: A version of this story appears in the May 2020 edition of E&P. Subscribe to the magazine here.]
Wall Street, investors and stakeholders are shining a bright light on the energy industry’s negative cash flow problem. Virtually every independent oil and gas company needs to tighten operations to drive costs down—the question is where and how? In a world where elimination or tightening of multimillion-dollar drilling programs are the leading indicators of belt-tightening, an often overlooked area of opportunity that has been exploited by the best run companies is their back-office operations.
The oil and gas industry has learned to settle for running its operations on 30-year-old legacy technologies. The oil and gas back-office technology landscape has withered from underinvestment and lack of innovation. However, the need for software innovation increased in urgency following the 2015 industry downturn, resulting in a new wave of innovation aimed right at the industry’s No. 1 problem—driving efficiency and effectiveness in oil and gas companies. And that innovation is proving to be especially well-timed for the unprecedented challenges facing the industry today.
So how can the oil and gas industry unlock value that it didn’t know it could unlock or was unable to unlock with decrepit technologies? That’s a question the brightest minds are working to solve. The hunt is on to find all of the areas across the organization where operations can be tightened up and cost savings can be dropped to the bottom line. And the key is the keeper of the bottom line, the accounting systems, the processes it operates under and the staff that executes them. Unlocking the massive potential for operational efficiency and driving costs out of a company depend on the choice of its enterprise resource planning (ERP) software.
Costs are locked up in three areas of the accounting department: processing time, IT, and general and administrative (G&A) costs. Oil and gas companies have become accustomed to hours of processing and overnight runs for common processes like revenue, joint interest billing and allocations. However, by applying the same level of innovation to accounting as companies have to reservoir simulation and seismic processing, the industry can cut time off critical processes, reducing cycle times from hours and days to seconds and minutes.
Legacy ERP systems create vast inefficiencies across the board. Ironically, the number of people (functional and technical) required to manage the processes these systems are meant to be “automating” creeps up over time along with G&A costs.
The accounting back office also is plagued with IT sprawl, adding myriad infrastructure and support-related costs year over year as systems proliferate across energy organizations, leading to a natural inefficiency that happens when any system gets too big and muddled. The cloud offers a new level of elasticity in procuring computing power, ensuring the speed and storage that it needs are available when needed and go away (and off the balance sheet) when they are not.
W Energy Software is a fully integrated ERP tool built 100% on the cloud. The company’s upstream ERP suite also accelerates accounting cycle times by as much as 150 times faster than legacy technology, reduces G&A and IT costs, and enables producers to drop more revenue to their bottom line.
To thrive in today’s dynamic business and market environment, oil and gas companies must do more with the resources they already have. By empowering the back-office accounting workforce with the technology companies need to unleash their full potential, producers can create tangible business value, drive game-changing operational efficiency and uplift margins. Oil and gas companies should aim for these attainable goals. However, a company’s choice of ERP software may be holding it back.
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