Recent booms within the upstream sector, triggered by higher oil prices, have historically led E&P companies to focus on increasing production. This has led to reactive procurement for services that have directly impacted margins on the production rates. These services can be wide ranging; however, new developments in technology make operations more efficient and lead to efficiencies in the supply of services.
Attracting the right talent is a key factor on company performance, but sometimes in the rush for hitting production goals companies can lose focus on their total workforce management processes. Oftentimes, companies employ overqualified, high-salary individuals who will perform duties that a less-experienced individual is capable of. It is normal practice for companies to recruit people well-known to them, but do they often fall into the trap of overpaying for the roles and responsibilities being performed?
In a busy market, there is also increased exposure for companies when handling risk associated with managing third-party consultants. For example, companies must manage changes required by the U.S. Department of Labor regarding the correct classification of W2 consultants and independent consultants and closely monitor job classifications to determine which job functions should be entitled to overtime pay.
All of these complexities are often managed by third-party consulting companies, but the hiring companies can still be exposed to financial risk should there be a failing of due diligence from their suppliers.
It is becoming more important for companies to invest time to properly audit their suppliers through a thorough procurement process.
It may seem more practical to assume the third-party suppliers hold all the risk in supporting temporary labor, but is this really the case? Recent class action cases for unpaid overtime for miscategorized workers would suggest not.
An increase in labor demands creates a high-priority need of increasing the speed at which consultants are mobilized to a job site. However, before a consultant can commence work safety protocols, compliance steps and internal approvals are required. Compliance processes can include background checks, drug and alcohol tests, industry- specific tests, safety course certifications, information management system certifications, offshore evacuation training and many more. It can be challenging for consultants to stay on top of this documentation because each course certification can have various expiration dates. The use of technology can help flag expiring certifications that reduce the exposure of having consultants on a job site with expired documents.
With the increased attention on domestic oil production, more operations are taking place in remote locations. An onshore company can run multiple job sites over a large geographical region, which presents challenges in staying on top of third-party workers. It is not uncommon for an E&P company to be unaware how many contingent workers they have working for them. This presents a real challenge not only in ensuring standardized compliance practices, but it also presents issues in standardizing pricing with suppliers and not falling victim to higher pricing negotiations that solve short-term needs in the haze of busy production.
Suggestions of how to manage consultants in various geographical regions include the introduction of electronic time sheet records, which allows hiring managers to approve multiple time cards for consultants through one streamlined software platform. Additional advantages of introducing technology include a uniform invoicing process, real-time reporting capabilities that monitor spending on consulting services per location and the identification of all consultant workers supporting E&P activity.
The rig count fell for the past four months and production growth in the Permian Basin and other key shale basins have slowed as oil prices fell and many independent shale companies cut spending.
The winter storm that gripped Texas and much of the country over the past week forced the biggest ever weather-related shutdown in the Permian Basin, cutting 2 million to 4 million bbl/d from nationwide oil output.
Only the Permian Basin increased its production of both crude oil and associated gas in 2020, the EIA said, but these increases did not offset declines in other U.S. shale plays.