Current Oil Market Demands
“The upward trend in crude oil prices is stimulating demand in the oilfield services sector,” explains Opportune Partner and Oilfield Services (OFS) Sector Lead Dean Price. “More specifically, rising oil prices have accelerated drilling activity in the upstream sector, leading to higher demand for drilling and completions services. As demand for services is increasing, M&A activity is increasing as well.”
Many more oil and gas industry experts agree. Last week, Forbes energy contributor Claire Poole proclaimed that “the focus of M&A activity seems to be shifting to the oilfield services sector.” So, how can private equity (PE) firms capitalize on their investments in these OFS portfolio companies?
The Value of Shared Services for Private Equity Oilfield Services
Based on research by Opportune’s oil and gas industry experts, a new whitepaper reveals why a shared services model for private equity (PE) firms could deliver a standard, best practice set of core services across similar OFS portfolio companies. The innovative model provides the PE firm greater control over operations and consistent performance management.
Shared services provide economies of scale and lower service costs by leveraging best practices, technologies and capabilities while meeting business needs. In addition to a significant reduction in costs, a shared services model would allow individual OFS companies to focus their time and attention on adapting products, services and capabilities in the rapidly changing market and position them to compete profitably in their respective markets.
The value of shared services is both economic and strategic, providing:
- 20-40% cost reduction, depending on the breadth of the shared services
- 30-40% reduction in capital investment of technology and infrastructure
- Scalability during growth periods as additional portfolio companies are acquired with relatively low incremental costs