Cost Savings & Operations Assessment for a US Onshore E&P
An onshore E&P company with interests in several basins engaged Carnrite to conduct a cost savings assessment of the business after a financial restructuring. The company’s board sought an external perspective to identify cost savings opportunities across its holdings to assist the management team in accelerating more profitable operations.
Carnrite conducted a series of interviews across the organization to fully understand the culture, effectiveness, and productivity of the organization, as well as the relative maturity of key operating workflows and the support functions. Concurrently, Carnrite evaluated transaction-level detail for G&A expenses and lease operating statements to corroborate information gathered in the interviews, and synthesized the outcomes into a comprehensive summary of current-state operations and a set of pragmatic solutions to improve performance. Carnrite worked closely with the management team to achieve these results.
Key Results & Outcomes
- Developed a ground-up approach for organizational design and recommended a new organization structure, based on internal client employee costs and external peer benchmarking
- Identified improvement opportunities for back-office processes, and data and analytics management to encourage enhanced decision-making at an improved pace
- Identified specific field-level cost reduction opportunities unitizing a series of operational assessments for the client’s two largest operating areas – opportunities resulted from assessments of maintenance efficiency, well performance, productivity, utility usage, contract labor and overtime
- For the remaining operating units, Carnrite conducted a similar series of assessment on a reduced scale, in addition to assessing the operational and financial performance of a small midstream operation that was part of the business
Carnrite’s Unique Value Contribution
Carnrite’s participation in this project delivered significant value to our client. It helped the management team achieve two major breakthroughs: to start thinking differently about how to be a cost-leader in a new commodity price environment; and to challenge many old ways of thinking by way of the external, objective input from Carnrite Oilfield Service practice experts.
The zero-based organization development approach introduced by Carnrite to reset the organization size and structure enabled the company to focus on its core competencies. The streamlined organization was more effective and efficient than an organization resized through a top-down, marginal approach. The company had already done an excellent job pushing down responsibility for decision-making through the organization, especially at the field operator level. This dynamic resulted in best-in-class maintenance activities that were undertaken to maintain production. However, the operators did not have direct visibility of the cost of these decisions. Carnrite helped our client to become a unit-cost leader in its sector by developing a series of dashboards visible throughout the organization and connecting these to the cost management system in real time using an analytics platform.
Our client generated a 28.9x overall return on investment from engaging Carnrite.