First, the natural state of the oil and gas industry is best viewed as its own ecosystem comprised of three primary areas: upstream, downstream, and midstream. Each one of them has their own unique set of challenges during this current economic climate. The basic problem is that of demand, price (sales), and cost (expense). The market hates uncertainty and the current situation is definitely one of uncertainty. Each area of the ecosystem feeds the other in that price in one area becomes cost to the others.

Given the volatility in the market, the barrel of crude slowly climbing after a $100 free fall, and the difficulty in being able to forecast accurately due to the lack of a consistent demand, cost and price, I would recommend looking into any technology that reduces capital requirements, operating expenses, and/or frees up resources in a very short timeframe. I would suggest that a 90 to 180 day return on investment is appropriate. The applied technology needs to make a significant impact on the bottom line or improvement in company operations in a very short amount of time. Companies are not willing to commit the capital on a long term payback at the moment.

However, if the company does have the capital to spend and they are forecasting a strong financial position over the next year or two, I would recommend investing in technologies that will improve efficiencies and streamline processes. These would be projects that require a bit more capital, time, and commitment from the executive leadership and the board. Ultimately, this would allow the company to take full advantage of the market when it turns for the better by being positioned to handle a significant increase in volume without a commensurate increase in expense. Projects in this area might include process redesign or those that provide additional automated support such as workflow. Your best targets for these will depend on where the company is positioned in the oil and gas ecosystem. For instance, for E&P companies, investment in solutions to manage the process (workflow) and information generated in evaluating exploration opportunities is a new area of evaluation.

Allen Taylor