As oil and gas operators increase their activity and oilfield service suppliers begin to rehire to meet the increase in demand, seeking best value during the industry rebound becomes an area of focus. A recent study conducted by Kimberlite Oilfield Research based on 13,485 performance ratings from 2,837 personal interviews with end users worldwide addressing 74 oilfield product and service lines reveals that:
Oilfield service suppliers (particularly the major suppliers) need to better differentiate their overall performance and value delivered to the oil and gas operators or risk being commoditized.
Oil and gas operators need to perform proper due diligence in order to identify and receive best value. The Value Map below illustrates the aggregation of 13,485 performance ratings across the 74 product and services lines for the big 4 oilfield service suppliers.
The Value Map evaluates each supplier’s overall performance relative to the respective cost for the supplier services. Supplier performance is plotted on the X-axis and supplier pricing is plotted on the Y-axis. The “fair value line” is shown diagonally across the Value Map and its slope reflects the relative weights customers place on costs and benefits.
It is easy to understand why so many oil and gas operating companies struggle to distinguish performance differences among the major oilfield service suppliers and essentially view oilfield services as a commodity.
The Value Map above reveals that each of the big 4 oilfield service suppliers plot in a similar spatial position on the “X” axis (performance axis) suggesting that overall in aggregate they are viewed by the oil and gas operating companies worldwide as providing a similar level of performance. The greatest differential is observed on the “Y” axis (pricing axis) revealing that pricing is where the oil and gas operators view significant differences between the offerings of the big 4 oilfield service suppliers.
However, the subsequent exhibits reveal that each of the big 4 oilfield service suppliers exhibit significant differences in overall performance and value as viewed by the oil and gas operating companies when evaluated on a regional basis or a product basis. The analysis becomes more complex and revealing when adding the secondary oilfield service suppliers to the analysis.
As observed above, differences in performance and value do exist. If oil and gas operators do not perform proper due diligence by region and product line, it is reasonable to understand why they view oilfield services as a commodity when assessing on an aggregate basis rather than investing the resources to identify performance and value differences.