surviving the downturn

Surviving the Downturn

November 19th, 2015 | Chris Speziale

Welcome to the second edition of ERD Magazine!

Things are really tough out there, folks. REALLY tough. There are many smaller companies going out of business, particularly in the drilling service sector. That’s bad for a lot of reasons, but the main ones, in my opinion, are the lack of innovation and the loss of experience that will result from only the “big guys” surviving the downturn. Smaller companies tend to lead the way in innovation; it’s the larger companies that are masters at scaling it up and mass-marketing. That wouldn’t be possible without the smaller outfits doing it first (if there is one thing a large service company is good at, it’s maintaining the status quo for as long as humanly possible, or until their clients threaten to run them off, whichever comes first…). I’d like to talk about some of the ways HXR is surviving the downturn; maybe some colleagues who are in the same boat as we are will read this, and at least give it some thought. Maybe it will help?

Never stop marketing

The HXR team finds itself using some version of the following words when talking to prospective clients: “I know things are slow right now, but if you have time, we’d like the opportunity to come in and discuss…” I know of several companies that have backed off on marketing and sales meetings. We don’t agree with that. We look at this slow period as a chance to get in with our clients, both potential and current, and try to understand what their expected needs are for upcoming projects. Most operators realize that, at least at first, they won’t have the personnel resources available that they had during the boom. Mass layoffs have gutted drilling and geology departments. So go into their office and ask them what they are going to need, and how can you help. Something else, too – Most will be noncommittal. You have to believe – companies that barely acknowledge you now, hard pressed to get an email response from them, they WILL remember you when prices come back up and they are ready to drill – your efforts are not lost on them. So maybe forget the “official” meeting – take them out for a beer after work. With prices the way they are, they might need a drink.

Don’t forget your current clients

Big service companies are great at doing this. “We got that contract due to combined services. Next….” Small companies can’t do that – we wouldn’t survive, even a boom, if we did that. We have no combined services, so we can’t compete with a major service company that way. We have to find other ways to compete; mainly by being better than the big guys (and hiring their experienced hands when they get fed up and quit…). HXR doesn’t get a contract because we can “throw in cementing”; we get it because we know engineering, field services and geomechanics for ERD and complex wells. Period. It’s HXR’s philosophy that we wouldn’t be here if our clients hadn’t given the “little guy” a chance; by the same token, our clients realize a lot of cost savings by having a smaller outfit like ourselves give a lot of attention to their projects. So if you have to work weekends, keep an engineer, geoscientist or salesman on the payroll that knows the projects well, or do some other action that goes against “conventional” cost cutting procedures, I’d say do it, if you can afford it. Your clients were there for you when you needed them – they are going to need you again soon enough.

Don’t cut your Tech budget – Cut back on lunches

I had this conversation with some of our team not too long ago. Like everyone, we’ve had a few clients push back the start dates of their projects (several years, possibly…), so we had to do some belt tightening. A big expense of ours, as well as for many engineering service companies, is Tech – software development, software upgrades, geoscience costs, etc. Look at those numbers hard enough, and you start thinking they’d look a whole lot better if they were a whole lot smaller. Don’t fall into that trap. I don’t care what you have to do, but don’t stop upgrading your services and capabilities and equipment. When oil prices come back up, and your clients are itching to get their projects started, come right out of the gate with new and improved services, ready to fill their personnel and experience gaps. Many are going to ask you to come in, maybe rebid, and present, once again, what you can do for them – don’t let it be the same presentation you gave 18 months ago. It wasn’t all that good then, let alone now, right?

 Shift a paradigm without a clutch – It only grinds for a minute

Don’t be afraid to change the conversation, in terms of services offered. There was a time, not long ago, when you had a cell phone, and you had a digital camera – you didn’t have a cellphone camera. The technology was there – why not combine them? And so they did, and added music services, video, and a whole list of other things that, at one time, existed in parallel, but were never combined, even though it really made sense. So if you look around and realize that YOUR service, that your company provides, relies upon another service that you could provide yourself, I’d say go for it. Change the conversation. Combine them: 1+1 = 3 if the combined product of the two services is better than what they were standalone. HXR doesn’t accept the “conventional” role of an ERD company – do the engineering, and send a guy out to watch your shakers. That doesn’t do it for us; and operators are starting to take notice. An ERD or complex well can’t be drilled if it isn’t stable, so why not offer integrated geomechanical services? Bring on world-renowned veterans to provide the services, establish a framework of how to integrate engineering and geomechanics, and take the whole package in to the clients. If what you are saying makes sense, then they are going to see that. You probably have competitors that are larger than you, and have been doing the same thing for the last 10, 15 years or more, day in and day out. The next original thought they have will be their first – and I bet their clients know it, too. Maybe those clients can be yours, if you’re smart enough?

I don’t know if that helps anyone, and it’s not an earth-shattering insight, but I know I can’t be the only guy (or gal) out there running an outfit that has some serious decisions to make on how to best set their company up to survive the bust and, hopefully, make it to the next boom. This is how we plan to do it – if you notice our website go down, well, I was wrong, I guess. Anyway, thanks for reading it, I hope you got something out of it, and I wish you luck. Just remember – the boom will return; just gotta hold on a little longer, hands…

Chris Speziale, President

About the Author

is the President of HXR Drilling Services. He has extensive global experience in directional/horizontal and extended reach drilling, both from onshore pads as well as offshore TLP’s, platforms and man-made island drill sites.

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