“Collapsing Costs: Curing Procurement” by Rob West, Redburn

In November 2016, Redburn released a report “Collapsing Costs: Curing Procurement” written by Rob West on the need for cost reduction in the oil and gas economy, emphasizing opportunities in procurement. The research discusses cost reductions available through the use of digital platforms and highlights achievements of E&P companies, including BP, that use RigUp.

We’ve summarized the article, but please download the full report at the end of this post.

 Today’s Procurement Challenges:

  • The average Major manages relationships with 100,000+ suppliers.
  • Many oil industry buyers don’t have access to their suppliers’ financial reports or HSE records.
  • The size and complexity of the industry has resulted in an uncompetitive model of excessive sub-contracting.

Curing Procurement:

Digital procurement platforms are changing the oil and gas industry. RigUp connects 17,000 U.S. contractors with 150 E&Ps and raises bids-per-award from 2.3 to 7.1. Cost savings reach 30%, middlemen are dis-intermediated, and nimble E&Ps can run 20-30x smaller procurement teams than Majors.

BP is the only Super-Major using RigUp at this time. Contractor usage is down 30% since 2012. Conversely, Shell forces suppliers to pay a $1,700 – $3,285 fee to access its own bespoke pre-qualification system—it has half the supplier numbers of peers, yet the highest headcount in procurement.

Benefits of procuring via digital platforms, such as RigUp: 

Greater Reach. More bids can be surveyed in a shorter amount of time.

blog_redburn_002Contract Cost Savings. One E&P, Three Rivers, saved 30% on an Authorization for Expenditure (AFE) for a drilling program with savings on wellhead and cementing equipment as high as 44%.

Unbundling removes unnecessary layers of oil service margins.

Time savings: In another case study, E&P Ameredev onboarded 17 contractors in less than one week, with under 24-hours screening time per contractor.

Blog_Redburn_AvgProcurementCounts

G&A Savings. Major independents have 100-200 people dedicated to US unconventional purchasing, where smaller companies are running comparable rig crews with 4-5 people.

Benchmarking potential. Anonymized cost data is available for benchmarking from the RigUp platform.

Download the full report HERE.

And visit www.rigup.com and sign up for a free account.

Three Rivers Operating Company: Drilling Lean in the Permian with Volatile Commodity Prices

A case study on how RigUp helped streamline the bidding process to save considerable time and money.

In today’s environment of uncertain commodity prices, there remains a constant pressure to ensure operations remain on track, often by doing more with less. This case study is an example of how operators are changing their behavior in order to continue drilling lean in a volatile market.

In April of 2016, Three Rivers Operating Company (3ROC) leveraged the RigUp platform to revise an AFE. In next to no time their engineers were able to:

  • Build “Requests for Quotes” (RFQs) for key products and services within their drilling program.
  • Select qualified vendors from RigUp’s network of 10,000+ Service Companies (many of which were previously unknown to 3ROC, but experts in the Permian).
  • Distribute 8 unique requests to more than 60 vendors at the click of just a few buttons.

Pricing came back within a week and 3ROC were delighted with the results:

Drilling Lean

By marketing our drilling projects through the RigUp platform, Three Rivers was able to discover, investigate and ultimately contract a turnkey option at a significant discount to our daywork budget.Grant Sirgo – Drilling Engineer, Three Rivers Operating Company.

Cost Savings

  • 30% cost savings compared to a previous round of bidding of the exact same services, from just a month earlier.
  • Increased exposure to vendors; More Vendors = More Competition = Lower Prices
  • Almost 90% Execution Rate on pricing received.

Time Savings

  • Consolidated workflow; RigUp acts as a one-stop-shop for creating, compiling and tracking all requests in a single location.
  • All vendor communications are managed on the platform with no phone-tag or email correspondence to worry about.
  • All received pricing is consolidated in an “RFQ Report” to help you quickly analyze bids and take the hassle out of sifting through dozens of documents (potentially saving up to 6+ hours per RFQ).

Process Transparency

  • Real time AFE re-bidding; a must have in the current commodity market.
  • Unbiased, no nonsense, decision making. RigUp acts as the conduit between you and your vendors, effectively removing unnecessary communication from factoring into the decision making process.
  • All bids and communication is retained on the platform for audit purposes.

Looking to get fresh pricing for an upcoming job or program?

  • If you have an account already, click here to start bidding out work today.
  • Otherwise, we’d love to hear from you and help you start saving time and money. You can email us at support@rigup.com.

EHS Solutions for Every Operator

On Earth Day 2016, we at RigUp are reflecting on why we do what we do…

EHS & Profit DiagramOne of our core beliefs at RigUp is that profitability and environmental responsibility are not mutually exclusive. Since the early stages of our company, we have been seeking the best practices to surround these beliefs.

We know that when companies are forced to cut spending, the expensive EHS tag is certainly a tempting place to start. But compromising on employee’s safety or responsibility to the environment will not be beneficial in the long run.

RigUp has created a marketplace where the safest and most environmentally conscious companies can succeed. We want to make sure that EHS needs are no longer a financial burden that companies have to find a place for in their budget. There are three ways that our marketplace offers a solution to these problems.

Screen Shot 2016-04-21 at 2.02.16 PM Using RigUp can ensure that a company is getting the lowest prices on EHS services in their area by increasing the competition between vendors. On RigUp it is easy to include multiple companies on each bid.  Our marketplace enables E&P’s to compare prices across a larger selection of companies.

Screen Shot 2016-04-21 at 2.02.23 PM For operators of all sizes, RigUp is one central place for all environmental needs. No longer do they have to spend the time researching who offers the services that they need or managing multiple separate relationships. Finding vendors in proximity to a particular job can lower freight cost substantially.

Screen Shot 2016-04-21 at 2.02.29 PM Smaller companies with limited environmental connections benefit greatly from a single place to go to meet all their needs. As soon as they sign up for an account they receive access to over 9,000 vendors to choose from.

Environmental responsibility and high safety standards are strong drivers behind why we do what we do. The tools we have created are designed to make sure that exceeding industry standards is not as difficult as it has been in the past. Take control of your EHS responsibility and use RigUp to be proactive. 

No matter what your EHS needs RigUp can help you solve them. 

Happy Earth Day

Templates for Every Bid

Without clear ways to standardize your RFQ results, you end up comparing apples to oranges. Often there has been a misunderstanding about what line items to bid on – some may have included freight while others did not. Some set a flat fee for delivery while others charged by the mile.

In an attempt to alleviate those frustrations, RigUp began to work with operators to create job specific templates. These powerful tools augment the bidding and normalization process by giving the service companies specific guidelines. Using a template ensures all vendors are bidding on the same line items, dramatically reducing time spent in the analysis phase.

All of our templates are tagged by product or service allowing you to easily find one that is specific to the needs of your job. If you find that our current templates do not match your company’s requirements we will work with you to create templates specific to your company’s bid.

You may think that this is only beneficial for an operator and that most service companies would rather not use a template. We have found, however, that bid submission rates increased when templates were included on a request. Based on the RFQs of five RigUp operators, those who used templates saw a 13% increase in submission rates. 

Bid Templates Submission Rates

This increase could indicate that service companies appreciate the elimination of guesswork in the bidding process. They know exactly what the operator is looking for without having to waste time clarifying.

We have not only been able to create templates for tangible goods but also for many complicated services including frac jobs, directional drilling, etc. No matter what the job is, our experienced team of petroleum engineers will create templates that are up to industry standards.

Recently we worked with WPX to create 6 templates for a wide variety of bids. We asked District Production Engineer, Justin Warren what he thought of the process:

RigUp aids our company in creating a consistent bid process by utilizing one of their many standardized templates that cover multiple disciplines. These templates are an integral part of normalizing pricing and obtaining apples-to-apples comparisons. The RigUp Team is also exceptional at understanding what I need in a RFP and have the ability to create a specific template that completely suits my needs. The vendor pool is vast and new vendors can be added in minutes by one of many “more-than-willing-to-help” team members. Customer Service is top-notch. RigUp allows management to stay well-informed of all on-going RFPs.

Have an upcoming job you want a custom template for? Reach out to us at support@rigup.com.

A 10% Reduction in LOE adds 4% to a Single Well Return

In the current oilfield environment, every last dollar counts. Now more than ever E&P’s of all sizes are having to rethink the way they see their costs. Managing spend is the difference between whether a company sinks or swims at sub $40 oil.

Of all the categories of spend, perhaps the easiest to let slip through the cracks is lease operating expense. But carelessness about just a few of these categories begins to pile up and soon you will be faced with a giant bill for expenses you barely considered when you drilled the well.

Taking LOE seriously does not lead to trivial gains. In fact, our data shows that a 10% Reduction in LOE adds 4% to a single well return.* Companies who fail to effectively manage their LOE leave money on the table.

Three large LOE categories, fluid hauling, compression, and production chemicals, need to be addressed separately.

For fluid hauling the most important issue is making the logistics as efficient as possible. RigUp lets you bid out field water hauling & trucking rates to get the best pricing for your locations. Use zip codes to generate a map of all vendor field locations close to the well. Locating nearby vendors cuts travel time and expenses.

When considering compression, the major concern is when to switch to a smaller unit when you no longer need the capacity of a larger unit. Being able to compare the price of compressors either on a purchase or rental basis with the cost of swapping units gives you the opportunity to evaluate the optimal time to make the switch.

For production chemicals the key is pricing. Falling oil and gas commodity products have an effect on production chemicals which leads to discounts. Use our templates to generate a normalized chemicals list so that all vendors are pricing the same material. You can return bulk pricing with tiered discounts or unit costs on an as-need basis.

RigUp Pricebook puts all the cost in front of you so you can ensure nothing slips through the cracks. With Pricebook you can request updated pricing in seconds to keep a handle on all LOE spend categories.

*Based on an industry standard horizontal permian well.

3 Ways to Get the Most out of Your RigUp Profile

You’re a RigUp Service Company Now!

We are excited to have you, but I know from my own patterns, that often I make an account online only to forget I ever signed up for it. It slowly drifts out of my mind as other things pile up and I begin to forget what actually compelled me enough to sign up in the first place.

So how can you prevent that from happening on RigUp? How do you make sure that your company gets maximum views from an operator? I’ve got 3 ways for you to ensure you reach the potential of your company’s Profile.

#1. Updating image. If you use Facebook or LinkedIn in your personal life it is easy to think about this as a “profile picture.” But this is far more import1456787765_imageant. This is a space to convey all the weight and trust that your brand carries with it. Having the most updated, high-definition, and correctly proportioned image sets the tone for all the business you do on our website.

#2. Confirm regions and product tags. Ensure all regions and product tags accurately reflect your business. We are working every day to optimize our tags for the maximum number of vendors. Updated product tags and regions increase visibility to the operators who are looking for you.

1456787796_phone#3. Invite your team. Rig up is at it’s best when your whole team is able to engage with the site. The collaborative tools are designed to optimize your team’s performance, and having your whole team available encourages the right messages to get to the right people.

Doing these three things will greatly improve your presence on RigUp, driving up the amount and value of transactions.

The Environment at $30 Oil

When the outside world thinks about the oil & gas industry, they think about the most prominent news stories in the past decade. The industry as a whole is often vilified with little recognition given to the companies who act responsibly.

However, when oil is $30 a barrel, some companies cut costs anyway they can – even if that is in safety and environmental programs.

Environmental responsibility and sustainable operations are at the core of who RigUp is as a company. Our desire is to partner with companies who make EHS a priority in their business. We believe the desire to operate responsibly should be intrinsic to a company and not solely reliant on external pressures.

Our mission is to connect operators with service providers through a common goal: effective, efficient, and safe operations. We seek to maintain a marketplace where the safest and most environmentally conscious companies can thrive. Since the beginning we have strove to build our company on the foundations of responsibility, and better business.

Regardless of the price of oil, our likeminded team is committed to achieving lasting change in one of the world’s largest industries. We are dedicated to a better future.

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