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Digital Adoption: The Key to Oil Service Firms' New Approach

For the energy sector, the year 2020 turned out to be one of pain, intense volatility and unprecedented turmoil caused by the COVID-19 pandemic. The coronavirus pandemic wreaked havoc on the energy industry by driving down demand and engineering the worst-ever crude crash. At the same time, the crisis has fast-tracked the sector’s remote transformation to ensure business continuity.

While the adoption of digital technologies in energy had started to show significant growth even before the outbreak of the contagion, clearly, the pandemic has acted as a catalyst in shifting from the traditional drilling and fracking system and changing the way of exploring for oil and gas.  

The oilfield service providers, for example, have been at the forefront of this technological revolution.

Increasing Spectrum of Digital Offerings

Let’s start with Halliburton HAL, which is undergoing a rapid digital transformation. It has signed a five-year strategic agreement with Microsoft MSFT and Accenture ACN to boost its digital prowess in the Microsoft Azure cloud platform. The pact will help Halliburton improve its client services by strengthening real-time monitoring of operations, augmenting AI-driven analytics capability, and speeding up the deployment of new technology and applications.

Halliburton has also collaborated with fellow operator TechnipFMC FTI to launch Odassea, the first distributed acoustic sensing solution for subsea wells. This technology is believed to improve seismic imaging and reservoir diagnostics, while reducing costs and improving the data gathered for oil and natural reservoirs below the sea floor. One of its latest offerings, the SmartFleet intelligent fracturing system, lets operators control fracture outcomes while pumping. Halliburton has also tasted success with its DecisionSpace 365, with more and more upstream operators availing the cloud-based subscription service to automate the working method. As it is, the company’s Halliburton 4.0 framework continues to accelerate digital deployment and integration across the value chain.

Smaller rival Baker Hughes BKR is also executing on its digital solutions. The company now supports most of its drilling activity by remote work compared to roughly 50% in 2019. As part of its digital capabilities, Baker Hughes successfully implemented the remote operations model to support Equinor’s EQNR drilling and well construction activities in the Norwegian Continental shelf. More recently, the company got a gig from Petrobras PBR per which it will supply a suite of digital solutions across the Brazilian oil major’s sites.

Meanwhile, the world's largest oilfield services company, Schlumberger SLB has experienced a solid increase in drilling remote operations since last year. Currently, more than two-thirds of Schlumberger’s drilling operations utilize remote capabilities. Last year, when oilfield demand collapsed due to the COVID-19 pandemic, the company’s digital business held up well and is now on growth track. In fact, the company is looking to double the quantum of its digital business in the foreseeable future with the primary focus on remote operations and digital inspections.

Expanded Use of Remote Operations Minimize Cost, Drive Margins

The successful and expanded use of digital technologies has helped the companies to enhance performance and lower operational risk — especially amid the COVID-19 pandemic. Simply put, it allows them to remove equipment and/or crew from site, substituting with software solutions. With fewer personnel on location, jobs being monitored offsite using remote data center management tools, and the replacement of expensive hardware by software solutions, the operators are able to reduce costs and capital investment. In other words, the increasing cloud-based data flow between site and the back office translates into expanded margins for oilfield service providers.

Wrap-Up

Last year’s slump in oil prices and the coronavirus-induced demand shock have pushed drilling activity lower by introducing tremendous uncertainty around the exploration and production spending outlook. Obviously, this translates into lesser work for the companies that make it possible for upstream players to drill for oil and gas. To survive, their cash outflows as capital expenditure continue to fall as the oil service firms reign in their spending levels. They are also pushing for a reduction in overhead and other costs in an effort to become smaller but at the same time striving to improve efficiency and profitability. Most firms claim that the digital push has helped them get more with less.

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Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
Petroleo Brasileiro S.A. Petrobras (PBR) : Free Stock Analysis Report
 
TechnipFMC plc (FTI) : Free Stock Analysis Report
 
Schlumberger Limited (SLB) : Free Stock Analysis Report
 
Halliburton Company (HAL) : Free Stock Analysis Report
 
Accenture PLC (ACN) : Free Stock Analysis Report
 
Baker Hughes Company (BKR) : Free Stock Analysis Report
 
Equinor ASA (EQNR) : Free Stock Analysis Report
 
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