Watchful Eyes Everywhere
Going forward, virtually every move the industry makes – or fails to make – will be subject to analyses designed to ascertain whether the industry can be trusted to take the steps needed to improve its performance, stewardship and reputation. In some cases, the scrutiny will be fair; in others, it will be politically driven or even twisted. Sometimes the truth will carry the day, other times the truth won't see the light of day. But, make no mistake, the scrutiny will persist.
Moving ForwardGiven this, how should the industry proceed? Does it continue to operate as it has in the past, making steady but mostly incremental (and sometimes insufficient) progress? Or does it more purposefully tap into its own remarkable and proven capacity for problem solving, making larger strides than might otherwise be expected and, in the process, taking greater control of its destiny? We believe the latter is the correct path forward.
We also believe that leading companies within the oilfield supplier sector can play integral roles in advancing the industry's cause and reputation. In the same way that a small group of iconoclastic automobile manufacturers kicked off decades ago the quality movement that each of the world’s auto companies and their suppliers embrace today, there exist companies within the oil and gas industry that are already leading the revolution towards greater performance, reliability and accountability.
Multiple Areas of FocusOne area on which considerable focus has fallen since the Gulf spill hit the headlines is the health, safety and environmental, or HSE, practices of the industry. Notwithstanding some ill-informed pundits’ assertions to the contrary, an oilfield supplier’s HSE performance has for years been the first and last factor considered by most customers when selecting their oilfield providers.
The good news is that over the years HSE ratings of suppliers via EnergyPoint Research's independent customer satisfaction surveys have come in materially higher than suppliers’ overall customer satisfaction levels. Moreover, despite overall satisfaction levels reaching a low point in 2006-07 as industry activity skyrocketed, HSE ratings were not themselves compromised (see chart below).
HSE ratings leaders in EnergyPoint’s most recent land driller, offshore driller, oilfield services and oilfield product surveys are, respectively, Helmerich & Payne (HP), Noble Drilling (NE), Schlumberger (SLB) and Oceaneering International (OII).
When it comes to supplier performance and reliability, the importance of consistency can’t be overstated. In fact, a company’s ability to consistently satisfy its customers, in part by reducing or eliminating the creation of dissatisfied clients (i.e., via instances of poor performance), can have direct impacts on its total satisfaction ratings, and on its stock-price performance, over time (see charts below).
Helmerich & Payne is rated tops in EnergyPoint’s surveys in terms of performance and reliability among land drillers, while Ensco Plc (ESV) rates first among offshore drillers. On the oilfield products side, privately-held Derrick Equipment holds the honors. Core Laboratories (CLB) enjoys the strongest such marks among service providers.
The last several months have also cast a spotlight on the perceived integrity and accountability of the industry and its participants. Not surprisingly, many of the same suppliers that score well with customers in accountability and responsiveness in our surveys also score well in terms of integrity and ethical behavior.
In addition to many of the suppliers already mentioned above, other industry players that survey respondents see as truly “walking the walk” in terms of organizational character and integrity include Newpark Resources (NR), Parker Drilling (PKD), M-I SWACO and Rowan Drilling (RDC).
It’s important to note that, since EnergyPoint conducted its first survey in 2004, service-, professionalism- and character-based attributes have played significant roles in driving the overall satisfaction levels achieved by individual suppliers.
Answers Reside Within the Industry
Industry suppliers would do well to both study and emulate the actions of the industry's top-rated companies. For example, those looking to understand how to manage assets and people that operate in unforgiving environments for months at a time, lift anchor, relocate to another region of the world, then do it all over again safely and efficiently should take a close look at Noble Drilling and Ensco, two offshore drillers that have shown themselves to be among the best in the world at these kinds of activities.
Likewise, those wanting to successfully combine fit-for-purpose technology with long-term organizational balance, performance and safety should acquaint themselves with Helmerich & Payne, a company with considerable talents and reputation in these areas.
There’s also much to be gleaned from Oceaneering and Derrick Equipment, especially when it comes to designing products that perform as expected and over the long haul.
Finally, Core Laboratories can teach all of us something about world-class consistency, quality and vision.
Room for Improvement
To be clear, there’s considerable evidence outside of the Gulf oil spill that the oil and gas industry, and specifically its supplier base, has room for improvement in terms of its performance and quality. After converting our ratings scale to that of the University of Michigan’s American Customer Satisfaction Index, or ACSI, EnergyPoint’s broader oilfield supplier satisfaction ratings significantly trail those of most of the industries tracked in the ACSI.
In fact, oilfield suppliers as a whole registered scores much closer to the ACSI laggards (utilities and transportation) than its leaders (durable and non-durable manufacturers).
On the other hand, many of the leading oilfield suppliers highlighted in this and other EnegyPoint Research reports over the years enjoy customer satisfaction ratings that rival those of the highest-rated companies in the world, companies like as Apple (AAPL), BMW, Federal Express (FDX), Google (GOOG), Sony (SNE), Southwest Airlines (LUV), etc.
The upshot is, as the oil and gas industry searches for ways to improve its overall reliability and performance, it would be wrong to assume that the final blueprints for such improvements lie outside of the industry itself. Rather, we believe the industry need look no further than the oilfield suppliers already identified over the years as being the best at what they do. By doing so, the industry will find many of the answers it seeks -- and in the most familiar of places.
To read other EnergyPoint Research notes and reports concerning the companies mentioned herein, click on the following: Helmerich & Payne, Noble Drilling, Schlumberger, Oceaneering, Ensco, Core Laboratories, Newpark Resources, Parker Drilling and Rowan Drilling.
Note - This analysis is derived from 12,000+ customer evaluations of oilfield product and service suppliers collected via EnergyPoint Research’s independent surveys since 2004.
Disclosure: No positions