When a severe industry downturn occurs, most service companies institute a well-worn series of steps to counter the effects. The companies immediately halt nonrevenue producing programs to stem cash flow, slashing the overall budget (both current and long-term) and instituting massive layoffs. While some cuts are necessary, many are made without any overarching vision or strategy. In fact, many of these cuts are short-sighted remedies that ultimately sacrifice the future growth of a company.

Although no one wants to see a continuation of today’s depressed oil and gas market, the current state of the industry presents an opportunity to review and improve critical components of a company’s business and operational programs. These components are not only limited to traditional processes around safety, maintenance and supply chain but can be applied to enterprisewide initiatives that address data and operational efficiency, research and technology development, and even mergers and acquisitions.

During periods when it is not feasible to deploy new equipment, companies are well served to review and focus maintenance programs that extend the life of existing equipment and reduce overall operating costs. For example, C&J continues to work on extending the life of its fluid ends and also is upgrading the control systems in its fracturing units. These programs will result in better performance, lower costs and enhanced service quality and will eventually achieve a standardized platform across all its fracturing operations.

Enterprise technology implementations such as an enterprise resource planning system require companywide participation. While projects of this scale are challenging in any market, a downturn offers the opportunity to step back and assess the current state of data and processes. From those observations, a solution can be designed that is responsive to the needs of the organization and its customers. C&J is prioritizing solutions that will enable more informed business and operational decisions and faster response to field and market conditions by delivering the right information to the right people at the right time.

Slower periods are an ideal time to reinforce HSEQ standards and help ensure that all employees are engaged and aware of safety protocols.

In a downturn, all aspects of supply-chain management must be examined. Now is a good time to renegotiate contracts; review procurement practices and supplier lists; and standardize price books, systems and processes. With the right fundamentals in place, companies will be positioned to achieve increased economies of scale both in today’s market and as conditions improve.

A continued commitment to research and technology development can yield a competitive advantage, especially those technologies that create additional customer value and improve the bottom line. For example, C&J recently introduced the LateralScience engineered completion process. This technique helps optimize completions placement to increase well productivity. The company’s new Ultra Short Bearing Section drilling motor contains the industry’s shortest bit-to-bend length and is designed to drill the vertical, curve and lateral in a single run, resulting in fewer trips downhole and reduced nonproductive time.

Acquisition in a low-cost environment does not have to be on a massive scale to be strategically important. C&J recently completed the acquisition of ESPCT, a small Houston-based company that specializes in artificial lift accessories and hardware for installation of electric submersible pumps. Their capabilities fit well with the C&J strategy of expanding its presence in the production phase of the well.

The industry as a whole has a wealth of experience managing downturns—C&J has seen them before and will see them again. But while it is standard practice to adjust budgets and headcounts during market contractions, it is just as essential to preserve the core abilities and long-term vision of a company so it can take full advantage of the market return. Strategic commitments to human capital, technology, processes, safety and maintenance help companies navigate short-term challenges and lay the foundation for future success.

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