Let’s face it. Today’s energy market is weathering a tough storm and has been for months. Companies are facing tremendous pressure to minimize losses and require a lot more scrutiny for investing capital.
At the beginning of the downturn, one the leading exploration and production (E&P) companies in the U.S. took the initiative to put itself in a stronger position against its competitors. One of the key tools enabling this aggressive repositioning was Oracle Hyperion Planning. Just as important was the company’s three-pronged approach to using it.
At the time, a CapEx allocation meeting required multiple sessions with updates to a bloated Excel spreadsheet. The spreadsheet incorporated multiple variables to forecast expected revenue vs. investment, which the executive team would then rely upon for making investment decisions.
Knowing they could no longer afford to spend two weeks on a planning cycle, they decided to prioritize real-time planning capabilities — a new system that would allow the company to rapidly adapt their capital spending in response to shifting oil prices.
This E&P company put a new spin on Hyperion Planning, leveraging it for detailed strategic planning. Using less than a half-dozen drivers, including the price of oil, the new Planning solution allows the strategic planning team to make live updates during their capital expenditure meeting with their Board of Directors. This meant the executive team and the Board could make final decisions within the same meeting.
The new Planning application showed them the forecasted margin based upon the variables, so once the new capital spending targets were identified, this company wasted no time in shutting down production sights that showed little or no profitability. There were no committees to gain approval from or business units to win over with the approach. If the field didn’t forecast a good return in the Planning model, it was shut down until the price of oil returned to reasonable levels.
Since the implementation, this E&P company has already reallocated capital three times in executive meetings due to the market conditions. This would have been impossible in the previous Excel model due to the cycles required to make changes and update the variables to see new results. With the Planning model, they now have the ability to make quicker and more informed decisions that directly impact the health of the enterprise. As one of the strategic planning executives said, “We’re able to give the executive team 100 times more information, 100 times faster, with 100 times more insight.”
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