Ask An Expert

6 Fundamentals of Successful Planning [Oilfield Services Playbook] | US-Analytics

Marc Hadd
May 12, 2017


Oilfield services firms are the workhorses of the oil & gas industry, carrying out the drilling, completion, and workover tasks in addition to designing and manufacturing specialty tools and producing or procuring chemicals and silica sands.

For these dynamic organizations, specialization and segmentation is the economic trend, with two overarching goals:

  • Increase well productivity
  • Decrease well operating costs

Planning Challenges of Oilfield Services Firms

Services firms’ operating focus is divided across crew, equipment, and logistics; supply chain and manufacturing; customer service; and health, safety, and environment. Execute these fundamentals successfully to deliver on the mantra of free cash flow and effective use of capital.

But developing the business plan is more than preparing the financial budget — the planning process must validate business outcomes, the initiatives to achieve those outcomes, and the application of resources to those initiatives. Furthermore, oilfield services firms have to plan around the overarching market constraints and influences and develop a process that embraces the exploration and production marketplace.

All of these variables present a number of challenges when you’re applying traditional approaches to your planning process:

Market Dynamics

  • Commodity, financial, or regulatory constraints change quickly, making the business plan outdated
  • Understanding the impact that basin activity has on the oilfield services value chain requires end-to-end demand planning and supply chain considerations

Business Process

  • Financial plans are disconnected from operating plans
  • Operating units have limited capability to analyze equipment cycle time activities to seek insight in operational efficiency gaps
  • Merger and acquisition activity creates challenges integrating systems and data
  • Strategic initiatives such as HS&E are critical for success but are difficult to integrate into the planning process

Planning Process

  • Business plans becomes inaccurate or outdated and “sit on the shelf”
  • It is difficult to incorporate leadership’s budget guidance while maintaining the integrity and ownership of the budget submitted by the profit or cost center owners
  • The planning process ignores the organizational learnings; planning “starts from scratch”
  • It is challenging to address “what might happen” or evaluate possible business use cases


  • Planning requires data from many disparate and possibly inconsistent sources — there is a need for a common data repository
  • Spreadsheets are fast and simple but quickly become unmanageable and not conducive to an integrated plan
  • Spreadsheets, email, and other documents tell the real story behind the plan


The O&G Planning Playbook

The framework for successful planning in the oil & gas industry embraces uncertainty — the only given. Below are six tenets of sound planning processes.

1. Build a plan that’s based on reality.

The objective of the planning process is to make the relationship between strategic outcomes and operations clear. The plan is the collection of actions that, if achieved, close the gap between today and the strategic horizon. Driver-based plans connect strategic objectives with operational activities leading to financial outcomes.

Driver-based plans are about applying scarce resources — assets and people — to achieve results. With operational drivers aligned with organization accountabilities, driver-based plans highlight controllable and non-controllable measures plus focus on material financial statement line items. The intent is to develop a clear picture of how the business operates and intentionally manage the activities that are linked to your initiatives and outcomes.

2. Accommodate uncertainty.

Scenario planning helps you cope with uncertainty. The exercise of defining scenarios directly challenges the notion that the past predicts the future. Scenario planning forces you to account for and understand what operational changes must occur to cope with market influences, greatly improving your planning process.

3. Simplify and iterate for a better plan.

Traditional, cumbersome planning methods yield one plan version, at best. Given the organizational effort, the plan must “hit the target” the first time. Conversely, driver-based plans with scenarios encourage iterative plan-do-review-act cycles. Now the best plan is the result of collaboration and continuous improvement; this approach encourages accuracy, not gaming the system to beat budget.

This plan is actually simpler to understand because overwhelming detail is removed by the exercise of preparing the driver model and understanding the operations to financial outcome relationships. Scenarios foster thinking outside the box and a consideration of what-ifs — a push away from being overly conservative and missing opportunities. This simplified approach results in more time spent analyzing the plan and less time building the plan, setting the stage for removing the barrier between planning and forecasting.

4. Remember that business drivers are assumptions.

Driver-based plans are effective — but only to the extent that the drivers are accurate predictors of business outcomes. Drivers are the hypothesis of the cause and effect relationship. Modeling techniques, such as fishbone diagrams, are useful tools for documenting cause and effect relationships and process bottlenecks.

Identifying the business drivers is not a one-time effort; the cause and effect relationship must be re-validated over time. This ongoing dialog between leadership, financial planning, and operating managers results in continuous improvement.

5. Leverage business intelligence for driver model insight.

Comprehending the business drivers requires digging into the operational details. Business intelligence (BI) provides the means to explore vast amounts of data, looking for trends and exceptions and ultimately providing confidence that the business driver is an effective predictor of future performance.

BI gives you the power to link data across various subject areas to explore operating results. In short, the value BI brings is clarity to the operational events that shape the business driver. Your organization is now able to have a conversation with the data — drill down capabilities starting from a financial line item traversing data to operational details.

Business intelligence methods range from operational models (e.g. equipment cycle time and utilization) to subject-specific data marts (e.g. HS&E), information discovery (e.g. in-cab driver logs looking for fuel savings) to mobile device dashboard to data visualization.

6. Embrace the complete performance management cycle.

This is how top-performing firms endure and thrive regardless of marketplace and economic shifts. The business plan is the forward-looking instrument that funds initiatives that move the firm towards its strategic objectives. Business intelligence is the analysis and reporting method used to investigate performance and communicate results. Together, these tools answer the key questions of what happened, why it happened, and will it happen again. This is the essence of continuous improvement and learning.

Oil and gas firms — global or national, large or small — face the same commodity and market challenges. Companies that recognize these challenges and develop planning processes that embrace them become thriving market leaders. They set priorities, understand risks and opportunities, make the right investments, and move the organization forward. A solid planning process is one building block in effective management controls.



Want something amazing in your inbox?

Subscribe to our newsletter below