Part 1 – Why ‘Outsourcing’ Shouldn’t be a Bad Word

Presented with unprecedented challenges, oil & gas companies nonetheless have the opportunity to confidently move forward armed with technology and a new workforce model. Entrepreneur, thought leader, and trailblazing oil & gas businesswoman Elizabeth Gerbel has teamed up with W Energy Software to share her valuable point of view and explain why a “one sourcing” approach gives energy firms the freedom to focus by containing G&A costs while providing them with the elastic workforce, software, and data needed to scale up with a lean team.

By Elizabeth Gerbel, CEO at EAG 1Source

Boom or bust, mention the word “outsource” and it instantly conjures fears for employees and the C-suite. For most land, accounting, production, and other back-office staff, outsourcing directly targets their job security. And despite the cost savings, many executives see outsourcing as replacing trusted resources with part-time outsiders, trading G&A for the dedicated talent needed to grow. This is true in many ways, and I want to acknowledge right out of the gate that the traditional approach is flawed, but I’m here to set the record straight and show you why “outsourcing” should no longer be a bad word for E&Ps.

Over the next few blogs, I’m going to delve into the very real costs of running the energy back office the old way, including G&A, hidden costs, and even the emotional costs of cycle-driven hiring and firing. I’ll show you how a one sourcing model can scale to match the needs of any E&P, with my final post delving into a real-world case at Sandridge Energy. I am excited to share this with you, but first, a little backstory on my journey building an oil & gas business process outsourcing (BPO) practice that culminated in the launch of a new turnkey approach for oil & gas companies to source the expertise and technology they need to navigate today’s complex industry.

Having started EAG Services in 2003, I’ve witnessed the outsourcing needs of the oil & gas business evolve, adapt, and transform. This includes the crazy days of the shale revolution, where costs were very much in the background as companies prioritized drilling and growing, truly throwing money and people at the problem of double- and triple-digit production growth.

Following the 2014 downturn, the emphasis shifted. At that time, startups were trying to minimize their standup costs, including overhead as well as the intensifying information technology costs of the expanding digital oilfield. Other E&Ps were struggling to hire fast enough to build out their organizations as production in growth accelerated in the Permian and other basins.

Through my conversations with CEOs during this time, a common question kept surfacing: why should I have to keep buying technology and adding overhead every time I need to grow? Whether growing through drilling or through acquisitions, oil & gas companies were increasingly looking to do more with the resources they already have while streamlining software portfolios. Which is where EAG 1Source comes into the story.

Today, lenders and private equity are looking for E&Ps to have a strong balance sheet. This requires a disciplined approach to cost containment, which has underscored the important role that BPO has to play in helping E&P teams and their financial backers achieve their goals. That cost containment strategy must include people and technology costs, which is where the 1Source model has gained such traction.

On one side of the cost containment coin is people, and we’re helping by giving oil & gas companies one source for trusted expertise, land, accounting, production, and IT resources. It’s an elastic, fractionalized model that draws on a deep bench of seasoned energy pros. On the other side of the cost containment coin is software and data management outsourcing. Companies can now jettison the costs associated with the never-ending tasks of evaluating, implementing, and maintaining the digital systems they need and draw on best-in-class technologies and the people who know how to use them. This combo has been a game-changer. By taking E&Ps out of the HR and IT business, companies have more freedom to focus on their core business of extracting hydrocarbons, onboarding acquisitions, and securing prime acreage ahead of the competition.

The worries of the C-suite today are not those of 20 years ago. Companies are not always looking for growth or startups looking to scale and grow immediately. The biggest concern is whether the 1Source model can scale fast enough when growth is needed. To move forward with confidence, today’s oil & gas business should embrace outsourcing as a way to augment their existing team, in order to do more without adding headcount internally, and optimize G&A spend without sacrificing agility. Early adopters of 1Source, my clients, are the proof that it works. And based on our positive feedback from PE and lenders, it’s what capital markets are looking for too, for their portfolio companies to shrink standup and long-term costs.