While surplus assets may not always be top of mind, it’s important to consider these scenarios in the E&P industry:

  • A leading operator possesses older equipment originally manufactured 40 to 50 years ago that can no longer provide the service required for efficient operations; or
  • A global energy company is wrapping up a project in a specific region and no longer needs large capital assets used to support the project.

These are real-life scenarios that require a more strategic answer. Competition in the energy industry has pushed companies to look beyond the typical business areas to drive innovation across the organization. This is even more important in today’s challenging environment of declining commodity prices. While the majority of in-house resources are often focused on E&P to tap resource-rich areas around the world, there is untapped value to be found in existing surplus assets (also known as the reverse supply chain).

Given budget restrictions and the importance of adhering to environmentally friendly business practices, oil and gas companies cannot afford to allow assets to remain idle or dispose of them without thought to the process. By implementing best practices, including redeployment procedures, remarketing techniques and working with a vendor to manage important aspects of disposition, organizations can support strategic business goals.

Redeployment

Redeployment is a cost-effective option, often saving the company money by eliminating the need for procurement of new assets while enhancing overall sustainability by extending the life cycle of assets. However, the management of a redeployment program requires more than traditional paper-based methods to effectively work for the business.

An important step in creating an efficient asset management program is to implement a web-based enterprise-wide system for internal redeployment. There are trusted tools available from established providers to choose from, and it’s important to know the business needs before choosing a platform. Operators should set guidelines for redeployment vs. sale of surplus. It’s critical to align the redeployment time frame to criteria that make sense for the company—setting timelines by asset category or the company’s internal financial management system. For instance, if it’s necessary to move assets off department books within a 60- or 90-day window, employees can list surplus assets as available for internal reuse for one month. If it is not requested by another location or department within that time frame, it should automatically move to an online marketplace to allow the asset to be sold to the highest qualified bidder, maximizing potential recovery to the bottom line.

Operators also need to apply user access levels across the web-based system. The best asset management platforms allow for the organization to set user access levels across the system. In this way, only managers at a certain level of access will be granted authority to release an asset for redeployment or to move to sale. This ensures that internal controls are followed and limits key decision-making to qualified staff.

Remarketing techniques

Thinking strategically about the reverse supply chain can deliver a number of benefits, enhancing compliance, sustainability and financial recovery. To maximize revenue when selling surplus assets, organizations should implement the following remarketing best practices:

Determine equipment value. A valuation from a trusted service provider with access to current market data for similar assets can enable management to make informed decisions.

Determine a sales channel. Online auctions are typically the best route to achieve higher recovery in a short time frame. Using a solution provider with an established buyer base will increase bidding activity and recovery values. For specialized assets where time is not a constraint, sealed bids or online listings may be effective tools. It is helpful to work with a partner who provides a range of solutions.

Create marketing collateral. Just like selling products in the primary market, it’s important to market surplus assets in the secondary market. Buyers often have specific requirements just as an organization might have when procuring through the traditional supply chain. Demonstrating the asset’s unique qualities through targeted, thoughtful marketing can increase selling price.

Provide original equipment documentation. Along with detailed asset descriptions and photographs, it’s important to also hold onto the original documentation for the asset(s). This adds to the value of the asset since the new buyer may need the paperwork for insurance, finance or other reasons.

Have a removal period in place. Depending on the asset and space it requires, it can be expensive to hold onto surplus or idle equipment. By negotiating a removal period into the buyer agreement, an organization is better equipped to free up storage as soon as possible, which can be used for new equipment purchases.

Applying strategy to scrap

In the energy industry, sustainability continues to be a topic on the minds of management. Minimizing environmental impact across the business adds value and enhances the triple bottom line. The reverse supply chain offers opportunities to enhance sustainability. For materials that cannot be sold or may be obsolete, scrapping or recycling the materials can serve as a cost-effective and environmentally friendly way to recover value from these assets.

When selling scrap, it is important to take steps to achieve the maximum value. For instance, it’s better to use an auction or bidding process via a platform that serves a global base of buyers. This creates a competitive environment that engages buyers and results in significantly higher return on scrap vs. selling only to a single vendor or a local provider.

In-house vs. vendors

A strategic sales process is best driven by a team with ownership over that functional area. When handled in-house, this task often falls on the already overburdened shoulders of operations, procurement or logistics employees. Without a proven strategy in place or the time to properly manage the process, surplus assets are sold via local liquidators at minimal return or placed aside, losing value while they sit in storage, accruing unnecessary storage costs.

Leading companies, regardless of the industry, use the best practice of partnering an in-house team that possesses internal knowledge with an external provider with expertise in the reverse supply chain. When choosing a vendor, it’s important to ask the following questions:

  • Does the vendor have proven experience in the energy industry and knowledge of secondary markets?
  • How does the vendor demonstrate success to clients (e.g., what types of reporting do they provide)?
  • Does the provider effectively communicate and provide an assigned account management team, minimizing any potential for confusion and ensuring a seamless process?
  • Is the asset management platform the provider uses scalable and flexible to adapt to current and future requirements?
  • Are its processes documented and repeatable?
  • Does the provider have an extensive global buyer base and case studies of successful results?
  • Does it ­have the in-house resources to support a company’s safety and compliance standards?

An experienced provider will be able to easily provide answers to the above questions and will likely also send over case studies. The proposal also should demonstrate the level of responsiveness, accuracy and service level it would bring to a business.