Oilfield services carry much higher C2C (97 days) than other segments.
Summary: Working capital performance varies widely across oil and gas industry segments. This reflects each segment operating at various point of the oil and gas value chain.
Data shows stronger C2C performance for exploration and production (3 days) than for refining and marketing (34 days), with integrated companies (27 days) close to refining and marketing.
For exploration and production, this reflects strong results for DIO and DPO, supported for the latter by high levels of capital expenditure.
WC variations by segment, Q410
Source: EY analysis, based on Q4 publicly available financial statements
Refining and marketing boasts a superior performance in DSO, helped by the low level of receivables inherent to the marketing operations. On the contrary, inventory levels (DIO) are kept high, as make-to-stock is commonly used for refining products.
Cash to cash in oilfield services
Oilfield services carry much higher C2C (97 days) than other segments. This reflects the complex, sometime long cycle nature of the segment's operating model, with certain long-term contracts carrying significant down payment and progress billing terms.
Some oil and gas companies are also exposed to the production of chemicals, which generally exhibits a high C2C.
Variations in cash-to-cash performance
Analysis also shows wide variations in performance for C2C and other working capital metrics among companies within each segment of the oil and gas industry.
This performance gap is due to
- Differences in sales mix - each segment carries varying levels of working capital
- Levels of vertical integration
- Nature of supply contracts
- Production, logistics and distribution infrastructure
The spread of performance among companies is larger for oilfield services and exploration, and production than for refining and marketing. For exploration and production, this bigger dispersion of performance may be partly explained by differences in products and customer mix and levels of capital expenditure.
For oilfield services companies, this reflects the nature of their related sub-segments, with each individual company operating at various points of the life cycle of a reservoir, as well as variations in the way manufacturing strategies have been deployed.