Cash in the barrel 2013

Current working capital performance by segment

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Today, WC performance continues to vary widely between the different segments of the oil and gas industry. This divergence reflects the specific characteristics of each segment, with each type of business operating at varying points in the oil and gas value chain.

Of the various oil and gas segments, independent E&P still exhibits the lowest level of C2C (3 days). This reflects strong results for DIO and DPO, with the latter supported by high levels of capital expenditure.

Integrated companies and independent R&M present similar levels of C2C (25–27 days), but with significant differences for each WC metric. Independent R&M boasts a superior performance in DSO, helped by their marketing operations’ inherently low level of receivables.

In contrast, DIO is kept high, with supply chain capabilities regarded as lower priorities than the need to absorb fixed costs and maximize refineries’ productivity. DPO is also lower due to reduced capital expenditure requirements.

Oilfield services providers display much higher C2C (106 days) than the other segments. This reflects the complex, long-cycle nature of these companies’ operating model, with some long-term contracts carrying progress billing terms and inventory availability requirements.

Our analysis also reveals wide variations in performance on C2C and other WC metrics between different companies in each segment. However, these differences in WC performance may be due — at least in part — to variations in factors, including:

  • The mix of products and services (with each segment carrying varying levels of WC)
  • Levels of vertical integration
  • The nature of production and distribution arrangements and supply contracts
  • Production, logistics and distribution infrastructure

Table 7. WC performance by segment, Q412

Days Industry Integrated Independent E&P Independent R&M Oilfield services
DSO 37 35 68 22 76
DIO 29 27 13 31 60
DPO 37 37 78 26 30
C2C 29 25 3 27 106

Source: EY analysis, based on Q4 publicly available financial statements