Cash in the barrel 2012

Working capital management in the oil and gas industry 2012

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Our annual working capital (WC) report found that global oil and gas companies managed to improve their working capital (WC) performance further in 2011, extending the progress made in 2010. During 2011, cash-to-cash (C2C) fell by 3%, bringing the total reduction to 8% in the last two years.

A dedicated focus on WC management could release additional cash flows totaling tens of billions of US dollars across the companies in our survey.

This report is based on a review of the WC performance of the largest 29 oil and gas companies (by sales) headquartered in the US and Europe. The insights are derived from an analysis of publicly available annual and quarterly sources of information. The oil and gas companies in the sampling include integrated (12), independent E&P (6), independent R&M (3) and oilfield services companies (8).

Take a closer look at our findings

The recent improvement in WC performance has not been big enough to reverse the deterioration seen in previous years. As a result, the industry’s overall C2C is showing an increase of 16% between 2003 and 2011.

Overall, our research findings suggest that each company in our study has huge opportunities for improvement in many areas of WC, supply chain planning, demand management, scheduling and inventory management, billing, collection and payment terms, joint-venture payment arrangements, contractor management, and sourcing.

Our deep and long-standing experience in the oil and gas industry confirms that a dedicated focus on WC management could release additional cash flows totaling tens of billions of US dollars across the companies in our survey, given that their aggregate levels of gross WC — defined as the sum of trade receivables, inventory and accounts payable — amount to some US$800b.

 


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