Operations Case 2 – Operational excellence program for rig services company
situation
A drilling rig services company focused on land operations was struggling to cope with the rapid increase in its drilling activities
The company was experiencing frequent delays in project delivery and cost overruns resulting in operational inefficiencies and cash flow constraints. It was facing loan defaults and possible bankruptcy
our approach
Operational diagnostic was structured along three areas:
Financial
Costs (manpower, supplier costs and leverage ratio analysis)
Revenue (rig rate and utilization)
Operational
Non-productive time analysis
HSE performance review
Rig move and start-up analysis
Organizational
Current state analysis of company’s relationship with its customers, suppliers and staff
Customer surveys and competitor SWOT analysis
Recommended 5 “improvement levers” based on diagnostic findings and developed analytical model to evaluate financial impact of implementing each lever
Outcome
Proposed 5 recommendations with roadmap to turn-around $40M negative cash position and improve efficiency:
Controlled working capital: $6M reduction in account receivables in first year
Optimized manpower and contracts: $2.5M/year saved over 5 years