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May 20, 2021

Most reinvention-committed O&G companies expect twice the revenue of least committed

O&G companies that are most committed to reinventing themselves expect to grow their revenues and margins at twice the rate of least committed companies.

By Yoana Cholteeva

Prompted by the Covid-19 pandemic, oil and gas operators that are most dedicated to reinventing themselves over the next three years expect to grow their revenues and margins at twice the rate of companies least dedicated to reinvention, professional services company Accenture has found.

According to the new report, ‘Necessity is the Mother of (Re)invention’, companies should adopt new strategies to thrive in the energy transition as it identifies the best practices for reinvention.

Based on data from a global survey of more than 200 oil and gas executives, from 179 oil and gas companies across five continents, Accenture classified the 10% of companies setting the pace for reinvention as “Leaders” and those in the bottom 25% as “Laggards”.

Driven by the Covid-19 pandemic, all of the Leaders plan at least some level of significant changes to their business, with half intending radical reinvention, compared with only 9% of the Laggards.

Almost seven in 10 Leaders consider enterprise-wide transformation essential to this reinvention and 77% of Leaders see cloud as crucial to their business reinvention plans in the next three years.

The research also found that reinvention could drive substantial rewards. For example, Leaders expect a minimum margin growth of 7% on average in the next three years, more than double that of the Laggards (3%). Leaders also expect to grow revenues over the same period by at least 11%, compared with just 6% for the Laggards.

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Accenture senior managing director at the Energy industry group Muqsit Ashraf said: “Competition from new energy sources, environmental accountability, talent scarcity, investor apathy, and the Covid-19 pandemic have led most oil and gas companies to realise the need to transform to ensure profitability, embrace sustainability, and maintain their relevance.

“What’s required isn’t just piecemeal transformation but wholesale business reinvention, which is anchored in a new approach that we call our ‘5C’ model.”

The ‘5C’ model for reinvention focuses on competitiveness, connectivity, carbon, customer, and culture.

The report also emphasises that attaining carbon neutrality could be a key facet of the reinvention required to thrive in the era of accelerated energy transition. In fact, more than a third (37%) of respondents, including all the Leaders, expect margin improvements of 20% or more from their low-carbon businesses in the next three years.

Refocusing investments, operations, and products will also be key, with 97% of all respondents citing environmental performance as a priority and 33% naming it their top priority.

Hydrogen and renewable power were identified as the two low-carbon businesses with the most growth potential. More than half of the Leaders expect hydrogen (cited by 62%) and renewable power (54%) to account for more than 7% of their revenues within the decade.

“This decade will be a make-or-break period for the oil and gas industry, which remains rutted in a low-price environment, but the opportunities presented in the report provide a blueprint for reinvention for continued success,” Ashraf said.

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