If you’re an oilfield equipment or solutions provider, “sorry, but your price is too high” is a phrase you’ve probably heard a lot of over the past two years.
It’s easy for anyone to see the subjectivity in that statement. “Too high compared to what”, you might ask the buyer. “Our solution is technically superior and provides a better return on investment than other products on the market today. Did you take that into consideration?”
Unfortunately, the cyclical nature of the industry has created a marketplace where there is very little product differentiation in the eyes of the buyer. As the “Great Crew Change” takes place and we make way for the new generation of oilfield employees to take over there is a noticeable shift in how business is being awarded based on different frames of reference.
The new seller came into the industry at the height of the boom cycle (let’s say 2013). With spending from operators at an all-time high, they didn’t really have to sell so much as they did pour their coffee, kick their feet up on the desk, and take orders from buyers as rapidly as they could.
Then, the downturn happened. Orders suddenly weren’t coming in like they were before and the seller, who hadn’t really done much selling in his time in the industry, was totally unprepared to find value and distinguish his or her products and services from competitors.
In similar fashion, the new buyer was so rapidly placing orders to keep up with rig count during the boom cycle that distinguishing differences in equipment and personnel from one solution to another wasn’t a priority. Even if it failed twice as fast as other offerings at least it was producing. So, like the new seller, they were unprepared to do any product vetting when the downturn happened.
This has ultimately resulted in the creation of a marketplace where the “value” of many products and services (particularly in the eyes of newer oilfield employees) has been reduced to one thing: purchase price.
Anyone who’s worked in the oilfield long enough knows that technologically advanced products can save a lot of time and money in the long run.
In the ESP market, quite often pumps and motors that were the result of a technology transfer (i.e., imported from Asia) in the 60’s and 70’s are mistakenly perceived to be as valuable as those that are patented and have a proven track record of better performance. Advanced products are designed for today’s harsh environments. They can handle more gas and solids and outperform legacy products, which directly translates into a lower total cost of ownership for the operator.
Trained and experienced personnel are key ingredients to successful operation as well. Most importantly they know how to get the job done safely. They also know how to get it done right the first time, which is critical on high-producing wells where the difference in a 2-day install versus a 5-day install can result in lost revenue that far outweighs the cost of the ESP system itself.
At Summit ESP we continue to invest research dollars into improved products and take pride in our highly trained and competent field personnel. In head to head tests with wells on a single pad we continuously outperform the competitor’s legacy products in runtime and uptime, especially when installed with our new gas separation and handling pumps.
So next time you find yourself in the buying process, remember that all products are not created equal. And if you make a decision based solely on purchase price, you’ll probably end up “paying more for what you get” instead of “getting more for what you pay”.
Mr. Neinast has more than 35 years of domestic and international Oil & Gas experience with over 25 years of senior management experience in the electrical submersible pump and artificial lift industry.