Opinion

Rule of Thirds: Breaking It Down in the Midstream


Shrinking E&P budgets, weak commodity prices, the rise of environmental, social and governance (ESG) investing. The case for greater emphasis on customer satisfaction in the oil and gas industry has never been stronger. Providers of midstream services, and their stakeholders, ignore the evidence at their own peril.

Results from EnergyPoint Research's 2019 Oil & Gas Midstream Services Survey make the case. Companies rating in the top third of the survey register investor returns well in excess of the bottom third.

The top group consists of eight publicly traded companies: AltaGasCrestwood MidstreamEnable MidstreamGibson EnergyMPLXPhillips 66 MidstreamPlains All American and Williams. Two private firms—Boardwalk Pipeline and Oryx Midstream—also rank in this cohort.

Table summarizing midstream company customer satisfction.
View in PDF

Average investor returns for the top tier have outpaced the bottom tier by 12.4 percentage points over the last year. Returns for Gibson Energy, Phillips 66 Midstream and Crestwood Midstream were especially strong. These companies garnered strong ratings in service and professionalism (S&P), personnel (PERS), and operations (OPS). All are material drivers of satisfaction.

Although competing in their fair share of midstream segments (i.e., service types), higher-rated providers tend to be more selective as to where they compete. It's depth-over-breadth. And it has its rewards—the group's market valuations are on average 35% higher than peers.

Midstream ratings in select attributes.

Contrast this with the vast footprints and “iron-in-every-fire” styles of certain lower-tier competitors. Energy TransferEnterprise Products and EnLink Midstream can be found in almost every corner of the oil patch. Yet their size and scope fosters an unwieldiness that hurts consistency and undermines customer loyalty.

Arrayed between the two groups are companies like ONEOKInter Pipeline and Magellan Midstream. While these mid-tier companies tend to tout higher systems and administration (S&A) marks, project development (PD) remains a weakness. Still, the group's investor returns beat those of the lower-tier across one, three and five-year periods.

Overall, customers are most satisfied with midstream companies in PERS, S&A. OPS ranked third. Within PERS, engineering and operations personnel rated highest. For S&A, scheduling, accounting and adminstrative functions rated strongest. In OPS, it was HSE practices.

Customers were least satisfied with providers' pricing and contract terms (P&CT). This extended most deeply to prices and contract terms vs. quality received. Respondents also rated providers relatively low for PD. Scores for value-adding projects and solutions were particularly low.

Midstream ratings by attribute

How a company ultimately allocates resources to address customer satisfaction should not simply be a function of whether it outperforms or underperforms in a particular area. Rather, the level of importance of attribute in determining overall satisfaction should be considered.

As the matrix below shows, for the midstream, OPS, P&CT and S&P are primary drivers of customer satisfaction. Top-rated companies use OPS and S&P as levers to extract higher fees and better terms. It's about value, not price.

Resource allocation matrix for midstream suppliers in 2019

The upshot to all this? As priorities like sustainability and environmental stewardship move center stage, customer satisfaction will increasingly be tied to corporate reputation, employee satisfaction, earnings and other key performance indicators (KPIs).

Few can say precisely what the future holds. But companies that master the right things for customers will see their opportunity sets rise and financial results outperform. They shouldn't be surprised to see other aspects of their businesses also fall in line.



New service from OilVoice
Trip Shepherd is for companies who need to track their staff in areas of risk.
It's free to use, so we invite you to try it.

Visit source site

https://energypointresearch.com/oilfield-insights/...

midstreamOil Gathering LinesMarkWest Energy PartnersMPLXAndeavor LogisticsPlains All AmericanPipelines

More items from dougsheridan


Newpark Resources & Core Lab Top EnergyPoint's 2020 Oilfield Services Customer Satisfaction Rankings

HOUSTON (August 12, 2020) – EnergyPoint Research announces results from its 2020 Oilfield Services Customer Satisfaction Survey. Newpark Resources , an independent provider of drilling fluids services and systems received the top rating in this year's survey. In addition to ranking first overall, ...

Doug Sheridan - EnergyPoint Research


Posted 3 months agoPress > customer satisfactionnewpark resources

Can Oilfield Suppliers Save Themselves?

Few sectors have ever fallen farther over any extended period than oilfield suppliers have since the beginning of the current industry downturn in  June 2014 . Relative to the broader market, the sector's decline may be totally unprecedented. Six years ago, Saudi Arabia fired the round felt around ...

Doug Sheridan - EnergyPoint Research


Posted 4 months agoOpinion > WeatherfordSchlumbergerHalliburton +4

Apergy, Derrick Equipment, Newpark Resources, Gardner Denver and Dril-Quip Top 2020 Oilfield Products Ratings

HOUSTON (January 22, 2020) – EnergyPoint Research announces final results from its 2020 Oilfield Products Customer Satisfaction Survey. The survey, which has been conducted annually since 2007, is one of several EnergyPoint studies focused on the oil and gas industry's satisfaction with the product ...

Doug Sheridan - EnergyPoint Research


Posted 10 months agoPress > ApergyDerrick Equipmentnewpark resources +7

Pirates on the Prowl in the Offshore

Opportunists lurk in today's offshore oil and gas industry. And like the buccaneers of old, they are starting to make waves. Last week, Luminus Management issued a press release criticizing the management and board of Valaris . Luminus, through its affiliates, owns 18.7% of Valaris. The firm ...

Doug Sheridan - EnergyPoint Research


Posted 11 months agoOpinion > valarisENSCORowan +7

MPLX-MARKWEST-ANDEAVOR REPEATS AS NORTH AMERICA’S TOP-RATED MIDSTREAM PROVIDER; PLAINS ALL AMERICAN, CRESTWOOD, ALTAGAS AND BOARDWALK ROUND OUT TOP FIVE

Infrastructure & Services Needed to Facilitate Continued Oil and Gas Development and Growing Exports Place Midstream Providers in Spotlight HOUSTON (November 5, 2019) – EnergyPoint Research, the leading provider of customer satisfaction ratings for the oil and gas industry, announces results from ...

Doug Sheridan - EnergyPoint Research


Posted 1 year agoPress > oil and gas midstreamSurveyMPLX +10
All posts from dougsheridan