Unlocking Efficiency Gains through Step-Change Function Process Performance
Artificial Intelligence is driving transformation across every aspect of the oil and gas sector, bringing with it a new set of challenges. Rapid change can often lead to decisions that feel right in the short-term, but quickly show signs of wear and tear. Conversely, innovation demands that leaders take brave steps and “fail fast” without discouraging teams. How do businesses navigate these new challenges while moving forward with confidence?
Ahead of the upcoming Operational Excellence in Oil & Gas Summit, we sat down with William Speer, Former VP of Transformation at California Resources Corporation (CRC) to dive deep into how CRC are working towards achieving synergy capture targets in excess of 2X the industry average and delivering step-change functional process performance through disciplined integration and technology deployment.
Isobel Singh, Event Director: Tell me a little bit about your role as the Vice President of Transformation at CRC?
William Speer: My primary responsibilities encompass enterprise project management and the governance and oversight of our merger integration. This includes driving cash synergies and functional integration, which involves aligning processes, policies and technologies across the merged entities. We employ both a bottom-up and top-down approach to ensure that the highest-return initiatives are integrated effectively and in the correct sequence. My team supports and guides other leaders through the inevitable barriers that arise during integration, providing a mechanism to elevate discussions to the appropriate decision-makers. This year, we have two key objectives: achieving synergy capture targets in excess of 2X the industry average (which is typically 3% of EBITDAX*) and delivering step-change functional process performance through disciplined integration and technology deployment.
*Earnings Before Interest, Taxes, Depreciation/Depletion, Amortization and Exploration Expense.
Isobel Singh, Event Director: You mentioned aiming for "synergy capture times two." Could you explain what that means?
William Speer: In mergers and integrations, the industry average for typical savings is about 3% of EBITDAX. These savings often come from capital efficiencies. However, our approach at CRC is different. Our merger is more of a "best of both" functional integration, rather than a simple bolt-on. We are specifically targeting operational and staffing efficiencies, which are considerably harder to achieve than capital efficiencies. Because of this strategic focus, we are aiming for savings in excess of 6% of EBITDAX – double the industry average – in these more challenging categories.
Isobel Singh, Event Director: Why have you decided to take this different approach, focusing on operational efficiencies over capital efficiencies?
William Speer: Our decision stems from the unique operating environment in California, which is highly regulatory-constrained. Our long-term survival and value proposition depend heavily on managing margins. While capital efficiencies often represent one-time cost savings that are easier to control, operational costs and the expenses associated with supporting operations are more fixed in nature and much harder to remove unless you systematically eliminate waste and adopt new technologies for different ways of working. Our company's long-term goal is to significantly increase our market capitalization and improving our margins substantially is key to achieving that and continuing to consolidate across the state. It's about sustainable, long-term growth and fundamentally being able to run the business at a lower cost than competitors in a market that is currently shrinking.
Isobel Singh, Event Director: How do you determine the right metrics to measure the business value and ROI from digital transformation initiatives, especially in the context of M&A integration?
William Speer: When evaluating digital technologies, we don't solely focus on output metrics like cost. Instead, we prioritize input measures. For instance, with systems like "open wells" (a subsurface well management system) and various reporting tools, we're consolidating user accounts and standardizing reports. Our focus isn't just on reducing cost, but on tracking how many people are using a certain technology and identifying those who might be avoiding it. When you have two systems doing the same thing, it often means you effectively have "nothing" or you're doubling your costs by running concurrent systems.
For other technologies, like remote monitoring, we measure different aspects. Instead of just looking at the initial investment, we track how many events are occurring, how many false alarms there are and if we're deploying resources unnecessarily. By leveraging technology to better utilize our existing staff, we believe we can increase workforce efficiency by 10-30%. The overarching goal is an operation that requires fewer resources to run effectively. While there's always a capital investment and a required rate of return (ideally over 20%), our primary focus is on controlling the inputs, as these are the leading measures that allow us to "fail fast" and pivot quickly if something isn't working, rather than waiting for cost data which can be delayed.
Isobel Singh, Event Director: What are your main challenges when scaling different digital transformation projects, particularly in a merger scenario?
William Speer: The biggest challenge is change management and the inherent cultural resistance within any organization, especially when merging two distinct cultures. When executives declare a "best of both" approach, it's aspirational; there's a natural human resistance. The core challenge lies in dealing with people's emotions and driving change. It's not that the technology itself doesn't work; often, many technologies are effective. The difficulty is getting people who aren't used to working a certain way to embrace it.
Our approach involves a combination of management decisions and identifying "early adopters" or "first followers" who can help guide colleagues through the change curve. This means having advocates "boots on the ground" within teams, as change cannot effectively be driven solely from the C-Suite. Leaders need to communicate the "why" behind the change, but it’s the individuals within the team who truly influence adoption. This challenge is particularly evident with AI, where direct employee resistance stems from fears of job displacement, which must be carefully managed.
Isobel Singh, Event Director: How do you envisage the technology landscape changing over the next 12 months and what areas should operators be investing in to drive operational excellence?
William Speer: The AI race is on and it's a broad topic. In the next 12 months, I foresee significant gains in remote monitoring and alarm management. Remote monitoring, using cameras and automated computer systems at well sites, will revolutionize how people work. Instead of deploying field operators to every site, centralized control centers will monitor multiple locations, with humans making decisions on resource deployment only when necessary. This increases EHS awareness and creates efficiencies.
Regarding alarm management, safety-critical facilities often generate millions of alarms daily from various sensors. Historically, humans processed each one. Now, we're seeing technologies that can rationalize and sort alarms, reducing them by up to 98% (from millions to tens of thousands), allowing resources to focus on critical issues. The adoption of these remote monitoring technologies and the growth of centralized control centers, where dispatching occurs only as needed, will fundamentally change industry operations.
Isobel Singh, Event Director: In a volatile market with squeezed profits and budget cuts, how can operators ensure they get the highest ROI from their current technology stacks?
William Speer: All companies should perform basic annual housekeeping of their technology stack. There's often a surprising amount of software that's either underutilized or duplicates functionality. Reducing unused licenses can significantly cut costs without impacting staffing. Secondly, evaluate if your current technology stack is strategically aligned with your company's goals. Often, technologies are adopted without full business-wide implementation, creating retained, unused tools. If something is working, scale it faster.
A major problem, especially in larger or merged companies, is a fragmented approach to technology implementation, where individual departments or business units acquire their own solutions. This leads to an unnecessarily large and costly technology stack and creates significant technical debt. This debt, encompassing administration fees, patching, hardware and the cost of subject matter experts, makes it incredibly difficult for traditional oil and gas companies to make major technology switches, as the cost often outweighs any potential ROI. The solution lies in establishing governance structures, like communities of practice, where departmental leaders collaboratively decide on technology adoption.
Isobel Singh, Event Director: Finally, what are you looking forward to most at the upcoming Operational Excellence in Oil & Gas Summit?
William Speer: I'm particularly interested in learning about new technologies, especially in the AI space, that are being deployed by medium and smaller-scale companies. While the strategies of larger players are well-documented, I expect to see more innovative solutions from smaller entities where creativity can be best deployed. Additionally, I'm curious to learn more about different approaches to cultural transformation as companies grow. The entire industry is built around people who hold the solutions, so understanding how to create a structure that fosters their innovation, in alignment with company strategies, is where my curiosity lies. For example, I'm keen to learn about the AI corporate governance policies of other companies – whether they are restrictive or too loose.
Explore insights on AI from sessions such as, "The Validity of AI Decision-Making" with Chevron and Western Midstream, "Breaking Free from Pilot Purgatory: Realizing Economies of Scale with AI, ML, & Operational Excellence" with Albemarle, and more. Download the Event Guide today to learn more.
