Investors prefer steady, predictable earnings growth. But for an oilfield services provider that operates in dozens of countries, buying equipment and services in one country to deploy in another, performing work that often takes years to complete … the perpetually unsteady balance among global currencies was causing the company’s balance sheet to teeter like a broken pumpjack.
If only it were that easy to fix. Oil exploration and extraction are complex and risky undertakings. The company seeks to be the go-to partner providing a range of oilfield services across the exploration and extraction value chain—from analysis of underground oil deposits, to planning and drilling, to site remediation. Every project takes precision, expertise, equipment … and time. But in the few weeks it takes to, say, drill a well, currency exchange rates can fluctuate significantly. The result? One contract strikes black gold—while another turns into a dry hole.
Like many big international operators, the company had a foreign currency exchange (FX) hedging program in place. What it lacked was a cohesive vision, strategy, and process for identifying and addressing FX risk exposures in ways that produced consistent, predictable results. It didn’t help that the treasury team was stretched thin and still working manually via spreadsheets.
