The billing and payments associated with upstream oil and gas field services have been an area I dabbled in during my Ariba days and have kept an eye on since. It’s a gigantic area with many attractive aspects:
- huge dollars are at stake
- complex services invoices mean opportunities for both buyers and suppliers
- buyers have great credit ratings, suppliers (with a few big exceptions) have higher costs of capital, making various forms of supply chain finance interesting
This field (pun intended) seems like it should have produced a gigantic B2B network. But, so far, it has not for a variety of possible reasons.
- From the start, there were several competing oil company consortia that flamed out
- A company named Wellogix tried to make it in the space, but later claimed it was ripped off by Accenture/SAP, ended up suing Accenture and won! In theory, Wellogix won $44 million in a case that may now be headed to the Supreme Court. (You cannot make this stuff up).
- The other leading player, Digital Oilfield (later named D02 was a great business, but sold out to ADP (yes, the payroll company) and was basically never heard from again–by any name. (Again, you cannot make this stuff up–ADP!)
- Halliburton, Schlumberger and a few others on the supplier side wield enormous power in oil field services area and are not to be trifled with. That is all I will say on that topic.
- The oil field services business is highly global and regional (and not exactly in vacation spots) making it tough to cover for a little US software company
- There has been no natural consolidator in the industry–perhaps until now?
An expert in the industry recently informed me that Accel-KKR had invested in Transzap which is the owner of a company better known as Oildex. (I love the name game in this industry–it is so big that everyone needs two names!) Accel-KKR, as you may know, is no longer associated with either Accel or KKR. But I digress. Oildex is a player in oil and gas ePayables, as well as other payments information related to oil and gas partnerships. It’s not clear to me if they actually do the payments themselves, but they do mention on their website early payment discounts. Oildex also mentions being associated with $180 billion in transaction data. Again, not sure exactly what this means, but I do know that 5 basis points on $180 billion is the start of a nice business! Add some supplier financing to that revenue stream and voila, we are talking real money.
Accel-KKR had great success building a different kind of platform business in foodservice with iTradenetwork. Part of the strategy in that industry included consolidation of failed consortia. Perhaps the same strategy applies here. It is certainly long overdue.