Riccardo Bertocco: North American Midstream Strategy in a Time of Uncertainty

As the midstream oil and gas sector experiences turbulence like never before, companies have to rethink their strategic approach. Riccardo Bertocco, a partner with Bain’s Oil & Gas practice, discusses the four proactive steps leading midstream companies have taken to combat industry challenges.

Read the Bain Brief: North American Midstream Strategy in a Time of Uncertainty

Read the transcript below.

RICCARDO BERTOCCO: The midstream sector is experiencing turbulence like never before. Favorable contracts are actually expiring. There is a strong concentration of activity in fewer basins, leaving some of the assets stranded and underutilized. And there is excess of capital, including from private equity. There is chasing fewer deals.

Leading midstream companies have taken four proactive steps to actually address the situation in the short and in the long term. First, optimizing their asset portfolios by doubling down on high-growth areas and leveraging export opportunities while at the same time rationalizing their asset footprints in Tiers 2 and 3 basins. Then they worked on redefining the way they operate along the value chain, especially in gathering and processing, which is becoming very volatile and extremely competitive.

Third, they chartered a new path to growth beyond the three years by way of a repositioning their companies and really focusing resources along three dimensions. One is geographic, two is by asset type, and then finally, really thinking about the level of vertical integration that will have to drive competitiveness in the future. Last but not least, they've actually pushed the cost agenda as a way to achieve operational excellence.

Sector leaders are using zero-based redesign and digital technologies to drive their costs down and increase their efficiency. We have no evidence at this point that oil prices will go up anytime soon, but we do believe that midstream companies that can increase the resilience of their asset portfolios, that are taking a much more strategic approach to their investment decisions, and that are really pushing their cost agenda can thrive in the "lower for longer" environment.

Read the Bain Brief: North American Midstream Strategy in a Time of Uncertainty