Strategic use of rentals to boost efficiency, manage risk and safeguard capital.
When a newly purchased gas compression package is commissioned in the field, the stakes are high. The producer has made a major investment and waited, perhaps months, for the package to be engineered, built, delivered and installed. As Marc Vincent explains, it’s a scenario that’s loaded with risk for the producer.
“Typically when a well comes online, you have a sense of what the well might produce,” says Vincent, Compass’ Rentals Manager. “Until it’s actually in production, you don’t know for sure. In some cases, producers will buy a piece of equipment that might be either oversized or undersized for what their needs turn out to be. At that point, they’re stuck with the capital cost they’ve sunk into that equipment.”
When purchased equipment is operating as needed, it’s a money-maker for the producer. If purchased equipment isn’t delivering the desired efficiency, it costs the company money in a hurry. That’s why many Compass clients make strategic use of rentals in their compression equipment mix.
“If they rent, that gives flexibility and reduces risk,” says Vincent. “If they find it’s inappropriately sized – the pressure falls or there’s not enough horsepower or some other reason – they can return it at the end of the term.”
Another consideration is time. While a new compression package might take months to build and get operational, a call to Vincent can deliver a compression unit far quicker. Capital efficiency also comes into play. Some producers are careful about tying up capital by buying equipment, given the uncertainties about how it will perform in the field.
Managing costs is always a top priority. If a rented package and a purchased package are both operating as needed, the rental will cost more over time and can be a drag on profitability. The producer might decide they like how their rental unit is working and want to buy it. Compass makes that easy.
“Our normal rental offering would have a purchase option,” says Vincent. “Eventually if they prove-out the field or the well and the fit is correct, they can buy out the unit. If the fit isn’t correct, they can rent another unit that more closely fits their conditions. Overall, depending on the situation, renting can help the client gain control over some of the unknowns and manage their risks.”