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Creating value through working capital

Why now is a great time to unlock cash

Overall, the working capital (WC) metrics deteriorated in 2022 compared to 2021. But are things changing for the better in 2023? Our quarterly report for mid-and large-cap oil field services shows some promising signs but also highlights the areas of concern. Explore the findings to identify the opportunities to free up trapped cash and improve working capital efficiencies.

How is working capital fueling growth as 2023 paves the way for 2024?

Revenue growth was again strong in Q3 at $2,157 million, an increase of $932 million on the prior year and marking four sequential Q3 periods of average revenue growth for peers and the strong third quarter in the prior five years. Average net working capital topped $1.8 billion for the second time in recent quarters, reaching a high of $1,826 million at the end of Q3 and continuing a year of high absolute levels and elevated cycle times. Overall, Q3 was a strong performance for cash generation driven by revenue and income strength.

In our previous quarterly report on publicly traded companies in the United States and Canada that are categorized as Oil Field Services, we noted that there were some notes of caution around accounts receivable, and the Q3 results show that this continues to be a challenge with average Days sales outstanding (DSO) continuing to rise. While some level of friction is to be expected, given the rapid increases in revenue, we would expect to see companies taking steps to mitigate this through Q4 and into 2024. Results also showed an increase in inventory levels and days inventory outstanding (DIO), which contributed to an overall increase in net working capital. Historically, we have seen inventory increases through the year and some release in Q4, so watching the final path to year-end will be critical, as well as determining whether there is a sufficient runway for inventory to be deployed and turned into cash.

Working Capital Roundup Q3 2023:

Crafting a cash-conscious culture

Risks keep evolving year after year. It can range from supply chain challenges and conflict between countries to rising raw materials and labor prices. However, companies that show organizational resilience and focus on producing higher revenue results across all sectors usually benefit from key tailwinds like the continued opening of the global economy.

Exploring the findings of our annual Working Capital Roundup makes it clear that the sooner the decision-makers understand the importance of protecting liquidity, the better. Companies and executive teams need to be prepared to manage their working capital cycles proactively to tackle different challenges and gain a competitive advantage compared to their peers.

Read our previous reports:

The next steps

The right people, processes, and systems can create a culture that improves WC performance and frees up capital. That freed-up capital can then be used to lower debt and invest in the business. And this flexibility can lead to greater returns and sustained performance in the future. Leaders must put in place proactive measures that build a cash-conscious culture, where an employee is empowered to assess every decision through a liquidity lens.

We can help you thrive

Disruption is inevitable. But companies have options. They can either be at its mercy or become disruptors themselves—but only the latter will thrive. To optimize working capital performance, companies need a tailored and structured approach. With our leading-edge technologies, insights, and experience, we help clients design a robust cash governance framework and move toward becoming an outcomes-driven organization.

Learn how to valuate and improve your working capital.

Get in touch

Ryan Maupin
Ryan Maupin
+1 973 602 6379

Anthony J. Jackson
Anthony J. Jackson
Deloitte Transactions and Business Analytics LLP
+1 214 632 6658

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