Best Supply Chain Finance Solution Highly Commended: Halliburton

Published: Oct 2021


Photo of Richard Whiles, Assistant Treasurer.

Richard Whiles

Assistant Treasurer

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SCF programme delivers huge benefits for Halliburton

The challenge

In 2019, the company revisited the previously investigated supply chain finance (SCF) idea and found greater receptivity among its vendors, although there was still no bellwether programme within the oilfield services sector.

Importantly, Halliburton’s customers were beginning to pay more slowly, while Halliburton continued to pay its suppliers relatively quickly. As a result, the company was experiencing a negative impact on its cash flow and working capital. Halliburton wanted to reverse this trend, by extending payment terms which would increase days payable outstanding (DPO).

However, Halliburton did not want to put undue pressure on its suppliers’ working capital. It sought to provide suppliers with a tool to mitigate the impact of the terms extension (and in some cases gain an economic benefit) by receiving early payment at an attractive financing rate (based on Halliburton’s credit rating).

“Our stated goal was ‘supply chain neutrality’ in relation to working capital, with vendors and customer payments having roughly the same terms,” says Richard Whiles, Assistant Treasurer.

The solution

The initial plan was to roll out a first phase of the project in North America before reflecting on its benefits and then potentially extending it to other geographies. However, by the time the first phase went live in November 2019, it was clear that there was strong demand from procurement to expand the SCF programme quickly. A decision was taken to expand its scope rapidly, starting in early 2020, but as Q1 developed it was evident that both Halliburton, and the global economy were facing unprecedented hardship.

Beginning in January 2021, Halliburton’s stock price began a precipitous fall, as investors began to worry that the emerging COVID-19 pandemic would be a significant threat to oil and gas demand. As the true nature of the crisis became clearer, the industry in general, and Halliburton specifically, entered a historic downturn.

Indeed, in April 2020, the price of a barrel of West Texas intermediate crude was negative. In response to the market collapse, Halliburton engaged in aggressive cost cutting, which resulted in approximately 40% fewer employees available to execute the SCF initiative. In addition, both Halliburton and its bank were given strict work from home orders, meaning the entire international rollout would need to be done remotely.

Despite these historic headwinds, Halliburton was able to on-board a level of spend not often seen in a programme launch and an impressive number of vendors in the first 90 days. In addition, Halliburton was able to continue to increase its efficiency as the rollout continued, working increasingly effectively to identify and on-board vendors.

Best practice and innovation

While SCF has become a mainstream tool in some sectors, oilfield services have been slow to embrace it. Halliburton has always been working capital focused and a leader in applying innovative techniques. When its working capital was impacted by longer customer terms, it decided to act. In the process, it created a bellwether SCF programme that has prompted competitors to follow suit. To date, Halliburton has unlocked an estimated US$150m+ in working capital globally and closed the gap on supply chain neutrality, aligning vendor and supplier terms, while supporting suppliers with attractive financing. The programme will soon be live in 18 territories, with more than 500 suppliers.

Key benefits

  • Unlocked an estimated US$150m+ in working capital benefit.
  • Supply chain neutrality by aligning vendor and supplier terms.
  • Where suppliers are unfamiliar with SCF and hesitant about adoption, the bank worked with Halliburton to provide education about SCF tailored to the supplier’s circumstances.
  • Relationship between procurement and treasury reinforced.

The Adam Smith Awards is the industry benchmark for best practice and innovation in corporate treasury. The 2021 Awards attracted a record-breaking 309 nominations spanning 40 countries. To find out more please visit: https://treasurytoday.com/adam-smith-awards.

Christine McWilliams

Global Head Commodity and Energy Trade, Treasury and Trade Solutions

I am proud of how Citi delivered for Halliburton in countries such as Oman and Iraq, allowing us to demonstrate our global capabilities, and a truly global platform. Halliburton can see all their in-country activities on a single dashboard. The speed of execution is also notable, even more so as it occurred in large part during the COVID-19 lockdown. At our ten month review, the programme had on-boarded the highest spend and largest number of vendors of any Citi led programme in that same timeframe. We are thrilled to see the recognition that Halliburton has received.

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