MARKET DOWNTURN PROVES VALUE OF CVAs

CVA

FINNING CUSTOMERS WITH AGREEMENTS BALANCE CASH FLOW

OIL & GAS OPERATIONS REDUCE RISK, GAIN PEACE OF MIND

Cat® dealer Finning, which serves oil and gas operations throughout Western Canada, has offered some version of Customer Value Agreements (CVAs) for decades. These agreements, which go way beyond mere service and maintenance contracts, are designed to keep an operation’s fleet working every minute of every day. While it’s easy to see the value such an arrangement provides in good economic conditions, it’s during market downturns that CVAs truly prove their value.

“We’ve had zero cancellations of CVAs during the last two downturns,” says Paul Zuk, director of energy and transportation sales at Finning. “That’s because CVAs minimize your total cost of ownership, reduce your risk and protect your investment in good times and in bad.”

 

Balancing cash flow, smoothing budgets

Finning’s CVAs are flexible and built around each operation’s specific business needs. Many oil and gas operations choose a subscription-based agreement, where they pay an hourly or monthly fee that includes everything from parts to maintenance to overhauls — keeping cash flow balanced over time.

“Market volatility is a certainty, not a maybe, for our resource-based customers,” says James Morrison, who is responsible for CVA execution at Finning. “With a CVA, because you’re paying monthly and all your major services are covered, you don’t have to skip out on routine maintenance or a needed overhaul because of challenges with cash flow.”

Because CVAs are an operating expense, not a capital expense, they’re less likely to be subject to budget cuts during a slowdown. And even if the assets covered by a CVA aren’t currently working, the agreement ensures they’re ready to go when market conditions change — essentially removing the cyclical natural of maintenance in a cyclical industry.

“If you park an asset during the downturn and don’t maintain it, it’s likely going to require major repairs when you bring it back online,” Zuk says. “With a CVA, we continue to maintain it so you don’t need to worry about a major cash outlay. It provides budget smoothing over the lifecycle of an asset.”

 

Solving each operation’s specific challenges

Solving cash flow issues isn’t the only reason to consider a CVA. For some oil and gas operations, getting parts when and where they’re needed or avoiding unplanned failures and downtime are struggles. For others, particularly in well service, keeping maintenance on track when fleets are on the move presents challenges. Finning has found that CVAs can help solve these problems and many more — and always starts the conversation with a focus on the customer’s goals and priorities.

“We start by understanding their current maintenance practices and operational model, then collaborate with the customer to build a CVA strategy that aligns with their business requirements,” Morrison says. “Our goal is to build a fleet maintenance strategy properly up front so our customers have peace of mind for their asset’s lifecycle, which may include its second life.”

Every Finning CVA includes digital connectivity, condition monitoring, fluid analysis and genuine Cat parts. Beyond that, the dealer works with each oil and gas operation individually to custom-build a plan with additional services like inspections, labor and repairs. Most CVAs end up falling into one of these three levels:

  • Level 1: Everything you need to carry out your own preventive maintenance using genuine Cat parts kits, supplied to you when you need them
  • Level 2: A preventive maintenance package that takes the hassle out of servicing with Cat certified technicians carrying out all required tasks with genuine Cat parts kits
  • Level 3: A total maintnance and repair solution that provides peace of mind, with all servicing, planned repairs and breakdown response covered

“It’s all about ease of maintenance and the confidence that you’ll always have the parts or service available to keep working,” Zuk says. “CVAs allow you to focus on running your business knowing your fleet is in safe hands.”

 

Want to know more?

Not all Cat dealers offer the exact same CVA levels and services as Finning, but every dealer’s approach — and the challenges CVAs are built to solve — is similar. Talk to your local dealer for details on what’s available for your oil and gas operation.

“WE’VE HAD ZERO CANCELLATIONS OF CVAS DURING THE LAST TWO DOWNTURNS. THAT’S BECAUSE CVAS MINIMIZE YOUR TOTAL COST OF OWNERSHIP, REDUCE YOUR RISK AND PROTECT YOUR INVESTMENT IN GOOD TIMES AND IN BAD.”