What do you do with company equipment when wells aren’t being drilled?
The cyclical nature of the oil and gas industry creates significant challenges one of which is low equipment utilization, especially during slow-downs. With decreasing oil prices, drilling activity, as well as oilfield servicing is substantially impacted. For Albertan companies participating in the oil & gas industry, this means that certain pieces of heavy equipment (which may still be insured, but are no longer in operation) present an opportunity to recoup some overhead. So what do you do with equipment that’s not in use, but is still insured?
Simple: change your insurance program to reflect the change in equipment usage.
Equipment premiums are rated based on utilization (e.g.: your company only pays for exposure, so if a piece of equipment was rated at $1 but now you’re only using it 85% of the time, it would now be rated at $0.85)
During these periods when equipment is no longer in use and operating budgets are tight, this is an opportunity to recover some expenses by having your equipment rated. It’s a relatively simple process to review the policy; the most important factor is to ensure that the minimum premium on your policy is low enough to allow you to benefit from low utilization or stacked equipment.