Resources2 Energy. Effective Valuation of Integrated Operations. Integrated Upstream Operations Conference. Norway

Transcription

1 Resources2 Energy Effective Valuation of Integrated Operations Integrated Upstream Operations Conference Norway October, 2007 consultants serving the energy industry

2 Our Industry Mindset Unlike most industries, the routine decisions we make at all levels of any given operating company carry multi-million dollar price tags. Add to this the inherent danger of our operations, and then top it off with the risks and uncertainties of outside influences. It is no wonder we run our business on KPIs, and don t make changes to proven procedures without overwhelming and convincing value propositions.

3 The Industry is Facing a Challenge of Getting the Adoption Cycle Spinning. Executive Action Valuation is nearly half the equation! Results Communicated Incentives Results Achieved Integrated Operations

4 There is Intrinsic Value in the Integration of Operations. Co-located Resources Dispersed Resources ` ` ` ` Value Waste More Areas of Value And Less Areas of Waste Yet the resistance to change has created a strong barrier to execution.

5 Pockets of Value Have Been Calculated in Isolated Situations Using Simple Methodologies. Integrated Operations Segment/Asset/Operation Business Processes Benefits / Improvements KPIs INTEGRATED SOLUTION: Costs & Levers People Process Technology Organization Work Envnt. Performance Enhancement Metrics Business Problem Or Operational Problem Business Processes Reserves Revenue Expenses Calculating Value NPV OPTIONS IRR ROCE Payback Period Etc. Yet compelling cases for change/ investment have yet to be unveiled.

6 There are Critical Success Factors for Valuing Integrated Operations Don t lose sight of our KPIs Valuation that takes into account uncertainties Stochastic Models Sensitivity Analyses Valuation that clearly models risk vs. reward Valuation that speaks to the organizations multiple levels of stakeholders Executive / Investor Mid-level management Field Operators Valuation that supports integrated decision management

7 Do We Calculate Value at the Asset Level or the Segment Level? Corporate Returns Profitable Operations Grow Strategic Position Max Revenue Minimize Costs Grow Existing Assets Acquire New Assets Max Production Optimize Supply Chain Timely and Accurate Information Forecast Potential Value Knowledgeable Workers Leveraging Technology Understanding where a solution adds value drives alignment.

8 Old and Familiar Modeling of Uncertainties Applied in a New Way May Resonate Value Chain System. Multi-Level Optimized Independent Asset-Driven No. Spares Loss of Production Key Decision Quality / KPIs Downtime Production Level Production Decision Uncertainty Construction Time Time to First Oil Cost Calculation Objective Drilling Time Wage Rates Value Influence Investment Decision Time Oil Price Tech / Human. Tricorder & Telemetry More experts People Required

9 Probability with Those Most Interested in Understanding Risk vs. Reward. The cumulative probability chart identifies ranges of outcomes and risks in selecting one alternative against another 100% 90% 80% 70% 60% 50% 40% 30% 20% Momentum EASy Does It Canned Separate but Processed 10% 0% (10,000) (5,000) 0 5,000 10,000 15,000 20,000 25,000 NPV ($000)

10 Is there a Need to Create New Models to Help Us Value New Practices? K= Cost of the Knowledge Worker I= Effectiveness of the Incentive Structure D= Quality of the Data (information) V= Value of the Decisions Formula for the Value of the Decisions of a Single Knowledge Worker Formula for the Value of the Decisions of Multiple Co-Located Knowledge Workers K x I x D = V P = Worker Productivity (P 1 + P 2 + P N )D = V

11 The Model is Incomplete but it Begins to Tell the Story. D= Quality of the Data (information) D= Timeliness + Ground Truth + Transparency Single Source of Truth Secure, Robust Contextual Awareness End-2-end Visibility Presence, Modality Formula for the Value of the Decisions of Multiple Dispersed Knowledge Workers P 1 D 1 + P 2 D 2 + P n D n - T = V Where T = The Cost of Data Transfer

12 An Integrated Operations Value Calculator A suite of valuations of IO solutions that affect KPIs Key Corporate Measures like Reserves, Production, Earnings, and Lifting Costs are summarized in dashboard view.

13 Sample Worksheet in the IO Calculator

14 There is an Entire Suite of Tools Available, but Mathematical Models Decision Trees Multi-Attribute Assessment Option Theory Game Theory

15 Adoption No Matter the Model, Tracking Our Progress is Critical A capabilities assessment for IO is a means for evaluating the degree to which integration has been achieved and the corresponding value that has been realized, or conversely that remains to be realized. 100% 50% Nominal Limited Integrated Innovative

16 Along with Capturing Value in a Mechanism for Communicating Results Achieved. IO Levers Base Last Quarter This Quarter Progress Comments People KPI 1 KPI 2 Process KPI 1 KPI 2 Technology KPI 1 KPI 2 Organization KPI 1 KPI 2 Work Envnt. KPI 1 KPI 2

17 The Adoption Cycle Eventually Transforms to a Continuous Improvement Loop. Analysis Results Communicated Corrective Actions Results Achieved Integrated Operations