resilience in oil & gas event - aberdeen

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Resilience in Oil & Gas

1st December 2015

David RennieInternational Sector Head –Oil & Gas and CCS

www.scottish-enterprise.com


Energy Jobs Task Force

Theme Champion

Balanced Messaging Alan Johnstone – AMEC FW

Shared Principles and Values Trevor Garlick - BP

Cost Efficiencies Gordon Ballard – Schlumberger

Leadership for Change Roy MacGregor - Global Energy

Retain Talent and Skills Kevin Higgins - Petrofac

Supporting our People Bob Keiller – Wood Group


Examples of Actions

• Series of Job Fair Events (PACE)• Series of Industry Events covering:

– Leadership – Financial Management– Production Efficiency – Learning from Other Sectors – Values and Behaviours event – follow up action plan– Facilitating discussions between Operators and Supply Chain – Series of consultations with SMEs – and feeding those back to Operators and Contractors

• Oil and Gas UK Efficiency Taskforce• Set of case studies developed (now available)• Job Matching Service • Progress Report


Scottish Enterprise Text Wall

Do you have a question for any of our Speakers? Is it of a sensitive nature? Then why not send it anonymously to our Text Wall. We will try to answer the most pressing questions during the day and will follow up on all questions post event. How to submit a question to our text wall: Type: SEALL (not case sensitive, followed by a space) followed by @ and the name of the person your question is for e.g. SEALL @david. Then enter your question and send

the text to 0207 183 8329. Standard network charges apply.



1st December 2015

Bob KeillerCEO Wood Group




1st December 2015

Matt CorbinAker Solutions


Confidential © 2015 Aker Solutions

A Sustainable Future for our Industry

1st December 2015Matt Corbin | UK Managing Director, Aker Solutions Subsea

May 2, 2023Slide 7


Enough bad news?

May 2, 2023 qeqweqweqweSlide 8


Spend > Return

■ Trend is unsustainable…■ To extend UKCS, we need to change the model and the culture

May 2, 2023Slide 9


“Don’t waste a crisis”

May 2, 2023Slide 10


O&G UK outlook – there is a prize

May 2, 2023Slide 11

• The UK opportunity remains large• Considerable focus being put into collaboration, extending

life of assets, and production efficiency• Those companies that demonstrate agility will succeed• Those companies that are restricted by global mandates and

rigid process compliance will (probably) not


Industry Reaction

May 2, 2023Slide 12


Sustainable Processes

May 2, 2023Slide 13

Subsea Forum 2015Date

Requirement Rose


Sustainable Processes

May 2, 2023Slide 15


Sustainable People

May 2, 2023Slide 16


Thank You

Confidential © 2015 Aker SolutionsMay 2, 2023Slide 18

CopyrightCopyright of all published material including photographs, drawings and images in this document remains vested in Aker Solutions and third party contributors as appropriate. Accordingly, neither the whole nor any part of this document shall be reproduced in any form nor used in any manner without express prior permission and applicable acknowledgements. No trademark, copyright or other notice shall be altered or removed from any reproduction.

DisclaimerThis Presentation includes and is based, inter alia, on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ. These statements and this Presentation are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for Aker Solutions ASA and Aker Solutions ASA’s (including subsidiaries and affiliates) lines of business. These expectations, estimates and projections are generally identifiable by statements containing words such as “expects”, “believes”, “estimates” or similar expressions. Important factors that could cause actual results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are or will be major markets for Aker Solutions’ businesses, oil prices, market acceptance of new products and services, changes in governmental regulations, interest rates, fluctuations in currency exchange rates and such other factors as may be discussed from time to time in the Presentation. Although Aker Solutions ASA believes that its expectations and the Presentation are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in the Presentation. Aker Solutions ASA is making no representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the Presentation, and neither Aker Solutions ASA nor any of its directors, officers or employees will have any liability to you or any other persons resulting from your use.

Aker Solutions consists of many legally independent entities, constituting their own separate identities. Aker Solutions is used as the common brand or trade mark for most of these entities. In this presentation we may sometimes use “Aker Solutions”, “we” or “us” when we refer to Aker Solutions companies in general or where no useful purpose is served by identifying any particular Aker Solutions company.



1st December 2015


John ReidMichelin



1st December 2015

Gavin Yuill & Chris Durling EY


Resilience in oil and gas

Building business resilience in a challenging climate

1 December 2015

An introduction to Business Resilience

The principles of business resilience


Control the

controllableUnderstand

your customer’s customer

Keep doing what you’re

good at

Communicate

Embrace innovation

Whatmust

you achieve

Business resilience in overview


What does a resilient business look like?► Has efficient operational delivery and back-office processes► Flexible cost base – which allows it to react quickly to changing market conditions► Robust funding structure – sufficient to withstand any headwinds► Continuously looks to drive improvement in its business efficiency and effectiveness

Business resilience is important at all stages of a business’s life cycle► Should be positive – not defensive► Applicable to businesses at each stage of their life cycle:

► Growing – to ensure operational delivery and back-office processes keep up with revenue growth► Acquisitive – to ensure appropriate integration of existing and new businesses► Mature – to look for opportunities to drive profit and cash flow improvement► And, of course, when a business is facing market or business challenges

Is not just about cost reduction► Identifying and eliminating inefficiency in operational delivery and back-office processes► Targeted investment in key strategic initiatives is important too

And can drive improvement in profit and cash flow

The five big issues

2

Regulatory scrutiny

► Impact of increasing regulation and intervention from regulators and governments

► Revised 2014 Corporate Governance Code requiring companies to form a robust assessment of the risks threatening their business model over an extended period

3

Technological innovation

► Rapidly changing landscape of winners and losers driven by disruptive technologies, changing consumer behaviours and habits and globalisation

► A connected economy with multiple information channels means business situations spread quickly and information is difficult to contain

4

Aggressive capital

► Shareholder activism is on the rise in Europe, with over $100bn of capital to invest

► Traditional and alternative capital providers have huge amounts of capital ready to invest in high yield opportunities

► Capital is targeting undervalued businesses and capital inefficiency, including excess fixed assets and working capital

Winners and losers will be determined by how well a business builds its resilience and find ways to deliver extra value

► Economic uncertainty and geopolitical risk in a number of markets

► Political uncertainty and fiscal austerity constraining growth across Europe

► Volatile commodity prices and exchange rates creating a challenging business environment

1

Economic uncertainty

5

Market uncertainty

► Innovation and new market entrants impacting existing business models

► Customer trends and behaviours continue to drive rapid market transformations

There has never been a greater need for a company to challenge its own business resilience


Resilient businesses ask ‘how can it work better?’

► Revenue risks (customer, product, market, competition and pricing) understood and managed

► Market and trading data regularly used to align customer facing activity

► Clear strategy regarding disruptive technologies

► Flexible long term financing and achievable debt covenants supported by robust cash forecasts

► Strong working capital performance – building cash balances and capital efficiency

► Robust management of legacy liabilities

► Operational risks (key supplier, input prices, disruptive innovation) are understood and managed

► Flexibility in the cost base to be able to react rapidly to change

► Operational capabilities built to deliver business vision, with safeguards against challenges to the operational footprint

► A clear vision for the business, supported by market trends and organisational capabilities

► Credible management► Active engagement and alignment

with equity, financial and other stakeholders

Stakeholder resilience

Market resilience Capital resilience

Operational resilience

Helping companies

‘find the money’ and drive

shareholdervalue










Market resilience




Capital resilience





Helping companies


shareholdervalue


Some examples of stakeholder resilience actions

► Engaging early with key stakeholders – lenders; equity providers; key customers and suppliers

► Reviewing corporate strategy to► Define and focussing on their core business – what value do

we add? ► Identify opportunities to dispose of non-core assets or

outsource non-core functions ► Preparing robust trading and cash forecasts, based on:

► Bottom-up view of revenue and costs► Conservative ‘base case’ scenario► Flexible financial model – which allows easy sensitivity

analysis► Regular short-term cash flow forecasting – to provide good

visibility of cash flow needs► Evaluating the skill base of senior management – is it fit for the

current environment?









Market resilience




Capital resilience





Helping companies


shareholdervalue


Some examples of market resilience actions

► Moving away from delivery of products – to service provision/value adding activities

► Proactively engaging with customers – looking for ‘win/win’ opportunities (e.g., extending contracts on terms that work for both parties; profit share agreements for high cost assets)

► Going to customers with efficiency improvement ideas, extension of product/service offering in return for volume discounts

► Regularly appraising customer credit risk► Understanding the contribution of products, services or

geographies – and proactively taking action to improve or eliminate loss-making products, services or geographies

► Diversifying into oil geographies less impacted by the current oil price

► Examining sales force footprint and effectiveness









Market resilience




Capital resilience

Helping companies


shareholdervalue









Operational resilience Some examples of operational resilience actions

► Assessing board and management structures► Proactively looking for partnering opportunities► Evaluating asset utilisation (people and equipment) – can we

consolidate? Can we dispose of excess capacity? ► Building flexibility into key components of operational cost

(vessel charter costs; agency workers; working hours, etc.)► Reviewing procurement costs and processes – can we buy

smarter? Do we understand key supplier risk?► Simplification – can I simply my manufacturing/service delivery

process. (e.g., more standardisation; less bespoke)► Reviewing depot/office footprints – can we consolidate? ► Examining operational waste – can it be reduced? ► Focussing on overhead costs and support structures

► Is there duplication across business units? ► Can we outsource? ► Do we understand IT expenditure? Is it appropriately

controlled? ► Controlling discretionary expenditure.

► Eliminating redundant entities from their group structures









Market resilience




Capital resilience

Helping companies


shareholdervalue









Capital resilience

Some examples of capital resilience actions

► Engaging with lenders to agree at an early stage achievable debt covenants and repayment profiles

► Driving a cash culture into their business models – asking:► Can we issue invoices earlier? ► Does our billing process give us the best chance of collecting

cash from trade debtor balances on time? ► Taking a pragmatic view on historical trade debtor disputes► Is there an opportunity to reduce our stock holdings? ► Are we paying suppliers appropriately – on time, but not

before► Identifying tax saving opportunities (e.g., R&D tax credits; salary

sacrifice for pension contributions, etc.)

► Clear vision and strategy, embedded in organisational capability

► Vision and strategy known by wider team – not just senior management

► Strategy used to develop operational priorities

► Appropriate management structure – not ‘top heavy’ with senior management

► Clear reporting lines► Management empowered to take

initiative and make decisions► Appropriate financial monitoring

► Ongoing evaluation of customer and service/product profitability

► Streamline product/service portfolios

► Plans to exit/improve unprofitable customers and products/services

► Continual assessment of manufacturing footprint – is it aligned with strategy and current business focus?

► Explore outsourcing for functions

► Use of benchmarks to pinpoint scale of change in each operational area

► Organisational model aligned to current operations model

► Difficult organisational and management decisions taken without delay

► Appropriate approach to centralisation/decentralisation of direct and indirect functions

► Rewards high-performing employees appropriately

► Tactical savings invested in strategic initiatives

And are most likely to retain the benefits on a sustainable basis if they excel in six leading practices





Retaining improvements on a sustainable basis

Helping companies ‘keep the money’





























And are most likely to retain the benefits on a sustainable basis if they excel in six leading practices


Retaining improvements on a sustainable basis

Helping companies ‘keep the money’
















► Appropriate approach to centralisation / decentralisation of direct and indirect functions


A short, focussed diagnostic can help you identify areas where resilience can be improved


► Short diagnostic:► To identify broad areas where improvements

can be made► To give an indication of potential quantum of

benefits► Focussed on one or more business resilience

areas► Typical scope:

► Analysis of financial data► Benchmarking of performance against selected

peer group of companies► Tour of manufacturing / service delivery facility► Walkthrough of key processes► Workshop with key management

360°Time

Operations – Processes and

performance

Capital – Liquidity and financing

Market – Competitiveenvironment

Transparency and control for

Stakeholders

Market –Business model

Operations– IT

Business resilience in overviewKey messages


Improving business resilience requires a business to ask “how can it work better”?► Business resilience is relevant at all stages of a business’s life cycle► Improving business resilience is not just about cost reduction – improving efficiency and effectiveness,

embracing innovation, and targeted investment are key► Businesses are asking “how can it work better” in four key areas:

► Stakeholders► Markets► Operations► Capital

► A short diagnostic can help you identify potential areas where your business model can work better in these areas.

And can drive improvement in profit and cash flow on a sustainable basis

Any questions?

Thank you



1st December 2015


Break



1st December 2015


Stuart BrownBarclays Bank

Stuart Brown, Director

Working together for the long run

Collaboration - Bank and business together

What does it look like?

• Appropriate Headroom

• Support for the supply chain

• Support contribution

• Relationship & Trust

• Facilitating potential partnerships

Alternative Finance Options

Advances on Invoices• Invoice Discounting – For growth and typically debtors paying within 90 days• Supplier Finance – For suppliers to obtain advance payments from key client debts,

often with stretched terms.

Client(Seller)

Debtor(Buyer)Invoice

Sells debtor

Discounted cash received in advance

@ Debtor rate Pays on due date

43

Alternative Finance Options (contd)

• Trade Finance– Funding from imported goods purchase through to debtor receipt

• UK Export Finance– Government support to extend bank facilities for working capital requirements of exporting goods & services.

44

Customer

Supplier

1

2

3

45

Buyer

45

Shared support

Bank Support

Relationship & Trust

Potential Partnerships

Stuart Brown, Director

Working together for the long run

Thank You



1st December 2015


Garry PriceScottish Manufacturing Advisory Service

Operations in a downturnGarry Price

Turn over £12mDirect £ 7.0Indirect £ 3.8

Unit Costs £0.9m (unit)Sales Value £ 1m

Unit Build Time 1 MonthPayment terms 3 Months from Invoice

EBITDA £1.2mWorking Cap £ 0

DRIllstring Co

DRIllstring Co

Turn over £ 8.0Direct £ 7.0Indirect £ 3.8

Unit Costs £1.35 / UnitSales Value £ 1m


EBITDA £(2.8)

DRIllstring Co


Unit Costs £ 0.983 / UnitSales Value £ 1m


Working capital £ 0.983EBITDA £ 0.136

Lean Background

Lean Background

Waste Identification

Waste Elimination

6 sigma and CI

• Focus on Eliminating Waste• Reducing Cycle Times

• Cut Costs• Reduce inventory

“All we are doing is looking at the timeline, from the moment the customer gives us the order to the point when we collect cash. We are reducing that timeline by removing the non value-adding activities”

Taiichi Ohno – Joint creator of the Toyota Production System

Lean Background

Lean Background

This is not the car industry!

http://www.google.co.uk/imgres?imgurl=http://www.mohnaqua.com/CMSTemplates/MohnAqua/images/template/mohn-aqua-logo.png&imgrefurl=http://www.mohnaqua.com/About-Us/History.aspx&usg=__llsj99js9DZSkIIHTANW8_GbRbg=&h=114&w=132&sz=11&hl=en&start=1&zoom=1&tbnid=OsvCtJBwV7g-tM:&tbnh=79&tbnw=92&ei=FHqRT7K_A8GJ8gOXtuipBA&prev=/search?q=Mohn+Aqua+(UK)+Ltd&um=1&hl=en&gbv=2&tbm=isch&um=1&itbs=1

Lean Background

Waste is Non Value Adding Activity in the process

Lean Background

VA NVALean methods

VA NVATraditional Improvement Activities

Major Improvement

Minor Improvement

VA NVATypical Company

Current KPIRight first time

Total Lead Time to Customer

Waste identification

1 Month

£ 983k


VA

NVA


1 Month

£ 983k

VA

NVA

Waste Elimination

1 Month

£ 983k

Waste Elimination

Success Factors for Change

Skills Incentives Resources Action Plan Confusion

Vision Skills Incentives Resources Action Plan Change

Vision Incentives Resources Action Plan Anxiety

Vision Skills Resources Action PlanGradual Change

Vision Skills Incentives Action Plan Frustration

Vision Skills Incentives ResourcesFalse Starts

Vision Skills Incentives Resources Action Plan Change

Skills Incentives Resources Action Plan Confusion

Vision Incentives Resources Action Plan Anxiety

Vision Skills Resources Action PlanGradual Change

Vision Skills Incentives Action Plan Frustration

Vision Skills Incentives ResourcesFalse Starts

Reference : Tom Peters

£800K

VA

NVA

3 weeks

Waste Elimination

DRIllstring Co


Unit Costs £ 0.946 / UnitSales Value £ 1m


EBITDA £ 0.440

Continuous Improvement

– Focus on Company Productivity– Promoting Best Practice in Manufacturing– Hands-On, Practical Support – Free Diagnostic Review– Project Driven Approach through Direct Company Intervention

Client Enquiry & Initial Contact L1 Introduction, Information, Advice & Signposting

Manufacturing Diagnostic Review L2 Free 1-Day Review, Report & Recommendations

Best-Practice Awareness & Training L3 Best-practice sharing, awareness raising, networking and training activities (1-2-1 & 1-2-Many)

Manufacturing Improvement Project L4 Support, Part-Funded and Delivered by SMAS Practitioners

Referrals including Specialist 3rd Parties L5 Signposting and referral to other SE and HIE services and other recognised industry and business support bodies.

What Next

Garry PriceSMAS PractitionerTel: 07748111522

Email: [email protected]



1st December 2015


Current needs of the Supply ChainPaddy Collins – AubinJohn Glen – Spartan SolutionsMartin Noble – Samphire SubseaGunnar Olsen - TOTAL



1st December 2015


LUNCH



1st December 2015


Interactive Sessions• Strategic Resilience• Operational Resilience• Financial Resilience• Market Resilience



1st December 2015


BREAK



1st December 2015


Round up and Q&A

resilience in oil & gas event - aberdeen

Government & Nonprofit