Risk Mitigation within the Current Drilling Services Market The Challenges The Current and Future Environment Asia Offshore Energy Conference Denpasar, Indonesia 30 September 02 October 2015
The Challenges Collapsed Oil Prices, Global Financial Crisis, Geopolitical Instability Global Production: +/- 92.8 Million Barrels Per Day Global Consumption: +/- 92.8 Million Barrels Per Day (OPEC maintaining +/- 2% positive production margin above required consumption) Pending Demands: - increasing energy needs - traditional hydrocarbon resources, currently economical yet finite - alternate energy sources, capabilities, development costs, and need
The Challenges: The Cyclic Nature of Our Energy Industry The Highs and Lows 15 Source Jeff Desjardins
The Challenges: The Cyclic Nature of Our Energy Industry- Peak to Trough -63.5%* Source Jeff Desjardins
The Challenges: The Cyclic Nature of Our Energy Industry The Recovery Periods 15 - As of September 2015 Source Jeff Desjardins
The Challenges: The Driving Forces Controlling the Cycles Source Jeff Desjardins
The Challenges: Current Driving Forces - Geopolitical Interests and Market Positioning Supply has played a critical role in the current market. Industry overestimated demand and underestimated supply in mid-late 2014. The decision by OPEC not to cut production in 11/2014 severely impacted markets. In addition to the fact that Saudi Arabia, as a single albeit principle energy source, is reportedly incurring reduced revenues exceeding US$10 Billion per month, consider the Value of Current Low Oil Prices: reduction in financial strengths (Arabian vs. Persian Gulf, Russia vs. Europe) collapse of independence from traditional sources (shale oil / tar sands) reduction of value in alternate energy source investments (solar, tidal, wind)
The Current and Future Environment: Current Global Rotary Rig Drilling Activity Asia Pacific: 220 Middle East: 393 Africa: 96 Europe: 109 North America: 1,014 Latin America: 319 Total Rotary Rigs Running Globally This Week: 2,151 rotary rigs We continue to remain active in all regions, worldwide We continue to consume oil at +/- 93 Million Barrels Per Day
Northwest Shelf Australia US$60-80B Development 40 Trillion Cubic Feet Reservoir
Timor Sea Natuna Sea
Papua New Guinea - world record gas production tests
Papua New Guinea - frontier innovation - developing infrastructure
Cepu, Indonesia
South China Sea Brunei Indonesia Malaysia Thailand Vietnam
Offshore Myanmar - Growing market Western China - Increasing demands / cross border production
Iran - South Pars, Persian Gulf Assaluyeh, Iran
Qatar North Field, Arabian Gulf
Norway
Falklands Southern Ocean
Hibernia East Coast Canada
North Slope
Sakhalin
Polar Arctic Frontiers
The Current and Future Environment Immediate Concerns / Pending Impact: The horrific loss of experience with +/- 200,000 employees terminated within the previous six (6) months; the core loss of 20-30 year experienced personnel; further increasing losses of competent drilling, exploration, completion, production, marine and well service industry personnel and all supporting industries through daily / weekly reductions. The increase in training standards over the last decade has clearly proven to be effective within those areas of the world whereby such demands for competence are legislated or driven by strong corporate policy to ensure the preferred elimination of risk with business processes. Growing concern due to the fact that the significant decline in training budgets from Q42014 to Q32015 well exceeds the reduction in activity
Oil Price ( $.bbl) *indicative TRIF *indicative ALERT WELL CONTROL The Current and Future Environment The Fork In The Road For Risk Management 120 12 100 Oil Price ($/bbl) 10 80 8 60 6 40 4 20 2 0 Time 0
The Current and Future Environment The Required Focus: Leadership Continual Commitment to Creation of Value - leadership can not lose focus of the fact that the true value of their organization is not simply a calculation of the bottom line, especially in light of the fact that this another down cycle, albeit a brutal cycle Consideration towards the excessive costs that will be incurred to re-man, re-train, and retool the exploration and well service industry when we come out of the current downturn.
The Current and Future Environment The Required Focus: Leadership Model Coach Require - Model the corporate behavior sought and set and maintain the standard - Coach, train (and train, and train), and continually develop our personnel - Require compliance; ensure the standards sought are adopted / applied
The Current and Future Environment The Required Focus: What can we do, or rather what can YOU do, as active participant within the Asia Offshore Energy Conference, to ensure that we DO NOT ALLOW our Process Safety Standards to decline or take a secondary position to cost cutting in the current industry downturn? ensure the continual application of international standards of competence? ensure the application of proven process safety standards?
Conclusion / Communications Thank You