Bull or Bear: Is there gold in them there markets?
Are we on the verge of another California gold rush, boom market or depression? No one knows. What is certain; risk mitigation must be central to any business model.
This year may be especially challenging for the oil industry. Recently, conventional wisdom is downgrading average crude oil prices for 2019. Reasons include a plentiful supply and the other usual suspects.
This pundit tends to agree with a trading WTL trading range averaging in the mid $50s/bbl. There is likely more downward pressure than upward. If true, hopes for top/bottom line growth may not materialize.
The sector can continue to experience market difficulties, consolidations/spinoffs, reductions in force, etc. However, this need not be the fate for many.
For several years several studies have suggested that significant value is available if organizations in the oil sector implement and sustain a high level of Operational Excellence. Typical opportunities include:
- Improved HSE
- Cost Savings
- Improved Asset Performance
- Increased Production
The resulting impact on the Balance Sheet and Net Income Statement can be substantial. The implication is that Earning per Share will also grow.
The upstream sector has already undergone Austrian economist Joseph Schumpeter’s (1883-1950) Creative Destruction—some might refer to this process as disruption. This is widely attributed to information technology and fraking.
Therefore, any hopes that stronger crude prices will somehow ‘save’ the organization are misplaced. The clear strategic hope lies with Operational Excellence.
Since we know that ‘hope is not a strategy,’ only effective business processes will add shareholder value. Time to roll up your operational sleeves and get to work.
What is Your Organization’s Excuse for Not Implementing Operational Excellence?
Critical Mass: Value from the RBC Framework
Nuclear physicists define the term, “critical mass” as the amount of fissile material whereby a nuclear reaction is self-sustaining. From that original definition, the construct is further developed along societal and political terms as a function of the environment and number of adopters and their interdependencies that create enough of a consensus for individual actions that sustains an undertaking.
In 1996, the author published the first of several case studies on a societal interaction model based on the Relationships, Behavior and Conditions (RBC) construct among economic actors. Previously the model was only in the domain of academia.
This blog addresses contemporary issues from the RBC perspective and whether in the present state they are sustainable or not. Many readers may be familiar with the “Innovation Adoption Curve.” RBC seeks to enlighten the causality of behaviors that cause movement towards the critical mass that generates movement along this diffusion curve.
- Agility, Resiliency, Sustainability May 14, 2020
- Disrupting Disruption! May 11, 2020
- Tumultuous Decade: What’s Next for Oil & Gas? April 20, 2020
- A Funny Thing Happened on the Way to . . . Innovation! April 4, 2020
- Is Big Data Analysis Being Applied? March 24, 2020
Other Blogs by Dr. Shemwell
Dr. Shemwell is an author/contributor for the following 3rd party blogs.
So, You Want to be an Entrepreneur
Dr. Shemwell is a member of the Global Energy Mentors (GEM) Leadership Team. Every month he or one of his colleagues is posting timely tips to help entrepreneurs navigate the energy start up sector. Check out the Landing Page.
Governing Energy Blog
BTOES Insights is the content portal for Business Transformation & Operational Excellence opinions, reports & news. Dr. Shemwell is a contributor.
Consult 2050 connects organizations with a wide range of consultants all around the world. The firm operates an online marketplace for consultancy services.
Essays on Business and Information
This two volume set covers a series of newsletters and opinion pieces published circa 2002-2009, including Bug Lore–Lessons for the Online Economy that addressed real time systems vulnerabilities from Y2K (1998-99).
About the Author
Dr. Scott M. Shemwell has over 30 years technical and executive management experience primarily in the energy sector. He is the author of six books and has written extensively about the field of operations. Shemwell is the Managing Director of The Rapid Response Institute, a firm that focuses on providing its customers with solutions enabling Operational Excellence and regulatory compliance management. He has studied cultural interactions for more than 30 years—his dissertation; Cross Cultural Negotiations Between Japanese and American Businessmen: A Systems Analysis (Exploratory Study) is an early peer reviewed manuscript addressing the systemic structure of societal relationships.