[fa icon="calendar"] Apr 24, 2019 / by Tyler Hufstetler
Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat. – Sun Tzu
Occidental’s recent $38 billion challenger bid against Chevron’s $33 billion to acquire Anadarko Petroleum – the largest takeover in the global oil industry in three years – undoubtedly raises the stakes for the three companies. Regardless of the outcome, this is an illustrative use-case demonstrating how a supermajor or major, in need of a larger footprint in the Permian Basin, must manage the profound changes that are about to come.
While both Chevron and Oxy’s strategy behind the acquisition is well-reported – mainly to establish a larger presence in West Texas – whoever buys Anadarko will need to develop and execute tactics to quickly and effectively integrate Anadarko into its current operations. This includes SOPs, safety culture, and other back-office tasks.
Although acquisitions are commonplace, the process is complex. Even if the supermajor or major overcomes its own internal silo problems, often the acquired company has not. The latter tends to favor the status quo, conducting business as usual. This phenomenon is a perpetual challenge for M&As in the commodities industry (and keeps consultants employed).
Anyone who has worked in the O&G industry and visits various business units knows just how much personalities shape operations at each location. Such departmental tunnel vision comes at a great cost to the company’s efficiency, profitability, and even safety. When you’re merging two big companies, the business cost is even greater.
The first step to breaking down institutional barriers among locations – and therefore increase efficiency, profitability, and safety – is to integrate and improve the way people work across business units. When workers perform tasks according to vetted SOPs, production becomes safe and predictable.
For example, in recent years Chevron has spent considerable time and money instilling a safety culture, and these efforts have proven effective. However, the new challenge facing Chevron – if its acquisition is successful – is the efficient management of the company’s own SOP integration with Anadarko. Surely there is an opportunity to collaborate on procedures at various types of wells. The typical approach of “each region is different so let them continue” will prevent Chevron and their newly acquired employees from reaching their greatest operational potential. Consistent and transparent SOPs across business units will improve:
Following its acquisition, Chevron or Oxy has a limited amount of time to bring its people together and integrate processes across Anadarko before the business cost begins to add up. To their benefit, technology solutions are available that can accelerate and add significant value to their efforts. For example, Parsable is already assisting some of the world’s largest O&G and industrial companies develop solutions to similar challenges by giving these organizations the tools to share ideas, iterate process improvement, deploy SOPs, and manage large decentralized workforces.
By leveraging technology purpose-built for the unique operational needs of enterprise O&G companies, whoever acquires Anadarko will:
There is no doubt that the industry will be closely monitoring the integration of Anadarko into Chevron’s or Oxy’s operations. All eyes will be on new capital investment and tracking increase in production. And with increased and proven demand of West Texas shale, Anadarko will most likely be only the first of many major acquisitions this year.
About The Author
Tyler Hufstetler leads global deployments for the Parsable platform and is strategically aligned with energy customers. He has been leading teams in de-centralized operations around the world for 13 years. Tyler has worked in oil and gas, utilities, and the Department of Defense. He is a graduate the University of Southern California as well as the United States Military Academy at West Point.