Fall 2014 Deloitte Consulting Project

2

Team A

Lucrecia Siman

Class of 2017Management Consulting

Political Science

Kyle McHughClass of 2017

FinanceEconomics

Monica Barboza

Class of 2017Management Consulting

Portuguese

3

Team A

Tiphaine Delepine

Class of 2017Finance

Elizabeth Principe

Class of 2017Finance

Applied Math

Lake Heckaman

Class of 2017Finance

Mathematics

Presentation Outline

Solution

Implementation

Benefits

Conclusion

Solving Atlas’s ERP issues will position Atlas for future success

Atlas Energy (Oracle

)

Alberta Oil

(SAP)

Our solutio

n

Deloitte’s Task

Standardize business processesEnhance business continuity

Minimize change impacts

Increase operational efficienciesRetain top talent

Cut costs

Employees : 7,000

Annual revenue : $9 billion

Region: Canada

Alberta Oil

Employees : 12,000

Annual revenue : $13 billion

Region: Canada, US Eastern Europe and North Africa

Atlas Energy Inc

What is an ERP system?

ERP

Business process management

software

EnterpriseResourcePlanning

Automation and

integration of data

Improves effectiveness

and productivity

ERP modules include: HR, financials, supply chain, manufacturing, among others

7

Potential Solutions

Translate Alberta to Oracle

Translate Atlas to SAP

Alternative Option

ERP Deployment Options

Multiple sites or geographic locations

Single Tier becomes too large and costly to customize, maintain and upgrade

Increasing number of M&A’s entering or leaving the organization

Two-Tier

Drivers

What is a two-tier ERP system?

Two-tier ERP

Corporate level ERP system acting as global standard

Other subsidiary level ERP systems for divisions

1

2

2009 2010 20110%

10%

20%

30%

40%

50%

60%

27%32%

48%

Companies considering a two-tier strategy

Trend towards two-tier ERP

According to Constellation Research, the amount of buyers considering two-tier ERP strategies is increasing consistently

Two-tier ERP strategies have been gaining popularity since the 2008 recession

Ventana Research found that 2/3 of companies with over 1000 employees use ERP systems from more than one vendor

Our solution: a two-tier ERP

Maintain Tier 1 ERP system at corporate level and continue operating multiple Tier 2 ERPs at the secondary level. This simplifies future acquisitions

and sales of divisions.

Oracle Hyperion Financial Management

Atlas Energy

(Updated Oracle)

Alberta (SAP)

Future Acquisition

s

Future Acquisition

s

External reporting

Senior Management reporting

12

Many companies have already successfully adopted two-tier strategies

Support for big and small business units• Solved a $2B problem – domestic and foreign subdivisions were in need of ERP

• Lower TCO, under $100,000/year to operate

Rapid global expansion efforts• 140 locations worldwide running on different software systems

• Streamlined management

• Support for future expansion

Fast growing company• $670 million between 2009 & 2010

• Two-tier ERP went live in 6 months

• Plans for 26 international markets in 3 months

Establish Oracle Hyperion Financial Management System

Update Oracle base system in Atlas

Map data from SAP to Oracle

How we will implement our solution

14

Use comprehensive suite to merge Oracle and SAP repositories

Oracle Hyperion Financial

Management Close Suite

Data Relationship Management

Administration tool Patches

Hyperion Disclosure

Management

xBRL

“Hyperion is the latest move in our strategy to expand Oracle’s offerings to SAP customers.”

Charles PhillipsOracle President

15

0%

5%

10%

15%

20%

25%

30%

35%

40%

Savings from Cloud Usage

0-20% 21-40% 41-60% 61-80% Over 80%

Savings Amount

% E

RP

Use

rs E

xper

ienci

ng S

avi

ngs

Use cloud storage and computing to handle big data

Lower ownershi

p cost

Higher return

Total cost savings

16

Benefits of a two-tiered solution

Minimal Disruption

Human Resources

Lower overall costs

Mergers & Acquisitio

ns

Trends in Global

Economy

17

Two-tier helps maintain culture and retain top talent

Retain Atlas’ top talent

Take care of local issues

Maintain unique culture of

companies

Two-tier increases efficiency and savings

Minimal Disruption

Training only for high-level

management

Business operations

continue and improve

Cost Savings

Massive reduction in training costs

Lower purchase price

No lost revenue

Our solution will streamline future M&A activities

Lower cost

Shorter time

Ease of acquisitio

n

33% reduction in implementation costs50% decrease in full implementation time

Large-scale ERP systems cannot keep pace with a changing environment

20

Global economic trends will yield increasing revenue streams for Atlas

Canadian Dollar

Weakens

GDP’s increase/stay the same

Foreign Countries

Import Canadian Oil

0

5

10

15

Oil imports by countryUnited States

China

Japan

Germany

Netherlands

CanadaBarrels per day (millions)

There will be more revenue at stake, so more is saved when business operations are not halted

21

Potential drawbacks of a two tier system

Complexity Operating systems

from different

manufacturers

Upkeep Both

systems will need

periodic updates

Industry Precedent First to deal

with potential

issues

Two-tiered solution addresses concerns

• Implementing a two-tier ERP system is less costly than converting all divisions to a single system

• The unique culture of each division is not compromised and local issues are easily resolved

• Standardizing top management while divisions remain separate facilitates future M&As

• Low-level operations are not interrupted while high-level management is in training

Disruptions are

avoided

M&A is prevalent in the oil industry

Costs are minimize

d

HR remains division-specific

A two-tier ERP system creates standardization that promotes growth while facilitating interaction between divisions.

Recap

Enhance business continuity

Increase operationa

l efficiencies

Minimize cost

Minimize change impacts

Retain top talent

QUESTIONS?

TEAM A APPENDIX

26The Economist, EIA

Energy Trends in the Near Future

Proven reserves of natural gas up by ~30 trillion cubic feetConsumption of coal

Consumption of oilCoal preservesPrice of natural gas

Gro

wth

Declin

e

27Source: Stikeman Elliott 2014 Energy M&A Trends in Canada

Canadian M&A Energy Trends

Resistance to proposed pipeline projects will continue

Increase in consolidation and M&A of smaller companies expected to continue in 2014

Low natural gas prices and oversupply have led many industry leaders to sell assets

28Source: IBIS

Energy Trends – Industry Overlook

To 2019, industry revenue of global oil and gas is forecast to grow at an annualized rate of 4.3% to $5.6 trillionA steady increase in price of energy production is expected, as the world economy recovers from recession

Industry employment is projected to increase over next 5 years, a sign of positive growth

29EIA

Comparing Manufacturing Prices

Areas for growth

Development of midstream infrastructure

Crucial for efficient delivery of growing supplies to markets

Atlas Pipeline PartnersLeading MLP operating 14 plants

Increasing global demand for oil and natural gasGlobal oil consumption grew by

1.4% in 2014

US natural gas consumption grew by 2.4% (larger than the global

increase of 1.4%)

Global oil production increased by .6%

Global natural gas production increased by 1.1%

BP, The Energy Collective, INGAA Foundation

Shale Revolution- Increased production of oil and gas from shale formations using hydraulic fracturing and horizontal directional drilling

Energy Trends

31

Oil production is growing rapidly in North America

2012 2015 2020 2025 2030 2035

North America 0 0.163748372885444

0.299799699163717

0.334145713553896

0.347510648036927

0.371053982377284

Europe & Eurasia 0 0.00377712680098044

-0.022143977082

3609

-0.040927269734

8651

-0.062261088286

4885

-0.049907375550

7416

Africa 0 -0.032655488273

377

0.0535706201441035

0.0441113239428704

0.0329312183256429

0.0397129625798783

-5%

5%

15%

25%

35%

Oil Production Projection

North America Europe & Eurasia Africa

New deposits found in Canada

37 % growth by 203

High growth investments

32Bp.com

Africa is the next big thing in natural gas

2012 2015 2020 2025 2030 20350%

20%

40%

60%

80%

100%

120%

140%

160%

Natural Gas Production Projection

North America Europe & Eurasia Africa

Drawbacks• Lack of

infrastructure and stabilityHighlights

• Africa shows over 140% growth by 2035

Conclusion• If infrastructure can

be secured, investment recommended

Share of Total Oil Consumption 2013

Source: http://www.bp.com/content/dam/bp/pdf/Energy-economics/statistical-review-2014/BP-statistical-review-of-world-energy-2014-full-report.pdf

25%

7%

21%9%4%

34%

Consumption

North AmericaSouth & Central AmericaEurope & EurasiaMiddle EastAfricaAsia Pacific

Share of Total Oil Production 2013

Source: http://www.bp.com/content/dam/bp/pdf/Energy-economics/statistical-review-2014/BP-statistical-review-of-world-energy-2014-full-report.pdf

19%

9%

20%32%

10%

10%

Production

North AmericaSouth & Central AmericaEurope & EurasiaMiddle EastAfricaAsia Pacific

35Source: http://www.bp.com/content/dam/bp/pdf/Energy-economics/statistical-review-2014/BP-statistical-review-of-world-energy-2014-full-report.pdf

Oil Change 2013 over 2012

North America

South & Central America

Europe & Eura-

sia

Middle East

Africa Asia Pa-cific

WORLD

Pro-duc-tion

0.087 0.002 0.002 -0.007 -0.057 -0.017 0.006

Con-sump-tion

0.013 0.044 -0.004 0.022 0.032 0.015 0.014

-7.00%

-5.00%

-3.00%

-1.00%

1.00%

3.00%

5.00%

7.00%

9.00%

Perc

en

tag

e

36Source: http://www.bp.com/content/dam/bp/pdf/Energy-economics/statistical-review-2014/BP-statistical-review-of-world-energy-2014-full-report.pdf

Energy Industry 2013 BP Statistics

+2.7% growth in NA gas

consumption, with above-

average growth

+1.1% growth in global gas production

+1.1m b/d growth of

US oil production, the largest in the world

6.3m b/d China’s net oil imports, the world’s

second largest

Global oil trade in

2013 grew by 1.7% or 0.9 million

b/d

37http://www.srr.com/article/trends-and-challenges-oil-and-gas-industry

Oil and Gas Industry New Technologies

Focus on developing technological solutions, increasing the world’s producible reserves.

Development of the Subsea Oilfields

Moving processing to the ocean floor reduces infrastructure costs and production costs, greatly improving return on investment.

The Shale Play

Exploitation of shale basins using hydraulic fracturing and horizontal drilling techniques has increased U.S. crude output.

Enhanced Oil Recovery

Boosting oil recovery could unlock around 300 billion barrels of oil, reducing the risk and the infrastructure cost.

38International Journal of Production Economics, An AHP-based approach to ERP System selection, Wei, 2004

Components of Enterprise Resource Planning

Human Resource

Management

Customer Relationship Management

Manufacturing Resource Planning

Supply Chain Management

Financial Resource

Management

• Cloud Data Storage

• Social Media• Mobile

Accessibility• Two-Tier

Trending Towards

ERP Global Advantage

Integrated ERP systems allow access to real time data and the ability to standardize metrics to find inefficiencies faster and easier

Integration of Supply Chains with ERP allows Atlas to see where their inventory is throughout the entire supply chain (allows for planning and resupply more quickly)

Connecting to cloud computing ERP services would allow global connection throughout company, reducing necessity for the same job roles in differing location (allows a reduction in employees)

40

Comparing Oracle and SAP ERP systems

Oracle• Low market share

• Need more through vetting

SAP• Customization cumbersome

• High personnel requirement

90% of users realize ROI in 5 years

Software is trending towards cloud and big data

Projects have a larger scope and scale

Moving toward increased IT capabilities

41http://www.futurismtechnologies.com/blog/benefits-erp-software-energy-oil-gas-industries/

Competitiveness through ERP

Oil and gas exploration and

production is an extremely

expensive enterprise.

ERP

Easy integration: costs and schedules

Risk management: contingency

plans

Efficient project

management: within the

budget and on time

Simplification of large

projects: like joint ventures

and international

Provides assistance in

new employee training:

critical and technicalTo reduce this

heavy burden, a variety of

methods are used to improve management of

oil and gas production.

42

Instillation of High-Level System

A high level system allows for vital operations to be integrated, while day-to-day operations are fully functional

How Does it Work?

Companies essentially act as independent and separate entities

Maintain current ERP systems while making necessary upgrades and patches

Use the high-level system to manage vital operations like accounting software, financial systems, and production planning

43Source: http://www.eia.gov/todayinenergy/detail.cfm?id=15251

Need for Minimal Disruption

With low volatility, North American oil is primed for high sales, meaning minimal disruption is a must

Atlas

Net daily production of 261.3 million equivalents per day (6% increase over 2014 Q1)

33% Increase in Q2 to 2,100 barrels per day

20% increase in production capacity

Alberta

Strong economic growth with an expected trend of 3% growth

Massive spending on oil sands projects is now translating into sharply higher production and exportsWith more takeaway capacity (given by Atlas) Alberta can raise prices and turn a higher profit margin