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Names of group members omitted on purpose
Oil Services Industry
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AgendaAgenda
• Industry Analysis• Macro Impacts• Hubbert’s Peak • Schlumberger Analysis• Forecast Analysis• Recommendations• Q&A - Graduate…S research team
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Oil Service SectorOil Service Sector
Upstream The exploration and production of oil and gas
Downstream Oil and gas operations after the production phase and through to the point of sale, whether it be the gas pump or the home heating oil truck
We are within the Upstream Oil Services sector
Producers, refiners and marketers of oil, and associated carriers and service contractors.
There are two major sectors within the oil industry
OS is broken into two major areas: Drilling and Oilfield Services
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Oil Service - ServicesOil Service - Services
Seismic TestingTransportation Services
Directional Services
Assist the drilling companies in setting up oil and gas wells.
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Oil Service - DrillingOil Service - Drilling
Land Rigs
5,000 feet to upwards of 30,000 feet
Companies that physically drill and pump the oil out of the ground
Types of Rigs
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Oil Service IndustryOil Service Industry
Submersible Rigs
used for ocean, lake, swamp drilling
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Oil Service IndustryOil Service Industry
'jacked-up' allows it to be above the highest anticipated waves.
Jack-ups
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Industry factsIndustry facts
“Petroleum is the single largest source of energy used in the United States.“ - Department of Energy
“About 90% of these products are fuels “
Total Industry revenue amounts to $ 231 Billion
“Oil accounts for 40 % of the United States' energy supply and a comparable percentage of the world’s energy supply”
“Oil is a scarce commodity but is it still cheap?”
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… … and a little fictionand a little fiction
“There is no such thing as global warming““There is plenty of oil to last us for centuries
to come“
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Real GDP in Major Oil ConsumersReal GDP in Major Oil ConsumersReal GDP
0.00
2000.00
4000.00
6000.00
8000.00
10000.00
12000.00
1999 2000 2001 2002 2003 2004 2005
Year
Real
GD
P i
n B
illi
ons
United States
Japan
China
India
Germany
11,135
5,062
1,979
1,888630
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Real GDP Growth Rate in Major ConsumersReal GDP Growth Rate in Major Consumers
Real Growth Rate
-2.00
0.00
2.00
4.00
6.00
8.00
10.00
12.00
1999 2000 2001 2002 2003 2004 2005
Year
% G
row
th
United States
Japan
China
India
Germany
10.10%
8.43%
3.52%
2.62%
1.16%
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Oil Consumption in Major ConsumersOil Consumption in Major Consumers
Oil Consumption Summary
0
5000
10000
15000
20000
25000
2001 2002 2003 2004 2005
Year
Barr
els
United States
J apan
China
India
Germany
20,656
7,058
5,360
2,586 Germany
2,672 India
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Oil Consumption Growth RateOil Consumption Growth Rate
Oil Consumption Growth Rate
-5
0
5
10
15
20
2002 2003 2004 2005
Year
% C
han
ge
United States
Japan
China
India
Germany
Largest Growth RatesChina = 4.22%India = 3.85%
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Shift Caused by Increase in DemandShift Caused by Increase in Demand
Oil Industry
0
1
2
3
4
5
6
1 2 3 4 5 6
Quantity
Pri
ce (
$)
D1
S1
D2
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Average Change in Crude Oil PriceAverage Change in Crude Oil Price
Average Crude Oil Price
50.04
37.66
27.69
22.8123.00
16.56
27.39
0.00
10.00
20.00
30.00
40.00
50.00
60.00
1999 2000 2001 2002 2003 2004 2005
Year
Pri
ce p
er
Barr
el
Average Crude Oil Price
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http://www.rsoftconsulting.com/hubbert.htm
Cheap Oil is it real?Cheap Oil is it real?
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Hubbert’s Peak TheoryHubbert’s Peak Theory• Marion King Hubbert presented paper in 1956 to American Petroleum
Institute
• “.. fundamental observation that the amount of oil under the ground is finite”
• “Peak oil is peaking of production of a particular area”
• Early in the curve (pre-peak), the production rate increases due to the discovery rate and the addition of infrastructure. Late in the curve (post-peak), production declines due to resource depletion
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Schlumberger: Who are we?Schlumberger: Who are we?
Schlumberger is considered the leading oilfield services provider.
Founded in 1926
We are trusted to deliver superior results and improved E&P (Exploration and Production), and performance for oil and gas companies around the world
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Oil Services Industry BreakdownOil Services Industry Breakdown
32%
13%
9%
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Products and servicesProducts and servicesExploration/Development
Drilling
Seismic Testing
Reservoir evaluation
Production
Artificial/Directional Lifts
Cementing/Zonal Isolation
Efficiency
Coil tubing - efficient remediation
Well Stimulation
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Production and cost issuesProduction and cost issues
• $619 Million dollars was invested in Research and Development in 2005. (3% operating revenue)
• Specialized Training for highly skilled employees (new and existing), equipment (trucks, rigs, etc)
• Environmental regulatory adherence
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• Auto regression to forecast ‘Total revenue’• Used Research & Development• Researched through Bloomberg since 2000• Relevant predictors were R&D (qtr-0) – (qtr-6)• R&D (qtr-1)• R&D (qtr-2)• R&D (qtr-3)
Schlumberger Forecasting ApproachSchlumberger Forecasting Approach
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R&D ExpendituresR&D Expenditures
$ 169,482 M
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Revenue ForecastRevenue Forecast
10% MAPE
35% Increase inR&D
2007 Total RevenueOver 18B
TSTATS1.1 – 3.3
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RecommendationsRecommendations• Increase from R&D 3% to 5% of operating
revenue
• Focus R&D on efficiency drilling and exploration components
• Strategizing on alternative energy such as hydro and ethanol
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Ultimate Task Goal Desired By Oil Services IndustryUltimate Task Goal Desired By Oil Services Industry
Oil Industry
0
1
2
3
4
5
6
1 2 3 4 5 6
Quantity
Pri
ce (
$)
D1
S1 S2
D2
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Q&A with Graduate…sQ&A with Graduate…s
We are truly a partner to the GLOBE