Fun, new life, and growth are the themes that prevail in this month’s miscellany of truncated articles. These are the full versions of the “Drilling Deeper” news items that appeared as abbreviated versions in the print edition of PBOG’s July 2015 issue.
Langan Opens in Houston
Langan Engineering and Environmental Services has opened its Houston office. With this being the firm’s first location in Texas, the company has indicated its commitment to supporting clients and partners in the oil and gas industry, while also providing an integrated suite of engineering and environmental services to the real estate development market in the greater Houston region and throughout the state. Langan’s Houston office—located at 16225 Park Ten Place in the energy corridor of Houston—is led by W. Kyle Bogardus, PE, Senior Associate, and Chip Day, Senior Project Manager. Principals Gregory Elko, PE, and Rory Johnston, PE, work with the Texas team setting strategy and managing Houston-based projects, which span various oil and gas markets around the United States. In fact, the firm is well-positioned to provide local expertise in three prominent shale plays: Marcellus, Utica, and Bakken, via Langan’s existing offices in Pittsburgh, Cleveland, and Bismarck.
“Our nation’s economic future is connected to oil and gas, and the heart of that industry is in Houston,” said David T. Gockel, President/CEO, Langan. “We already support significant oil and gas projects around the country ranging from exploration to transmission to remediation, so being in Houston puts us closer to more clients and facilitates our ability to bring value to their business. The Langan local team is fully committed to Houston, and we look forward to being a Texas firm far into the future.”
In addition to applying its consulting expertise to the oil and gas industry, Langan is providing geotechnical, site/civil, and environmental engineering services to developers and architects in Houston, where many existing clients and partners are re-vitalizing the city and re-shaping its skyline.
“Langan has long recognized Texas as a great place to practice, and I am proud to plant my roots here in Houston,” said Bogardus, a military veteran who performed two tours of duty in Afghanistan and Iraq/Kuwait as a civil engineer during his 15-year career. “As one of the fastest growing metropolitan markets in the country, opening an office in Houston and staffing it with technical experts familiar with the local jurisdictions and environmental conditions makes strategic sense for our firm and we will no doubt help our clients achieve their goals anywhere they need our services.”
Unconventional Techniques Breathe New Life
As much as 141 billion barrels of potential incremental hydrocarbon resources could be unlocked if drilling and completion techniques refined in U.S. shale plays are applied to conventional, low-productivity oil plays outside of North America, according to new analysis from IHS (NYSE: IHS), the leading global source of critical information and insight.
Curious as to what the potential might be if newer techniques were applied to old plays, IHS Energy researchers conducted a high-level assessment that identified more than 170 mature oil plays worldwide with untapped oil potential that might benefit from horizontal drilling and hydraulic fracturing.
“While our analysis was an initial, high-level assessment of low productivity plays outside the U.S., we were quite surprised at the impressive potential for increased recovery using these unconventional techniques,” said Susan Farrell, vice president of upstream energy research at IHS, and one of the authors of the IHS analysis. “As many of the world’s oil and gas producers struggle to lower costs and optimize existing assets, we wondered what kind of impact the application of newer technological innovations could deliver to the industry in terms of expanding conventional resource potential outside North America.
The rock properties in these mature plays are less than desirable for production using conventional techniques and, as a result, many of them have produced only a small portion of the total oil in place. Of the estimated 141 billion barrels of potentially recoverable oil using unconventional techniques, the IHS assessment determined that 135 billion of those barrels exist in plays that would likely require hydraulic fracture stimulation to produce, while approximately 6 billion barrels sit in plays that may not require hydraulic fracturing.
“Drilling horizontal wells allows access to thinner zones, where vertical wells are not commercially productive,” said Leta K. Smith, Ph.D., director of upstream energy research at IHS Energy, and the principal analyst behind the IHS analysis. “Also, horizontal wells allow engineers to connect compartmentalized portions of the reservoir with one well instead of many vertical wells, which addresses cost and footprint considerations, as well as increasing the well-to-reservoir contact ratio.”
In addition, the study said, modern seismic and measurement-while-drilling (MWD) technologies would allow operators to achieve better placement of fractures to take advantage of natural fracturing and other geologic features for maximizing production and avoiding water zones. “Combined with other technologies developed for shale development, such as pad drilling, these improvements could breathe new life into some of these older, conventional fields,” Smith said.
Three recent examples were cited in the IHS analysis that showed operators already leveraging some of these newer techniques to address different geologic and production challenges. They included the Saint Martin de Bossenay field in the Paris (France) Basin; the Tahe Complex in China’s Tarim Basin, and the Bir Ben Tartar field in Tunisia.
The Saint Martin de Bossenay field was first discovered in 1959. By 1996, the field’s wells produced mostly water and it was abandoned. Recently, the field was redeveloped using modern technology, including seismic specifically targeting non-produced portions of the field. Hydraulic fracturing was not used, since it is not permitted in France. Following redevelopment, the field’s recovery factor improved from 40 percent to 44 percent—adding 1 million barrels to the 2P (proven plus probable reserves).
According to the IHS analysis, the numbers of low-productivity conventional fields that could benefit from new technologies are relatively evenly distributed across the various regions of the world, but two-thirds of the estimated potential incremental oil volumes are in the Middle East and Latin American countries. The top four countries outside of North America for potential incremental oil recovery in low-productivity conventional plays include Iran, Russia, Mexico, and China.
While many of the top-15 countries identified as potential for increased production are access-limited for international oil companies, Mexico, in third-place, holds substantial incremental oil. With the upcoming opening of the country’s upstream sector, Smith said, Mexico may see new investment in these types of resources. “For operators with experience in these drilling and completion techniques,” she said, “Mexico may be an attractive option for future investment, along with some of the 14 countries identified outside the Middle East, including Brazil, the U.K., Norway, Congo, and Indonesia.”
Economic Growth Expected to Continue
Economic growth is expected to continue in the United States throughout the remainder of 2015, say the nation’s purchasing and supply executives in their Spring 2015 Semiannual Economic Forecast. Expectations for the remainder of 2015 continue to be positive in both the manufacturing and non-manufacturing sectors.
These projections are part of the forecast issued by the Business Survey Committee of the Institute for Supply Management (ISM). The forecast was presented May 6, 2015, by Bradley J. Holcomb, CPSM, CPSD, chair of the ISM Manufacturing Business Survey Committee; and by Anthony S. Nieves, CPSM, C.P.M., CFPM, chair of the ISM Non-Manufacturing Business Survey Committee.
Fifty-five percent of respondents from the panel of manufacturing supply management executives predict their revenues will be 9 percent greater in 2015 compared to 2014, 16 percent expect an 8.9 percent decline, and 29 percent foresee no change in revenue. This yields an overall average expectation of 3.5 percent revenue growth among manufacturers in 2015, which is a meaningful decrease of 2.1 percentage points from December 2014 when the panel predicted a 5.6 percent increase in 2015 revenues. With operating capacity at 79.5 percent, an expected capital expenditure increase of 3.1 percent, prices paid for raw materials expected to decrease a 0.9 percentage point for all of 2015 compared to 2014, and employment expected to grow 0.7 percent for the balance of 2015, manufacturing is positioned to grow revenues while containing costs through the remainder of the year. “With 14 of the 18 industries within the manufacturing sector predicting revenue growth in 2015 when compared to 2014, U.S. manufacturing continues to move in a positive direction,” said Holcomb.
The 14 industries reporting expectations of growth in revenue for 2015—listed in order—are Nonmetallic Mineral Products; Paper Products; Primary Metals; Furniture and Related Products; Machinery; Textile Mills; Food, Beverage and Tobacco Products; Fabricated Metal Products; Plastics and Rubber Products; Chemical Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances and Components; Computer and Electronic Products; and Transportation Equipment.
Fifty-four percent of non-manufacturing purchasing and supply executives expect their 2015 revenues to be greater by 8.9 percent than in 2014. Overall, respondents currently expect a 2.9 percent net increase in overall revenues, which is less than the 10 percent increase that was forecast in December 2014. “Non-manufacturing will continue to grow for the balance of 2015. Non-manufacturing companies continue to operate very efficiently as reflected by the high percentage of capacity utilization. Supply managers have indicated that overall costs have been minimally impacted with pricing projected to increase 0.6 percent over the year. Overall employment is projected to grow a modest 2 percent. Thirteen out of 18 industries are forecasting increased revenues which is less than the 17 industries that forecasted increased revenues last year. Despite a cooling off in the rate of growth, the non-manufacturing sector will continue on the path of economic growth throughout the year,” Nieves said.
The 13 non-manufacturing industries expecting increases in revenue in 2015—listed in order—are: Retail Trade; Transportation and Warehousing; Wholesale Trade; Construction; Agriculture, Forestry, Fishing and Hunting; Professional, Scientific and Technical Services; Information; Finance and Insurance; Accommodation and Food Services; Health Care and Social Assistance; Arts, Entertainment and Recreation; Public Administration; and Educational Services.
Purchasing and supply managers report that their companies are currently operating on average at 79.5 percent of normal capacity, representing a decrease from the 83.7 percent reported in December 2014, as well as a decrease from the 82.3 percent reported in April 2014. The 12 industries reporting operating capacity levels at or above the average capacity of 79.5 percent—listed in order—are: Wood Products; Paper Products; Plastics and Rubber Products; Nonmetallic Mineral Products; Apparel, Leather and Allied Products; Miscellaneous Manufacturing; Chemical Products; Printing and Related Support Activities; Fabricated Metal Products; Food, Beverage and Tobacco Products; Furniture and Related Products; and Primary Metals.
Non-manufacturing purchasing and supply executives report that their organizations are currently operating at 86 percent of normal capacity. This is 1.6 percent less than what was reported in December 2014 and less than the 86.3 percent reported in April 2014. The following nine industries operating at capacity levels above the average rate of 86 percent—listed in order—are: Real Estate, Rental and Leasing; Educational Services; Information; Utilities; Agriculture, Forestry, Fishing and Hunting; Public Administration; Retail Trade; Health Care and Social Assistance; and Finance and Insurance.
Production capacity in manufacturing is expected to increase 3.4 percent in 2015. This increase is less than the 5.6 percent increase predicted in December 2014 for 2015, and also less than the 5.3 percent increase reported in December for all of 2014. This nevertheless reflects the continuing strength in the sector as 42 percent of respondents expect an average capacity increase of 10.7 percent, 9 percent expect decreases averaging 13.5 percent, and 49 percent expect no change. The 13 industries expecting production capacity increases for 2015—listed in order—are: Nonmetallic Mineral Products; Textile Mills; Transportation Equipment; Electrical Equipment, Appliances and Components; Furniture and Related Products; Paper Products; Food, Beverage and Tobacco Products; Chemical Products; Fabricated Metal Products; Machinery; Plastics and Rubber Products; Apparel, Leather and Allied Products; and Primary Metals.
The capacity to produce products or provide services in the non-manufacturing sector is expected to increase 2.6 percent during 2015. This compares to an increase of 3.6 percent reported for 2014 and a prediction in December 2014 for an increase of 4.3 percent for 2015. For 2015, 23 percent of non-manufacturing respondents expect their capacity to increase by an average of 14 percent, and 6 percent of the respondents foresee their capacity decreasing by an average of 11 percent. Seventy-one percent expect no change in their capacity. The nine industries expecting to add to their production capacity in 2015—listed in order—are: Accommodation and Food Services; Retail Trade; Finance and Insurance; Information; Public Administration; Wholesale Trade; Management of Companies and Support Services; Health Care and Social Assistance; and Other Services.
Predicted Capital Expenditures—2015 vs. 2014
Survey respondents expect a 3.1 percent increase in capital expenditures in 2015. This is less than the December 2014 forecast when the panel predicted an increase of 3.7 percent for 2015. Currently, 29 percent of respondents predict increased capital expenditures in 2015, with an average increase of 31 percent, and the 20 percent who said their capital spending would decrease an average of 30.2 percent. Fifty-one percent say they will spend the same in 2015 as they did in 2014. The nine industries expecting increases in capital expenditures in 2015 compared to 2014—listed in order—are: Nonmetallic Mineral Products; Transportation Equipment; Fabricated Metal Products; Primary Metals; Chemical Products; Food, Beverage and Tobacco Products; Paper Products; Miscellaneous Manufacturing; and Electrical Equipment, Appliances and Components.
Non-manufacturing purchasing and supply executives are expecting to increase their level of capital expenditures 1.5 percent in 2015 compared to 2014. The 34 percent of members expecting to spend more predict an average increase of 16.9 percent. Sixteen percent of respondents anticipate a decrease averaging 26.7 percent. Fifty percent of the respondents expect to spend the same on capital expenditures in 2015 as in 2014. The eight industries expecting an increase in capital expenditures in 2015 from 2014—listed in order—are: Accommodation and Food Services; Retail Trade; Professional, Scientific and Technical Services; Agriculture, Forestry, Fishing and Hunting; Finance and Insurance; Wholesale Trade; Arts, Entertainment and Recreation; and Management of Companies and Support Services.
Prices—Changes Between End of 2014 and April 2015
In the December 2014 forecast, respondents predicted an increase of 1.2 percent in prices paid during the first four months of 2015; and they now report prices have decreased by 1.9 percent for the period. The 19 percent who say their prices are higher now than at the end of 2014 report an average increase of 3.8 percent, while the 42 percent who report lower prices report an average decrease of 6.3 percent. The remaining 39 percent indicate no change for the period. Of the 18 manufacturing industries, only one industry, Nonmetallic Mineral Products, reported increases in prices paid for the first part of 2015.
Non-Manufacturing respondents report that their purchases in the first four months of this year cost an average of 1 percent more than they cost at the end of 2014. This is 0.8 percentage point lower than the 1.8 percent increase predicted in December 2014 for the first four months of 2015. Forty-six percent of the non-manufacturing respondents report the prices they paid increased an average of 5.3 percent in the first part of 2015. Fifteen percent report price decreases averaging 9.1 percent. The remaining 39 percent indicate no change in prices paid in the first four months of 2015. The 14 industries reporting an increase in prices paid in the first part of 2015 –listed in order—are: Retail Trade; Professional, Scientific and Technical Services; Other Services; Real Estate, Rental and Leasing; Arts, Entertainment and Recreation; Educational Services; Wholesale Trade; Finance and Insurance; Public Administration; Health Care and Social Assistance; Construction; Accommodation and Food Services; Transportation and Warehousing; and Management of Companies and Support Services.
Prices—Predicted Changes Between End of 2014 and End of 2015
When asked to predict 2015 price changes, 31 percent of respondents expect the prices they pay to increase by 4 percent for the full year of 2015 compared to the end of 2014. At the same time, 35 percent anticipate decreases averaging 6.1 percent. Including the 34 percent who expect no change in prices, survey respondents expect net average prices to decrease by 0.9 percent for the entire year of 2015, indicating that prices are expected to rise 1 percentage point for the remainder of the year. Out of 18 manufacturing industries, six are predicting increases in prices for all of 2015 in the following order: Nonmetallic Mineral Products; Printing and Related Support Activities; Transportation Equipment; Primary Metals; Food, Beverage and Tobacco Products; and Fabricated Metal Products.
For 2015, non-manufacturing respondents expect the prices they pay to increase 0.6 percentage point when compared to the prices at the end of 2014. Given that respondents have reported that prices have increased 1 percent through April 2015, the prediction is for prices to increase 0.6 percentage point over the remainder of the year. Fifty-two percent of the respondents anticipate price increases averaging 3.8 percent. Fourteen percent of the respondents expect price decreases of 9.9 percent, and 34 percent do not expect prices to change. The 15 industries expecting price increases in 2015—listed in order—are Other Services; Arts, Entertainment and Recreation; Construction; Real Estate, Rental and Leasing; Professional, Scientific and Technical Services; Health Care and Social Assistance; Finance and Insurance; Wholesale Trade; Public Administration; Retail Trade; Accommodation and Food Services; Transportation and Warehousing; Management of Companies and Support Services; Information; and Educational Services.
Change in Overall Employment – Balance 2015
ISM’s Manufacturing Business Survey respondents forecast that manufacturing employment will increase 0.7 percent during the balance of 2015, with 33 percent expecting employment to be 5.4 percent higher. Fifteen percent of respondents predict employment to be lower by 7.1 percent. The remaining 52 percent of respondents expect their employment levels to be unchanged for the remainder of 2015. The 11 industries reporting expectations of growth in employment during the year — listed in order — are: Nonmetallic Mineral Products; Textile Mills; Furniture and Related Products; Plastics and Rubber Products; Electrical Equipment, Appliances and Components; Fabricated Metal Products; Chemical Products; Miscellaneous Manufacturing; Primary Metals; Machinery; and Computer and Electronic Products.
ISM’s Non-Manufacturing Business Survey Committee respondents forecast that employment will increase 2 percent during the balance of 2015. For the remaining months of 2015, 33 percent expect employment to increase 7.6 percent, 9 percent anticipate employment to decrease by 6.1 percent, and 58 percent expect their employment levels to be unchanged. The 14 industries anticipating increases in employment in the remaining months of 2015—listed in order—are: Retail Trade; Finance and Insurance; Accommodation and Food Services; Professional, Scientific and Technical Services; Wholesale Trade; Construction; Health Care and Social Assistance; Public Administration; Management of Companies and Support Services; Other Services; Information; Arts, Entertainment and Recreation; Real Estate, Rental and Leasing; and Agriculture, Forestry, Fishing and Hunting.
Business Revenues Comparison — 2015 vs. 2014
Looking ahead, expectations are for increased revenues in 2015 as purchasing and supply management executives indicate an overall net increase of 3.5 percent in business revenues for 2015 over 2014. This is 2.1 percentage point lower than the 5.6 percent increase that was forecast in December 2014 for all of 2015, and 0.1 percentage point lower than the 3.6 percent increase reported for 2014 over 2013. Fifty-five percent of respondents say that revenues (before adjusting for inflation) for 2015 will increase an average of 9 percent over 2014. Conversely, 16 percent say their revenues will decrease an average of 8.9 percent, and the remaining 29 percent indicate no change. Of the 18 manufacturing industries, 14 are reporting expectations of growth in revenue during the year—listed in order—are: Nonmetallic Mineral Products; Paper Products; Primary Metals; Furniture and Related Products; Machinery; Textile Mills; Food, Beverage and Tobacco Products; Fabricated Metal Products; Plastics and Rubber Products; Chemical Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances and Components; Computer and Electronic Products; and Transportation Equipment.
Non-manufacturing respondents forecast that business revenues for 2015 will increase 2.9 percent compared to 2014. This is lower than the 10 percent increase predicted in December 2014 for 2015. The 54 percent of respondents forecasting better business in 2015 than in 2014 estimate an average revenue increase of 8.9 percent. This is in contrast to an average decrease of 16.8 percent forecast by the 11 percent who predict less business in 2015. The remaining 35 percent see no change in revenues for 2015. The 13 industries expecting an increase in revenues in 2015—listed in order—are: Retail Trade; Transportation and Warehousing; Wholesale Trade; Construction; Agriculture, Forestry, Fishing and Hunting; Professional, Scientific and Technical Services; Information; Finance and Insurance; Accommodation and Food Services; Health Care and Social Assistance; Arts, Entertainment and Recreation; Public Administration; and Educational Services.
SPECIAL QUESTIONS RELATED TO THE EARLY MONTHS OF 2015
The West Coast port slowdowns in the early part of 2015 and the significant drop in oil prices impacted many businesses. We asked the panels to tell us whether or not these two situations have impacted their particular businesses, and if so, to tell us the nature of those impacts.
With respect to the West Coast port slowdown in the early months of 2015, we asked the manufacturing panel to comment on whether their particular businesses were impacted, and if so, whether the impact was short term (impact cleared within a few months) or long term (having a lasting effect on most of the year). Of the total responses compiled, 38.7 percent said their businesses were not impacted, 47.7 percent indicated a short term impact, 9 percent indicated a long term impact, and 4.5 percent were unsure.
When asked about the net annual impact of the fluctuating price of oil and related commodities, 14.5 percent of respondents indicated a negative net impact to their businesses, 41 percent indicated a positive net impact, 33.5 percent indicated a negligible impact, and 11 percent of respondents were unsure.
We also asked the non-manufacturing panel to comment on whether their particular businesses were impacted, and if so, whether the impact was short term (impact cleared within a few months) or long term (having a lasting effect on most of the year). Of the total responses compiled, 54 percent said their businesses were not impacted, 34.5 percent indicated a short term impact, 4.6 percent indicated a long term impact, and 6.9 percent were unsure.
When asked about the net annual impact of the fluctuating price of oil and related commodities, 11.9 percent of respondents indicated a negative net impact to their businesses, 33.5 percent indicated a positive net impact, 39.2 percent indicated a negligible impact, and 15.3 percent of respondents were unsure.
Manufacturing Operating rate is currently 79.5 percent of normal capacity.
Production capacity is expected to increase 3.4 percent in 2015.
Capital expenditures are expected to increase 3.1 percent in 2015.
Prices paid decreased 1.9 percent through the end of April 2015.
Prices are expected to decrease a total of 0.9 percent for all of 2015, indicating an expected increase in prices of 1.0 percent for the remainder of the year.
Manufacturing employment is expected to increase 0.7 percent during the remainder of 2015.
Manufacturing revenues are expected to increase 3.5 percent in 2015.
Overall, manufacturing is expected to maintain a positive growth trend in 2015.
Non-Manufacturing Operating rate is currently 86 percent of normal capacity.
Production capacity is expected to increase 2.6 percent in 2015.
Capital expenditures are expected to increase 1.5 percent in 2015.
Prices paid increased 1 percent through the end of April 2015.
Prices were reported to have increased 1 percent in the first four months of the year and are expected to decrease 0.4 percentage point for the rest of the year for a total net annual increase of 0.6 percent.
Non-manufacturing employment is expected to increase 2 percent during the balance of 2015.
Non-manufacturing revenues are expected to increase 2.9 percent in 2015.
The non-manufacturing sector is projected to have continued growth in 2015.
*Miscellaneous Manufacturing items include products such as Medical Equipment and Supplies, Jewelry, Sporting Goods, Toys and Office Supplies.
**Other Services include: Equipment and Machinery Repairing; Promoting or Administering Religious Activities; Grantmaking; Advocacy; and Providing Dry-Cleaning and Laundry Services, Personal Care Services, Death Care Services, Pet Care Services, Photofinishing Services, Temporary Parking Services, and Dating Services.
In addition to the forecast, the Manufacturing ISM Report On Business is issued monthly on the first business day of each month and is considered by many economists to be the most reliable near-term economic barometer available. It is reviewed regularly by top government agencies and economic business leaders. The report, compiled from responses to questions asked of approximately 350 purchasing and supply executives across the country, tracks industrial production, new orders, inventories, supplier deliveries, employment, buying policies and prices. Manufacturing Business Survey Committee responses are divided into the following NAICS code categories: Food, Beverage and Tobacco Products; Textile Mills; Apparel, Leather and Allied Products; Wood Products; Paper Products; Printing and Related Support Activities; Petroleum and Coal Products; Chemical Products; Plastics and Rubber Products; Nonmetallic Mineral Products; Primary Metals; Fabricated Metal Products; Machinery; Computer and Electronic Products; Electrical Equipment, Appliances and Components; Transportation Equipment; Furniture and Related Products; and Miscellaneous Manufacturing*. The report has been issued by the association since 1931, except during World War II.
Covering the non-manufacturing sector, ISM debuted the Non-Manufacturing ISM Report On Business in June 1998. The Non-Manufacturing ISM Report On Business is released on the third business day of each month, and is based on data received from purchasing and supply executives from 18 different non-manufacturing industries across the country. The Non-Manufacturing ISM Report On Business is diversified by NAICS, based on each industry’s contribution to gross domestic product (GDP). The Non-Manufacturing Business Survey Committee responses are divided into the following NAICS code categories: Agriculture, Forestry, Fishing and Hunting; Mining; Utilities; Construction; Wholesale Trade; Retail Trade; Transportation and Warehousing; Information; Finance and Insurance; Real Estate, Rental and Leasing; Professional, Scientific and Technical Services; Management of Companies and Support Services; Educational Services; Health Care and Social Assistance; Arts, Entertainment and Recreation; Accommodation and Food Services; Other Services**; and Public Administration. The report covers business activity, new orders, backlog of orders, new export orders, inventory change, inventory sentiment, imports, prices, employment, and supplier deliveries.
About Institute for Supply Management
Founded in 1915 as the first supply management institute in the world, Institute for Supply Management® (ISM) is committed to advancing the practice of supply chain management to drive value and competitive advantage for its members, contributing to a prosperous and sustainable world. This year, ISM celebrates 100 years of leading, innovating and guiding the profession through the renowned ISM Report On Business, highly regarded certification programs, and industry-standard training and educational resources. ISM is a not-for-profit organization with global influence, serving supply chain professionals in more than 90 countries.
The full text version of each report is posted on ISM’s Home Page at www.instituteforsupplymanagement.org on the first and third business days of every month* after 10:00 a.m. (ET).
The Five Critical Skills for IT Success
By Don R. Crawley
Are you fully prepared for a successful career in IT? The most effective IT professionals possess a particular set of skills—five of them, to be exact. Your mastery of the five critical skills is critical to your career success. These five skills will, when mastered, allow you to positively influence not only your career, but also the people around you, and even the world.
1. Deep Technical Skills
In any field, you must have the technical skills necessary to solve technical problems quickly and permanently. In addition, your technical skills must be deep enough to allow you to anticipate and prevent future problems. You gain such a deep level of skill through education, reading, experimenting, and experience. Attend seminars, workshops, and conferences. Go back to school and take courses related to your field. Work on professional level certifications. Set up test labs at home or in the office using virtualization tools. Strive to be the best in the world at the technologies your support.
2. A Sense of Compassion
The second skill is compassion, the act of caring about the well-being of another. Being compassionate means having a profound awareness of another’s suffering combined with a desire to alleviate it. When our end users and customers place themselves in our care, they are first and foremost human beings. We may not like their political views, we may not like the way they look or act. We may not like anything about them, but they are still human beings deserving of our care, understanding, and respect. When you genuinely care about what happens to other people, when you are truly compassionate, you instinctively look for ways to better their experience.
3. Empathy for our Fellow Humans
Empathy is the ability to connect with another individual emotionally—to feel what they’re feeling. It’s often known as “putting yourself in someone else’s shoes”. The use of empathetic phrases, such as “I’d feel that way, too, if it happened to me,” or “I can see how frustrated you are and I don’t blame you” goes a long way in establishing and building relationships. It’s also important to be authentic in your empathy. If you simply can’t relate to the other person’s situation, it’s okay to say so when you combine it with honest human understanding. For example, you can say things like, “I’ve never been in your situation, so I’m not going to tell you I understand. I can’t even imagine what that’s like, but I am going to do everything possible to help you.” Be careful though; if you’re simply saying the words without trying to understand what the other person is going through, you’ll come across as phony or condescending. The key is sincere, human-to-human empathy.
4. Excellent Listeners
The fourth skill is the ability to listen, meaning that your sole focus is on what the other person is saying. It takes practice, so don’t expect to master this skill the first time you try it. Effective listening means focusing on the other person instead of yourself. Many listen attentively, but while they’re listening, they’re also preparing their response. To be a great listener, focus entirely on understanding what the other person is saying. A technique that can help is to listen as though you’re going to be tested on what is being said. If you know there’s a quiz, you’ll find a way to sharpen your focus on the speaker!
5. Acting Respectfully
The fifth critical skill is the ability to treat everyone with respect, regardless of how you might feel about them. In fact, it’s not necessary to respect someone to treat him or her with respect. Respecting someone is a matter of how you feel about that person and whether they have earned your respect. It’s internal to you. Treating someone with respect, however, is external. It’s about your behavior and, frankly, is a reflection of how you feel about yourself. People who have a high level of self-respect, tend to treat everything about them more respectfully.
In your role as a provider of service to people, you may find yourself dealing with others whom you don’t like or respect you. You maintain your own dignity and self-respect when you treat all living things respectfully.
It Becomes a Way of Life
The interesting thing is that, when you begin to apply these principles in your interactions with end-users and customers, they start to become second nature. You will stop worrying about your differences from others and start enjoying your interactions. In the process, you will intuitively provide outstanding customer service or end-user support.
By developing deep technical knowledge, living compassionately and with empathy, by listening, truly listening, to the people around you, and by treating all living things with dignity and respect, you will automatically become a customer service master which leads to IT career success.
About the Author:
Don R. Crawley, is an IT Customer Service Expert, speaker and author of “The Compassionate Geek: How Engineers, IT Pros and Other Tech Specialists Can Master Human Relations Skills to Deliver Outstanding Customer Service.” With more than four decades of experience in workplace technology and automation, he is dedicated to helping IT and other technical staff master the art of customer service and communication. For more information on Don, please visit www.DonCrawley.com
IHS and TH Hill Partner
IHS Inc., a leading global source of critical information and insight for the oil and gas industry, announced May 11 its the partnership with T H Hill Associates, Inc., that allows IHS to sell the Standard DS-1, a global standard for drilling equipment specifications, interoperability, and quality assurance. The DS-1 standard is now available in print and electronic PDF and can be ordered online through the IHS Standards Store.
Focusing on improving the safe and reliable operation of downhole drilling operations—including the equipment, services, operation, and inspection—the DS-1 is an industry standard shaped by a sponsorship committee composed of more than 40 operator, service, rental, inspection, and equipment companies. This comprehensive industry standard sets best practices in four volumes for Drilling Tubular Product Specification, Drill Stem Design and Operation, Drill Stem Inspection, Drilling Specialty Tools, and other related technology development.
“IHS offers T H Hill a unique opportunity to increase the reach and usability of the Standard DS-1 throughout the industry, to the hands of the engineers and inspectors globally, in the office or in the field,” said Thomas Redlinger, chief operating officer, T H Hill.
Drilling engineers, quality managers and inspection professionals rely on the DS-1 standard to provide the highest quality specification for drilling equipment, reducing risks of equipment failure and consequential non-productive time (NPT) in drilling and completions operations.
“Since its establishment in 1992, the DS-1 standard is a leading authoritative reference when it comes to drilling operations and offers a tremendous complement to IHS’s leadership in providing the critical information and insight to the Energy industry, in particular with upstream operators and respective equipment and service providers,” said Jeff Jarvis, senior director-IHS. “We are excited to offer a digital PDF version of the DS-1, in addition to print, as well as future expansion of our partnership with T H Hill.”
Keeping Cool When It’s Hot
Keeping cool on the job can be tough—especially with warmer months approaching. TECGEN FR has incorporated decades of flame-resistant (FR) clothing experience to develop specific guidelines for helping keep workers safe and comfortable year-round.
Know your limits
Everyone is different. Understand what your body is capable of and don’t push yourself too hard on the job. Carnegie Mellon recommends that workers get acclimatized slowly to warmer working conditions.
Make sure to keep plenty of water on-site to avoid dehydration. In fact, the Texas Department of Insurance recommends encouraging employees to drink one cup every 15 to 20 minutes.
Even a short 15-minute break can help rejuvenate the body and get you back on track for a productive day. According to the NC Department of Labor, workers should take frequent breaks in areas cooler than the work environment.
Choose proper attire
The CDC recommends wearing “light-colored, loose-fitting, breathable clothing” to avoid trapping in excess heat.
Educate yourself and your employees
Be sure to understand the risks of overheating on the job. Heat-stress can result in injury, illness and even death. OSHA suggests providing information on “health effects of heat, the symptoms of heat illness, how and when to respond to symptoms, and how to prevent illness.”
Newfield Exploration Reorganizes
Newfield Exploration Company (NYSE: NFX) announced April 29 its plans to combine its Onshore Gulf Coast and Rocky Mountain business units into one operating region, located in The Woodlands, Texas. The reorganization of these regional operating units will better align Newfield’s workforce with near-term drilling and asset management plans and create future cost efficiencies. As part of this restructuring, Newfield plans to close its offices in Denver, Colorado, and North Houston (Greenspoint area). Newfield will continue to manage its growing operations in the Mid-Continent from its regional office in Tulsa, Oklahoma.
“We are aggressively pushing for cost efficiencies in our operations and working to improve our margins in today’s lower oil price environment,” said Lee K. Boothby, Newfield Chairman, President and CEO. “The combination of two operating regions into one will reduce our future GandA costs, increase collaboration between teams and allow us to quickly transfer key technical expertise to our most active projects. Our near-term plans are focused on drilling in the Anadarko Basin’s SCOOP and STACK plays where we are fortunate to have strong and improving returns at today’s oil prices.”
Newfield expects that the one-time costs associated with this restructuring plan will approximate $20 million and will be recorded primarily in the second half of 2015.
Newfield Exploration Company, headquartered in The Woodlands, Texas, is an independent energy company engaged in the exploration, development and production of crude oil, natural gas and natural gas liquids. The Company is focused on U.S. resource plays of scale. Our principal domestic areas of operation include the Mid-Continent, the Rocky Mountains and onshore Texas. Newfield also has offshore oil developments in China.
4 Secrets to Communicating with Clarity
By Mark A. Vickers, Speaking Is Selling
After learning to create and present a clear and succinct value proposition, Gerry, the owner of a small company, was overheard lamenting: “I had no idea how important it was to get rid of all those extra words and slow down. How many sales have I lost over the last five years because my prospects didn’t understand my message?”
Gerry’s response is typical when business owners and executives realize they have been overwhelming people with information but under-messaging them. From the showroom to the boardroom, your ability to deliver a message with clarity will have a dramatic impact on your success. What is the cost of un-clear communication within your organization?
When it comes to your spoken communications, planning, and preparation allows you to deliver your message more effectively, increasing the likelihood others will respond as desired. As you consider your approach to any conversation or presentation, consider the four keys to developing clarity:
When you are communicating with others, you have a message to share and a desired outcome of the conversation. When you focus on the substance, you start taking an intentional look at your message to identify the key message and essential elements. By devoting time to developing your message you increase your probability of success.
• What is the single most important message I want them to hear?
• What are the most important details I need to share?
• What do I want them to remember?
• What action do I want them to take?
• What can I say or ask that will help them take action?
• What story could I share to illustrate benefits?
These questions will help you identify the most important substance of your presentation and form a strategic outline.
During your contemplation of substance you will invariably encounter a degree of “Ego Impact.” While you would like to believe that people care about everything you have to say… they don’t. As part of your message development process, continually ask “Who cares?”
When you consider what you are presenting from the perspective of your audience, you can honestly assess whether or not they care about certain statements or points. By removing elements that your listener doesn’t care about, you will begin to create truly powerful and impactful messages using fewer words than you imagined possible.
Having identified your core substance, ask yourself: “How can I deliver this in the most simplistic manner possible?”
Keep in mind that when you are presenting to others, they are:
• Listening to you
• Processing the information
• Thinking about the information and what it means to them
• Watching you
• Distracted by their surroundings
• Feeling their cell phone vibrating
• Thinking about other things they need to do
Given the level of thought and distraction occurring within the mind of your listener, the more straightforward your message, the higher the probability your message will stick with them.
As you develop your message, consider:
• Using simple terminology, avoiding buzz words and jargon
• Using shorter, more concise sentences
• Using a short story to illustrate a point
Keep in mind that the intent of simplicity is not to talk down to people but to present a message that is easy to understand, interpret, and act on.
During your process of simplifying your message, don’t be surprised if your Ego kicks in again. Part of your mind will try to convince you that those fancy, complicated words and long sentences with multiple commas and semi-colons make you sound more impressive.
Remind yourself that “less words = more message”.
Once you are clear on your key message and wording, developing the structure of your discussion or presentation will help you avoid missteps. Some of the key areas that require attention are:
• Rapport building
• Information gathering
• Information sharing
• Story structure and placement
• Closing/call to action
As you become more strategic about the structure of your presentations, you will develop a library of common openings, stories, and calls to action that you will be comfortable using in a variety of situations.
In the early stages of becoming more intentional about the structure of your presentations, you may have concerns that you will become bored with structured presentations. When this occurs, remind yourself that your presentation is not about you or for your entertainment and enjoyment; it is about the people you are talking to, their needs, and helping them move forward.
You have prepared and practiced your presentation and now it’s time to talk to a customer or present to a group. During any form of presentation it is important to use vocal variety (tone, volume, and speed) to help keep your audience engaged and to create emphasis on critical points.
Sami, a computer consultant and project manager believed that she was a dynamic presenter but could not understand why the members of her project team did not respond the way she expected.
After listening to a recording of herself presenting in a meeting she was embarrassed and explained: “I sound so boring! I don’t even sound like I care about the project. All I do is move step by step through all of the points I wanted to cover in the meeting.” What Sami realized is that what she thought she was presenting, and what others were hearing, were two very different things.
There are a few steps that will help you be more intentional about using speed to create greater impact:
• Record yourself speaking normally to determine your baseline speed, tone, and volume
• Highlight points that you are excited about and practice saying those at a faster rate and slightly higher tone of voice to convey excitement
• Highlight important points, and practice slowing down and lowering your tone to convey importance
• Practice using pauses to allow your listener to connect to your points, and think about their impact.
Initially, the changes to your speaking patterns will feel awkward and uncomfortable. Continue practicing and recording your presentation. As you listen to the recording consider the power of the message your audience will hear. You will begin to realize that the improved vocal variety is improving your message.
Effective communication is an intentional and practiced process. Through your increased focus on Substance, Simplicity, Structure, and Speed, your presentations to your customers or audience will become more consistent, powerful, and most importantly, more effective.
About the Author:
Mark A. Vickers is a Certified Professional Coach, a Gitomer Certified Advisor, and Certified World Class Speaking Coach. Mark is a communications consultant focused on helping you and your organization achieve Excellence through improved communication and speaking skills. He is known for creating and delivering specialized and innovative programs to help his clients. For more information about Mark and his workshops, consulting, certification programs, please visit: http://speakingisselling.com/
How Loyal Are Your Customers?
Your customers may love you, but do you really know what that means for your business? Jeff Sauro explains how to measure customer loyalty—and how to use what you find to gauge the health of your company.
Sure, your company has satisfied customers. If you didn’t, you wouldn’t be in business (at least not for long). But here’s a question few companies ask: How loyal are they? Will they recommend your products and services to others? Will they stick with you through thick and thin? Or will they run at the first sign of a price increase or some other change that rubs them the wrong way? The mere presence of customers (even those who’ve stuck around long enough to make multiple purchases) isn’t enough, says Jeff Sauro, author of Customer Analytics For Dummies (Wiley). You need to be able to measure their loyalty so that you can use it to predict the health of your company.
“Too many companies spend a ton of time and effort getting a customer to make a purchase, and then they just hope for the best,” says Sauro. “The problem with that approach is that operating in the blind in terms of loyalty makes it likely you’ll make ill-advised decisions that come back to bite you. When you measure customer loyalty, you’ll be able to not only make the most of that loyalty but also to make better strategic decisions for your company.”
Customer loyalty is just one of the analytics that Sauro highlights in his new book (which is relevant for almost all leaders, considering the extent to which measures and metrics have crept into almost every aspect of doing business). His book provides working knowledge of how to measure each stage of the customer journey and use the right analytics to understand customer behavior and make key business decisions.
“Good customer management comes from good customer measurement,” says Sauro. “Customer loyalty is an important analytic for determining how well a company or product is positioned to grow or shrink based on future earnings. The ‘best’ metric for determining customer loyalty depends on the industry, company, and type of product or service, but for most organizations, measuring customers’ intent to repurchase your product or service and their willingness to recommend your company to others provides a solid base.”
Read on to learn more about how to measure customer loyalty and to determine what it means for your company.
Find out if they’re likely to buy from you again. Probably the first way to gauge customer loyalty is to compute the percentage of customers who are repurchasing, reusing, or returning to a product or service. This data can be collected from past sales or from surveying customers about their past or future intent.
Repurchase habits are measured differently, depending on the type of product or service offered. For example, for rental car companies, the repurchase rate is a good indicator of loyalty as certain customer segments rent multiple times per year and have many companies to choose from. For software companies, a similar measure of repurchase loyalty is the maintenance contract renewal rates.
“Collecting actual repurchase rates and building a repurchase matrix can take years, especially for products that aren’t purchased frequently,” notes Sauro. “To speed up the process and gauge your customers’ loyalty before they defect, survey your customers and ask their intent to repurchase. For best results, keep the surveys short.”
Gauge word-of-mouth promotion with the Net Promoter Score. The Net Promoter Score (NPS) is a popular way of measuring customer loyalty through understanding word-of-mouth marketing. It is based on a single question: “How likely are you to recommend [product or service] to a friend or colleague?”
NPS is calculated by following a three-step process. First, ask your customers how likely they are to recommend your product or service to a friend or colleague. Next, compute the proportions of promoters, passives, and detractors. Promoters are customers who are most likely to speak about and recommend your product or service. Passives are generally satisfied with your product or service but are less likely to recommend it to others. Detractors are not only the least loyal, but also the most likely to actually discourage friends and colleagues from purchasing or using your product. And finally, compute NPS by subtracting the percentage of detractors from the percentage of promoters.
“Getting access to competitive data can be difficult for some industries and products,” says Sauro. “Even without competitive data, though, the best comparison is often measuring the same product, service, or company over time. Netflix offers a great example. In February 2011, the company’s NPS was very high at 73 percent. Then, in the fall of 2011, the company decided to split off its home delivery of DVDs and the streaming service into two companies, which angered customers. My company surveyed Netflix customers a month after the change and found the NPS had plummeted to—7 percent.
“Perhaps Netflix did perform such testing and anticipate losing customers,” he adds. “The much larger loss is likely due to other factors and perhaps to untested customer correspondence and the geometric effect of negative word of mouth. But using the Net Promoter Score as a predictive analytic tool can help prevent disasters and identify winners early.”
Be aware of bad profits. How does it feel to pay the check at the restaurant where you had terrible service and bad food? Or how about paying $150 to change your airline ticket reservation? Obviously, nobody likes to pay for a subpar or overpriced product or for bad service, and yet, in these examples, companies financially benefit from a customer’s negative experiences. However, it’s a short-term benefit. Those are bad profits, and they’re a ticking time bomb. They lead to customer resentment and a decrease in customer loyalty, and they eventually impact profits negatively.
“By combining Net Promoter Score data with customer-by-customer revenue data, you can estimate the amount of revenue derived from bad profits,” explains Sauro. “Even if you don’t have access to financial data for your company or a competitor, you usually can estimate the percentage of bad profit revenue. For example, when my company measured customers of consumer software products a couple years ago, we found that about 17 percent of Adobe Photoshop users were detractors. Assuming everyone pays around the same price for a Photoshop license, some 17 percent of Adobe’s revenue from Photoshop comes from detractors.”
While it’s bad to generate revenue from dissatisfied customers, it’s worse if a large proportion of your revenue comes from detractors, he explains. With too much detractor revenue for a product or entire company, you are more susceptible to new competition, alternatives, or abandonment.
“If more than 10 percent of company or product revenue comes from detractors, there are two things you can probably do,” says Sauro. “Stop selling to those customers or attempt to fix the problems that are making your detractors unhappy. Making the adjustments to price, quality, and features to meet those customers’ expectations can be a huge challenge, but that’s usually what separates the best-in-class companies from the rest.”
Find out what customers like most about your product/service. One of the most effective ways to understand what drives customer loyalty is to conduct a key driver analysis. Key drivers are things like quality (Are your products reliable? Do they work as described?), value (Does your product give buyers the best bang for their buck?), utility (Does your product offer essential features?), and ease of use (Can customers use your features without frustration?).
“A key driver analysis tells you which features or aspects of a product or service have the largest statistical impact on customer loyalty,” notes Sauro. “It can be conducted for all customers but also for each of your different customer segments. At the end, you’ll be able to identify the most popular or unpopular features or aspects of your product or service and have customers rate that experience as well.”
Pinpoint your haters. While companies should strive for more promoters, it’s often the customers who are least satisfied with their experience who have a much larger impact on referrals and the brand. Research supports that customers who are dissatisfied with a product or service experience are actually more likely to be vocal and tell more friends and colleagues about their bad experience than generally satisfied customers.
“For example, I’ve used Mint.com for years,” tells Sauro. “Its website allows you to see your personal and small business finances, expenses, and investments all in one place. Unfortunately, the product team recently turned off the small business categorization feature with no notice to customers. This meant hundreds of hours of logging small business expenses were lost and unrecoverable.
“Understandably, a lot of loyal customers were upset and let the company know,” he adds.
“While it’s unclear what will happen to the product, the experience has been so frustrating that I’ve shared it with at least a dozen close friends who manage small businesses and track their personal finances with Mint.com. This one change turned a promoter into a detractor.”
The negative effects of detractors can outweigh the positive effects of promoters. Again, once you’ve identified your detractors, you’ll have some decisions to make.
“If you want to win them over, you’ll have to find out what will make them happy and loyal, and then decide whether it is worth it to spend the resources to make those changes or whether it’s more cost efficient simply to go after new customers who will be happy with the way your company currently operates,” says Sauro.
Make sure you’re getting your money’s worth from promoters. Generally speaking, promoters are a positive asset to your company. But before going all-out to attract as many as possible, Sauro says you should take the time to understand how valuable a promoter is, both in terms of revenue and in how many new customers a promoter brings to a company. The best way to understand how much revenue a promoter generates is to tie actual sales to survey responses to see how many promoters actually recommended someone, and how many of those people who heard the recommendation actually became customers.
“With some estimate of the number of promoters you need to gain a new customer, you can then weigh the cost of new programs, features, pricing, and promotions to determine if the benefit from new customers outweighs the cost,” says Sauro. “For example, if you have to reduce the price of your product to turn customers into promoters, gaining those promoters might not be financially sustainable. Or you might find that it would cost close to a quarter of a million dollars to add a new feature to a product, while that new feature would generate only 10 new promoters—not worth it. And for websites, a new ‘customer’ might just be a new visitor or subscriber, so the cost of gaining new promoters can be important.
“Oh, and one more point: If you use a particular price, deal, or feature to gain promoters, think twice before changing it after those people have begun singing your praises,” he adds.
“Remember my experience with Mint.com: The removal of a feature turned me from a promoter to a detractor. Nobody likes to experience a bait-and-switch!”
“Customer loyalty isn’t black and white,” says Sauro. “When you can use analytics to dig into why customers buy from you, how often they do or don’t recommend you to others, and so on, it becomes very beneficial for your business. You can make better product decisions, provide better service, and make changes to ensure you can create many more loyal customers.”
About the Author:
Jeff Sauro is a Six Sigma-trained statistical analyst and pioneer in quantifying the customer experience. He specializes in making statistical concepts understandable and actionable.
He is the founding principal of MeasuringU, a customer experience and quantitative research firm based in Denver, Colorado, USA. Clients include Walmart, PayPal, eBay, Lenovo, Google, and Charter Communications. Jeff has published over 20 peer-reviewed research articles on statistics and the user experience. He has written four books, including “Quantifying the User Experience: Practical Statistics for User Research and A Practical Guide to the System Usability Scale.”
Jeff is completing his PhD in research methods and statistics from the University of Denver. Prior to DU, Jeff received his master’s in learning, design, and technology from Stanford University, and bachelor’s in TV, radio and film, and information technology from Syracuse University. Prior to starting his own company, he worked for Oracle, PeopleSoft, Intuit, and General Electric.
He is married to his wife, Shannon, of 12 years—together, they have three children (5, 7, and 9). He publishes weekly articles online at www.measuringu.com and daily updates on Twitter (@MeasuringU).
Burleson LLP Ranked Top Texas 100
Burleson LLP, a full-service corporate law firm devoted primarily to the oil and gas industry, announced that it has been ranked among the 2015 Texas 100, a list compiled by Texas Lawyer of the largest law firms in the Lone Star State.
The publication ranks firms according to a headcount of partners, of associates, and of counsel. Burleson placed No. 59 with 51 attorneys in offices in Houston, San Antonio, and Midland who practice across a spectrum of areas—from litigation and business reorganization, restructuring, and bankruptcy law to corporate, energy, labor and employment, and regulatory law.
Rick Burleson, managing partner of the firm, said the news underscores Burleson’s statewide geographic reach and comprehensive range of capabilities.
“We’ve established a significant presence in Texas because of the value our attorneys are bringing to clients both in and out of the energy sector,” he explained. “In San Antonio, we have more attorneys focused on the oil and gas industry than any other law firm in the Alamo City. In Midland, we’ve grown threefold in less than two years and now have a solid bench of attorneys who are experienced in litigation and oil and gas transactions. And our Houston office continues to be a powerhouse of skilled energy attorneys handling the complete range of corporate, litigation, and restructuring matters for companies with interests throughout North America.”
Since opening its doors in 2005, Burleson has grown from a handful of senior-level attorneys and a single location in Houston to more than 110 lawyers in six strategic offices in the most prolific producing regions in the United States: Texas, Louisiana, Pennsylvania, and Colorado. Its attorneys are licensed to practice in over 20 states collectively, and five lawyers in the firm’s Texas offices are Board Certified in Oil, Gas And Mineral Law by the Texas Board of Legal Specialization.
Playing it Forward: Fun in the Workplace
By: Nat Measley
To have fun or not to have fun? That is the question.
Are you curious how companies like Google, Zappos, Southwest, and others develop those winning workplace cultures, with such high productivity and profitability? Regardless of the industry, there is a common thread running through the highest performing companies: the inherent or stated culture of fun. Among companies denoted as “great” in Fortune’s “100 Best Companies to Work For,” a whopping 81 percent of employees say they work in a “fun” environment.
If you look closely at the highly successful companies mentioned above, they incorporate fun into the fabric of their culture. Fun at work may not be the “silver bullet” that produces superior results on its own, but a workplace environment that prioritizes fun will rise above the competition. With stout leadership, dedicated management, and strong company values, companywide fun can take you over the top.
Prioritizing fun in the workplace will have a direct impact throughout your company in a myriad of ways, but there are a few specific areas that can be highlighted.
Everyone would agree that a healthy and happy employee is a more productive employee, right? Fun can be an important component of emotional wellness. Often, fun is used to encourage participation or bolster existing wellness programs. The attention on emotional intelligence in the workplace and its impact on the bottom line is rapidly gaining momentum. For most organizations, human capital is the largest asset and the single largest expense. It seems like a natural place to focus considering it will have the largest impact on the bottom line. We have already seen the biggest advances in technology and those investments today are producing marginal returns and impact on productivity. The next revolution in the workplace is culture.
Secondly, let’s explore productivity. Do you ever get a break? Are you expected to work 8-hours per day, straight with no breaks? Fun can offer great breaks and distractions (not wasting time), but true valuable break time. As an example, there is a national call and customer service center that offers its employees a unique schedule. They have broken up their average daily time commitment into on-phone time and quick breaks (dubbed “shorts”). These “shorts” are sprinkled throughout any of the call center employees’ days. They last 15-minutes or less, during which time, employees can play ping pong, take a walk outside, or do anything they please during that time.
Look at Google. They give their employees 20 percent of any given work day to simply take to do “what they want to do”. And no, that time does not have to be work related. Why? One reason is for the sake of productivity of their work force. They realize that their people are working hard. The breaks are meant to enhance productivity of employee on-time.
Relationships and Loyalty
Relationships and loyalty (sometimes retention) go hand in hand. A staggering 79 percent of companies believe they have a significant retention and engagement problem. The average cost of losing an employee ranges from 1 1/2 times salary to 4-times their salary, depending on the position. What about attracting the next generation of great talent? The tides are shifting and given the choice most people—especially millennials—will choose culture over pay. Culture and fun is a differentiator that will give you the competitive advantage.
How can engagement be affected and in turn, affect the bottom line? In human resources, one very popular metric is employee engagement—an employees’ emotional and active commitment to the success of the company. Engaged workers are enthusiastic about their jobs. And disengaged workers are not. According to a Gallup survey a company loses $2,246 per disengaged employee per year. Why? Disengaged employees take more sick days. They arrive late, miss deadlines, and are more likely to instigate customer complaints. In all, they drag people and business down.
Fun can help. Fun has a 68 percent correlation to employee engagement scores. In other words, if someone perceives their work environment is “fun” on a survey, their individual engagement score will be affected positively by 68 percent. In other studies, 75 percent of companies observed who incorporate fun into their culture and operation who also currently measure engagement report increased or maintained scores over time.
Yes, it’s true. Fun at work is building solidarity, connection, and an outlet for workplace stress. When designed and delivered at regular intervals with forethought and understanding about what your staff needs.
Ok, you get it. So, how do you get started? Remember this is a cultural change not a single event or two so it takes time. Start by assessing your culture. Ask yourself if you see value in fun fitting in and then explore how the fun can become a part of your operation. The next big revolution in the working world is focusing in on culture. Enlightened leaders recognize that the old hierarchal ways of doing business and treating employees like numbers, not people, are no longer effective. You will be glad you considered fun: so will your employees and your business!
About the Author:
Nat Measley, MPA, is the CEO and Managing Partner at The Fun Dept. Nat earned his MPA with a focus on Organizational Leadership from the University of Delaware. He is an experienced public speaker, facilitator, and trainer who works directly with CEOs, leaders, HR professionals, and administrators to develop fun programming that supports their organizational goals. For more information on Nat please visit www.TheFunDept.com.
CITGO Pipeline Company Recognized
The CITGO Pipeline Company has been recognized for its outstanding performance with the 2014 Pipeline Occupational Safety Performance Award, in the category of Small Operator. It is the sixth consecutive year that the company received this honor.
This award is among the industry’s top recognitions and is reserved for companies that demonstrate excellence in safety. It is presented to companies with the lowest Occupational Safety and Health Administration (OSHA) recordable injury and illness incident rates for employees and contractors
CITGO Pipeline Company also received API’s 2014 Pipeline Environmental Performance Award, recognizing the company’s outstanding environmental performance last year.
“At CITGO, we strive to create a consistently safe work environment for every employee and contractor working in our operations. Safety and environmental stewardship are part of our culture and we are proud to be recognized for our unyielding commitment to performance excellence,” said CITGO President and CEO Nelson P. Martinez.
The awards were recently presented at the American Petroleum Institute (API) Pipeline Conference in Savannah, Georgia.
Geologist Says Irving Quakes Due To Fault Lines
Robert Cadwallader reports on an IPI event, “What’s At Fault (!) For Irving Earthquakes.” Cadwallader writes:
“The frequent but mild earthquakes giving shivers to the Irving area—but not other areas in North Texas—likely should be blamed on geologic fault lines rather than gas drilling practices, a geologist said Tuesday.
“Based on known geology and known science, the most likely explanation is that it’s occurring in a known faulted zone of an old buried mountain range,” Craig Pollard, vice president of exploration for Cinco Resources, said after a presentation hosted by the Institute for Policy Innovation. IPI is a nonprofit pro-economic-growth organization that has been fighting municipal efforts to restrict drilling and fracking.
The correct message hasn’t been getting out, Pollard said during his 90-minute speech and discussion to an audience of about 50 people, including many geologists.
“The media is working on sensationalism,” Pollard said. “For it not to be water injection, for it not to be fracking, is not news.”
But he said the different formations west of the Metroplex, including Cleburne and other Johnson County communities, point more toward wastewater injections into old wells than to fracking, the technique of high-pressure pumping of water and chemicals to crack shale and release its oil or gas.
He noted that Dallas sits on an ancient mountain range buried in sediment from the Cretaceous period, which ended 66 million years ago along with the dinosaurs. Mountains, because of the way they’re formed, indicate a web of fault lines. Tarrant County sits on a flat formation, indicating few faults.
But he said the culpability of wastewater or saltwater injections is limited because of underground pressure that resists the water. Pumping power is the key.
“Three miles is the farthest anybody has done scientific experiments to determine how far water can be pumped away from a well,” he said.
Irving has been near the epicenters of many recent quakes. A 3.3-magnitude earthquake hit northwest Dallas on Monday afternoon, the latest of more than 50 in the past 18 months.
The earthquake occurred at 1:14 p.m. Its epicenter was 4 miles north of Irving and 5 miles southwest of Farmers Branch, according to the U.S. Geological Survey.
The largest earthquake, which measured 4.0-magnitude, led the Texas Railroad Commission to send in a team of inspectors. The agency, which regulates the oil and gas industry, also asked the operators of five disposal wells in the area to run pressure tests. Scientific studies have linked oil and gas operations to a string of earthquakes near Reno and Azle.
Ramona Nye, a spokeswoman for the state agency, said tests on the wells in Johnson County are still being conducted, but since there are no disposal wells in Dallas County, there are no plans to dispatch inspectors to the area of Monday’s quake.
The Institute for Policy Innovation (IPI) is an independent, nonprofit public policy organization based in Dallas. For questions, please contact Erin Humiston at (972) 874-5139, or email@example.com.
Noble Energy, Rosetta Resources Announce Merger
Noble Energy, Inc. (Noble Energy) (NYSE: NBL) and Rosetta Resources Inc. (Rosetta) (NASDAQ: ROSE) announced a definitive merger agreement whereby Noble Energy was to acquire all of the common stock of Rosetta in an all-stock transaction valued at $2.1 billion, plus the assumption of Rosetta’s net debt of $1.8 billion as of March 31.
Dave Stover, Noble Energy’s Chairman, CEO, and President stated, “I am excited to announce this strategic transaction which adds two exceptional and material areas to our global portfolio. The Eagle Ford and the Permian are premier unconventional resource plays, two of the most economic in the U.S., which will expand our resource base and development inventory and further diversify our portfolio. The transaction will be immediately accretive to our per share production, reserves, earnings, and cash flow. Rosetta’s team has a strong culture and track record of safe and efficient operations, and we look forward to adding their talents and capabilities to our company. The strengths of the combined assets and people will drive significant value creation for our existing and new shareholders.”
Jim Craddock, Rosetta’s Chairman, CEO and President, stated, “The combination with Noble Energy brings together two complementary companies with a deep and diverse portfolio of assets in key unconventional resource basins. The deal will accelerate value delivery from our strong asset base, and the all-stock nature of the transaction will allow our shareholders to continue to reap that value growth across commodity price cycles. I have long respected Noble Energy and its management team, which has a strong track record of delivering substantial value to shareholders, both from the U.S. onshore business as well as global offshore exploration and development. I am confident the combined team, strong balance sheet, and premier asset base is poised for further success and shareholder value creation.”
Rosetta’s liquids-rich asset base includes approximately 50,000 net acres in the Eagle Ford Shale and 56,000 net acres in the Permian (46,000 acres in the Delaware Basin and 10,000 acres in the Midland Basin). Noble Energy has identified in excess of 1,800 gross horizontal drilling locations for development, providing net unrisked resource potential of approximately one billion barrels of oil equivalent.
Rosetta’s assets produced 66 thousand barrels of oil equivalent per day in the first quarter of 2015, and year-end 2014 proved reserves were 282 million barrels of oil equivalent. More than 60 percent of Rosetta’s current production and proved reserves are liquids. Noble Energy anticipates a compounded annual production growth rate from these assets over the next several years of approximately 15 percent, generating positive free cash flow on an annual basis.
Under the definitive agreement, Rosetta shareholders will receive 0.542 of a share of Noble Energy common stock for each share of Rosetta common stock held. Based on the Noble Energy closing price on May 8, 2015, the transaction has an implied value to Rosetta shareholders of $26.62 per share, representing a 28 percent premium to the average price of Rosetta stock over the last 30 trading days. Following the transaction, shareholders of Rosetta are expected to own 9.6 percent of the outstanding shares of Noble Energy.
The boards of directors of both companies have unanimously approved the terms of the agreement, and Rosetta’s board has recommended that its shareholders approve the transaction. Completion of the transaction is subject to the approval of the Rosetta shareholders and certain regulatory approvals and customary conditions. The transaction is expected to close in the third quarter of 2015.
By 2020, U.S. to Emerge as Largest Exporter of Light Naphtha
Global production of light naphtha, an essential steam-cracker feedstock for the production of gasoline and numerous chemicals, is increasing and could create a global surplus that exceeds market demand by as much as 14 million metric tons (MMT) by 2020. This capacity expansion and surplus of light naphtha is occurring in large part due to the rapid expansion of tight oil and shale gas production in North America, and in particular, the United States, which will surpass the Middle East to become the world’s largest exporter of light naphtha by 2020, according to a new international market review from IHS (NYSE: IHS), the leading global source of critical information and insight.
The IHS Energy and IHS Chemical Light and Heavy Naphtha International Market Review is the first comprehensive, long-term study that provides separate light and heavy naphtha supply and demand balances, international trade data and pricing, as well as a 15-year global forecast for 2014 to 2029. According to the review, global production of light naphtha was 367 MMT in 2014, and consumption was 363 MMT in 2014. Global consumption of light naphtha is expected to continue to increase at an annual rate of about 2 percent during the next 10 years, the report says, while the increase in production is expected to slow from just under 2.5 percent in the next five years, to close to 1.5 percent during the following five years as the market readjusts to bring production closer in line with demand.
While current production continues to increase, the growth rate of light naphtha consumption is constrained somewhat by the penetration of ethane, propane and butane (EPB) gases in the steam-cracker feedstock slate. All seven new ethylene plants currently under construction in North America have been designed to utilize ethane feed. Additionally, the availability and low prices of EPB feed has already minimized the use of naphtha as steam-cracker feedstock in North America.
“The rapid expansion of shale energy production, particularly in North America, has contributed to global oversupply of light naphtha, which is derived from crude oil,” said Nick Rados, director, chemical feedstocks and energy at IHS, and co-author of the report. “On one hand, we have a global excess in terms of oil production, and secondly, we have EPB (from natural gas liquids NGLs) displacing some of the naphtha demand away from steam-cracker feeds, which will further add to oversupply of naphtha during the next five years.”
Though light naphtha production is widely dispersed, three regions—North America (20 percent), the Middle East (17 percent) and Northeast Asia (19 percent)—currently account for nearly 60 percent of total global production. Light naphtha, noted the IHS report, is a heavily traded commodity, with nearly 30 percent of world production volumes traded.
Most light naphtha trade originates from the Middle East, Russia, and North Africa and is sent to East Asia, primarily for use as steam cracker feedstock. With the onslaught of U.S. production, though, this trade balance is shifting. Light naphtha demand will increase driven primarily by steam cracker feedstock demand everywhere except in North America, IHS said. Most of the present steam cracking demand is in Northeast Asia and Europe. However, going forward, most of the demand growth will be in Southeast Asia, India and the Middle East.
Said Rados, “It is unlikely that the North American market can use all of the light naphtha to be produced in the U.S., so by 2020, IHS expects the U.S. to emerge as the largest exporting country in the world for light naphtha, with almost half of these exports being imported by Canada. The increase in U.S. production will be imported by other regions and used to meet ‘price-sensitive’ demand for steam-cracker feedstock, heavy crude diluent, gasoline production, and blending into other products.”
The U.S. is not alone, however, in needing to secure a market for its increasing exports of light naphtha. “Like the U.S.,” said Tom Manning, senior director, natural gas liquids at IHS, and co-author of the report, “the growing surplus of light naphtha in Russia must find a market, so either Russia’s exports will increase—if there is market demand—or its production rates will be reduced in conjunction with a decrease in European production. Additionally, the Middle East has added an appreciable amount of new naphtha refining capacity, and utilization of these assets may be lower until market demand absorbs new naphtha refining capacity.”
According to the IHS report, the global refining industry is quite large—approximately 137 MMT of light naphtha is produced by crude distillation in refineries. Additional 60 MMT is produced in the world’s refinery hydrocrackers, cokers and hydro-treaters. About 58 MMT of light naphtha (natural gasoline) is recovered in gas processing plants and another 35 MMT is derived from condensate splitters.
Additionally, 77 MMT of lower-quality heavy naphtha is separated with light naphtha or is blended into full-range paraffinic-grade naphtha. Condensate splitting has never been a very large segment of the business, but increased availability of segregated condensate is encouraging U.S. refining as well as North and Southeast Asia petrochemical companies, to build condensate splitters.
Russia Continues Capital Programs
Anna Belova, GlobalData’s Upstream Analyst covering the Former Soviet Union, says: “Oil production surge outside OPEC is deemed one of the driving factors behind the recent decline in global crude prices. The behavior of main crude suppliers in the near term will determine if the global supply will equilibrate with the demand for oil. However, suppliers differ in their ability to respond to price changes and in their longer-term intentions to secure market share. Russia, the world’s leading energy producer, has been steadily increasing its crude output. Since the factors behind the past production increase are expected to remain in place, Russian crude output is likely to continue at current levels in the near term.
“At the outset, understanding of the main drivers in Russian production increases during the past decade is essential. The country has added over one million barrels a day to the global crude supply over the period. The past year, 2014, marked a new record in post-Soviet oil production in Russia. Buoyed by rising crude prices, the Russian oil industry rebounded from the 1990s production crush brought on by the collapse of the Soviet Union.
“The first factor responsible for the Russian production surge is new greenfield developments coming online during the last 10 years. While many new fields came from existing production centers, some were located in newer frontier provinces. The bounty of the Volga-Urals and West Siberian basins, which at their peak produced 4.5 and 8.2 millions of barrels per day (mmbd), respectively, was not replicated in any of the new oil regions. However, the multitude of targeted frontiers, ranging from the shelves of the Caspian and Pechora Seas to East Siberia, allowed for a significant production surge. The three largest new East Siberian fields, Vankorskoye, Talakanskoye, and Verkhnechonskoye, alone accounted for over 800,000 barrels per day (bd) of additional crude production by 2014.
“The second factor behind the decade-long production growth in Russia is the extensive capital campaign aimed at older brownfield developments. With around 6,000 new wells drilled every year, Russia’s producing well inventory increased significantly over the decade.
“What is more important is the increasing productivity per well achieved by more complex completions. Multilateral and horizontal wells were drilled in Russia first in the 1950s and fracturing with water, acid, and alkali widely implemented since the 1970s. Russian operators are now standardizing employment of more complex well configurations in infill drilling.
“At the Vyngapurovskoye oil field, which has been in production since 1982, a new conventional well was recently drilled to a total depth of 4,400 meters with a lateral of almost 1,000 meters, with eight stages of hydrofracturing—a Russian record. This example is not limited to this Gazrpom Neft field but is a representation of a wider trend, where over a half of Russia’s new conventional oil wells are completed using complex technologies yielding more hydrocarbons.
“Furthermore, the wave of consolidation that swept the industry over the past decade resulted in over 85 percent, or 9,079,333 bd, of Russian oil being produced by only six oil companies. These large companies realize the economies of scale when employing advanced well technologies unavailable to smaller operators in Russia or elsewhere in the world. Complex wells carry higher costs, but for every 50 percent of additional capital expenditure, average initial well flows double with advanced completion methods. Operators’ ability to effectively drill large numbers of conventional and complex wells lends a high degree of flexibility to Russian supply.
“Global crude prices began their decline in July 2014; however, Russian oil production continued to increase. Ruble devaluation reduced the marginal cost of production and transportation, while Russian oil tax rates also decreased with crude prices.
“Consequently, the effect of global price decline on the netback revenue per barrel for Russian operators has been less pronounced than with other geographies. Moreover, most capital costs will also decrease in dollar-denominated terms since exploration, drilling, and infrastructure contracts are usually denominated in Russian rubles.
“The Russian oil and gas industry is relatively self-sufficient when it comes to conventional onshore and shelf production, even with complex methods of recovery routinely employed. However, the ruble-denominated costs are expected to be subject to high inflationary pressures, with the official rate for 2015 predicted to average 15 percent.
“Within the five-year horizon, the factors that were behind a decade-long production surge are expected to sustain Russian production. The large new fields in frontier provinces act as anchoring production hubs for neighboring smaller developments. Production drilling began on Rosneft’s Suzunskoye, which will be connected to the giant Vankorskoye field in East Siberia, while Lukoil’s Filanovsky field in the Caspian Sea is benefitting from synergies with Y. Korchagin field – the company’s first foray into offshore production.
“In addition to new field tie-ins within frontier regions, additional small fields will be brought online within the established basins. In 2014, Lukoil alone brought online 17 new fields, most located within the company’s operating base in West Siberian and Volga-Urals Basin. The development of field extensions, or new fields, and intensive infill drilling campaigns within mature fields with complex well completions, supplemented with secondary and tertiary recovery methods, will continue to offset production declines from mature fields.
“While a production surge has a short-lived effect if accomplished through severe reserve depletion, Russian oil reserve replacement has outpaced production growth over each of the past eight years. This reserve base growth was accomplished through direct investment in exploration, funded through both the federal budget and individual companies’ geological exploration allocations. Close to 500 oil fields have been discovered in Russia during the last decade. However, the new fields are responsible for about 20 percent of new reserves, according to Rosnedra (Russian Resource Agency), with the majority of reserve increases coming from continuing exploration of existing fields.
“In terms of recent discoveries, the Pobeda field in the Kara Sea has received a fair amount of attention, with close to 1 billion barrels of official oil reserves, as well as significant gas reserves. More interesting is the Velikoye field, located within the Pre-Caspian Basin in the south, where official reserves were estimated at over 2 billion barrels of oil. The Pre-Caspian basin was well studied during the Soviet era, with over 100 fields discovered within Russia and Kazakhstan, but only Kashagan is of the same scale as Velikoye. Both share significant challenges due to reservoir depth and high sulfur content, yet Velikoye is onshore within a well-developed industrial area with mild environmental conditions.
“The main factors that drove the decade-long production surge in Russia will remain in effect, even in the low-price environment. Current production levels will be sustained within the five-year horizon through continuous drilling in established production centers, with new fields coming online in both frontier and existing petroleum provinces.
“Long-term prospects are the most price sensitive, including potential production from the Bazhenov Shale and other low-permeability formations, as well as Arctic offshore developments. These projects are targeted by the US/EU sanctions on technology transfer; however, even without sanctions, they are not competitive in the current price environment.”