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ARE OSBORNE’S UK OIL, GAS TAX CUTS SUFFICIENT?
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SEARCHING FOR TALENT IN ALL THE WRONG PLACES
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INDUSTRY PLAYERS STRESS COLLABORATION AT OTC ASIA 2016
D I G I T A L R E A D E R
APRIL 2016
Empowering People in Oil and Gas Empowering People in Oil and Gas
D I G I T A L R E A D E R
JULY 2015CONTENTS
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Searching For Talent in All the Wrong Places
Are Osborne’s UK Oil, Gas Tax Cuts Sufficient?
APRIL 2016 EDITION
ARE YOU FOLLOWING RIGZONE?
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Industry Players Stress Collaboration at OTC Asia 2016
Is Politics Behind Justice Department Thwarting Halliburton-Baker Hughes Deal?
CAREERS EDITORValerie Jones
APAC EDITORChee Yew Cheang
SENIOR EDITORSDeon DaughertyKaren Boman
ASST. EUROPEAN EDITORAndreas Exarheas
MANAGING EDITORSaaniya Bangee
DESIGNERMarcus Tenette
CREATIVE DIRECTOREric Duenas
EDITOR-IN-CHIEFJon Mainwaring
WWW.RIGZONE.COM
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I recently attended WorkforceNEXT’s (WFN) spring summit, a one-
day conference focused on strategic HR and workforce manage-
ment in the energy industry. I’ve attended several of their con-
ferences and while I generally find all the sessions of interest, I especially
enjoy the lunch sessions – no, it’s not because there’s food involved.
At least that’s not the only reason.
The lunches, which WFN describes as peer-to-peer roundtables, allow
attendees to discuss energy hot topics of their choosing. I always steer
to the talent acquisition tables because, well … that’s what interests me.
One lady I was speaking with was an HR professional in the recruiting
space. I won’t publish her name or company – that’s not important. What’s
important is what she told the table.
She said since the industry has slowed down, when clients come to her
to find qualified candidates, at times, she wants to redirect them back to
their own company.
“Sometimes, you’ll have those high potentials in your company already.
Why not pay to have them get that one extra certification or upskill them
so that they can fill the role?” she said. “I know it’s turning away money
for me, but I’d rather be honest with them. That client relationship is more
valuable to me than a few dollars.”
She made a good point. Employers often run to recruiters and staffing
agencies in hopes of filling unique positions within their companies, but
often don’t equip recruiters with the necessary tools to find the right fit –
company culture, for instance, is something that should always be shared
with recruiters, but often isn’t, she said.
And even worse is when an employer fails to recognize the talent within
their own organization.
Valerie Jones, Careers Editor @rz_careernews
Searching For Talent in All the Wrong Places
It shouldn’t take a downturn for a company to begin
their succession planning, but if that’s the case, then
now is definitely the time to do it.
HERE’S HOW YOU CAN START:
• Identify your high potentials – those who you expect to be your future leaders – within your organization
• Take an inventory of the skillsets you currently have and determine where your future needs will be
It’s imperative to check your employees’ engagement
levels. While most attention is focused on your high po-
tentials and workers who don’t perform well, there’s a
big chunk of your workforce (the “Steady Eddys” as one
attendee refers to them) who consistently do good work
but don’t make waves. Therefore, they may not be on
your radar. But with the proper coaching, those employ-
ees could make great middle managers.
Use the downturn as a time to help your company
plan for future success, by developing the right people
for future roles. Don’t neglect the talent you have within
your own organization. If you invest in your employees,
the return on investment will be much greater because,
let’s face it – sometimes the new hire just doesn’t work
out.
And sometimes, it just takes a recruiter to tell you
that during lunch.
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RZNEWS DIGITAL READER APRIL 2016
@Andreas_Ex
ARE OSBORNE’S UK OIL, GAS TAX CUTS SUFFICIENT?Andreas Exarheas, Assistant European Editor
U K Chancellor of the Exchequer George Osborne announced signifi-cant tax cuts in his Budget speech March 16 to help the oil and gas sector, which he described as “one of the most important and valued
industries” in the country.
Osborne’s latest measures, which follow the introduction of a new tax allowance intended to stimulate investment across the industry back in March 2015, include halving the supplementary charge on oil and gas to 10 percent and the effective scrapping of petroleum revenue tax. The changes will be backdated to Jan. 1 and will support jobs “right across Britain,” the chancellor said.
The oil and gas industry’s immediate reaction to Osborne’s tax changes has been somewhat mixed, with a significant number of organizations condemning the chan-cellor for not doing enough. As of April 1, Rigzone’s opinion poll on the efficacy of the cuts, which asked visitors if the changes were sufficient, revealed that 36 percent of respondents answered “no.” Twenty-nine percent of those who answered the poll believed Osborne’s cuts were sufficient and 36 percent were undecided.
One of the more outspoken critics of Osborne’s plans was Scottish National Party spokesperson for Energy and Climate Change Callum McCaig MP (Member of Parlia-ment). McCaig said in an SNP release that “far more could have been done” for the oil and gas industry and accused the chancellor of sitting back and resting “on his laurels.” The MP claimed that Osborne lacked the “vision” to bring forward a “long-term strategy for the North Sea oil and gas industry” and said that he had “failed once again to introduce measures that would encourage exploration.” McCaig also said that the chancellor had failed “yet again” to bring forward any proposals on non-fiscal support, such as loan guarantees “which would help sustain investment in the sector and help companies to protect jobs.”
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RZNEWS DIGITAL READER APRIL 2016
Another critic of Osborne’s changes was energy recruitment firm Airswift’s
CEO Peter Searle. Although Searle admitted in a company statement that the
tax cuts would go “some way” towards supporting the North Sea oil and gas
sector, the CEO said that there was still a “major risk that the industry will
continue to lose talent, skills and expertise to other sectors.” He remained un-
convinced on whether the cuts would protect or create jobs for the North Sea.
Also, law firm Ashurst’s Energy Partner Michael Burns said in an organiza-
tion release that the government’s action “may be a case of too little, too late”
and the firm’s Tax Partner Nicholas Gardner remained skeptical on whether the
latest cuts “will be enough.”
IO Oil & Gas Consulting’s Director of Field Development Chris Freeman ex-
pressed his concerns over Osborne’s tax cuts too. In a company statement,
Freeman took a swipe at the changes to the petroleum revenue tax, saying
this would only benefit the industry’s larger oil companies, and he would have
rather seen the supplementary tax be “fully reduced to zero.”
Although a large portion of the industry contested Osborne’s changes, there
were a few companies that saw the cuts as wholly positive. Some of the big-
gest supporters of the changes were UK offshore oil and gas industry body Oil
& Gas UK, the Aberdeen & Grampian Chamber of Commerce and KPMG Aber-
deen. The chief executive of the former association, Deirdre Michie, welcomed
the measures, saying in an organization statement that they would boost the
sector’s “competitiveness” and help to restore “investor confidence.” The
AGCC’s Research & Policy Director, James Bream, also praised the changes,
stating in an AGCC release that they would help to “build confidence” in the
sector, and KPMG Aberdeen’s Senior Tax Partner Martin Findlay said in a KPMG
statement that the cuts “will help to create a more attractive fiscal framework
for this strategically significant industry”.
Oil and gas recruitment specialist Fircroft’s CEO Johnathan Johnson was
another supporter of the cuts, saying in a company release that they will “help
protect one of the jewels in the UK economy. Johnson saw the “highly encour-
aging” changes as a “long-term move to ensure the security of jobs,” going
against those in the industry that claim the cuts won’t aid employment in the
sector.
The industry seems split on whether or not Osborne has done enough to
help the UK oil and gas industry in his latest Budget speech. While a number
of oil and gas organizations have praised Osborne’s tax cuts and suggested
that they are sufficient, a huge section of the sector, including the majority of
Rigzone readers, believes that the changes did not go far enough. If the next 12
months reveals that the latter group was correct, Osborne could find himself
having to do a lot more for the oil and gas industry in his 2017 budget speech.
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RZNEWS DIGITAL READER APRIL 2016
Chee Yew Cheang, APAC Editor @cheeyew_cheang
Industry Players Stress Collaboration at OTC Asia 2016
The significance of collaboration was a subject discussed in panel ses-
sions at OTC Asia 2016, which attracted just over 20,000 visitors from 70
countries, around 20 percent lower than the 2014 event that drew 25,000
participants from 88 countries.
While oil and gas firms are still preoccupied with project cost reductions
amid sharp cutbacks in capital and operational expenditures worldwide,
panelists said the time has arrived for collaboration between operators and
services contractors.
N obody expected a 60 percent decline in oil
prices when the inaugural Offshore Technol-
ogy Conference (OTC) Asia took off in Kuala
Lumpur, Malaysia two years ago. But it did. And senior com-
pany executives who spoke at last month’s conference called
for greater collaboration to help the industry emerge stronger
from the current downturn.
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RZNEWS DIGITAL READER APRIL 2016
shore operations, including facilities such as ware-
houses and office spaces, with other companies.
Meanwhile, the calls for industry collaboration
has become a priority as investments in more up-
stream projects are delayed. Wood Mackenzie esti-
mated that low oil prices could lead to more delays
in oil and gas projects, with the investment value
expected to rise to $500 billion this year, up from
the previous projection of $400 billion.
“Will we get to half a trillion dollars in the course
of this year? I won’t be surprised if we go that far,”
Dan Young, Wood Mackenzie’s head of consulting for
Asiapac said, adding that capital discipline and cap-
ital preserva-
tion are both
acute pres-
sures facing
oil and gas
companies.
Despite im-
mense chal-
lenges facing
the oil and
gas industry,
d e e p w a t e r
projects re-
main viable
because of their high production rate per well, ac-
cording to Royal Dutch Shell plc’s Upstream Inter-
national Director Andy Brown, who added that such
developments offer the most opportunities for own-
ers and operators to deliver innovative technologies
and keep costs down.
“It’s looking at the unit costs of these projects. We
have to have projects that will deliver at the best.
That is the important thing: our ability to be at the
lowest cost on the overall cost curve and not be the
marginal cost company,” Brown said.
“Once misery arrives, everybody has to put mutual distrust aside and say, look, let’s
stick together,” Mohd Anuar Taib, senior vice president for upstream Malaysia at state-
owned Petroliam Nasional Berhad (PETRONAS) said.
Already, market watchers said project owners and contractors have stepped up
engagement over the past year as the adverse effects of the downturn spread in the
industry with more and more upstream projects being delayed.
But, industry player like France’s project management, engineering and construction
firm Technip S.A. believed that such collaboration is proceeding too slowly. Technip’s
CEO Thierry Pilenko said the existing shift in the industry mindset has not produced
the sustainable solutions needed for the sector to significantly affect its cost curve.
“I understand that, in the very short term, all operators are doing what they have to
do, which is trying to extract cost savings as quickly as they can. But, in many cases,
those cost savings are absolutely not sustainable. If you’re starting to look at the way
you work and the way you do the
architecture of new developments,
there is a real opportunity to re-
duced structural costs,” Pilenko
said.
Industry collaboration could
boost project efficiency in the pres-
ent cost-sensitive market environ-
ment. To achieve this objective,
involved parties must be willing to
change their procedures.
“I would say in the current com-
modity environment that we’re
having better discussions around
what collaboration might look like and how it might reduce costs, but, at its heart, it
needs to define an outcome that we can achieve as opposed to defining how we can
achieve that outcome,” Jeffrey Miller, president and chief health, safety and environ-
ment officer at Halliburton Co., said.
Speaking as an operator, Bakheet al Katheeri, chief operating officer of Mubada-
la Petroleum, an Abu Dhabi-based oil and gas exploration and production firm with
assets in the region, told OTC Asia 2016 participants that permanent solutions are
required to curb industry costs in order for projects to be developed more efficiently.
“This requires being responsive, flexible and innovative in addressing costs, chal-
lenges and seeking out opportunities to adjust and thereby protect the value of our
resources,” al Katheeri said.
In this regard, Mubadala has promoted the sharing of services and supplies for off-
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RZNEWS DIGITAL READER APRIL 2016
MALAYSIAN PRIME MINISTER NAJIB RAZAK SPEAKING AT OTC ASIA 2016. SOURCE: RIGZONE
Deon Daugherty, Senior Editor @Deon_Daugherty
U nder the banner of preserving the beleaguered oilfield
services sector, the U.S. Department of Justice (DOJ)
slapped a civil antitrust lawsuit to block the proposed
Halliburton (NYSE: HAL) merger with Baker Hughes (NYSE: BHI).
The DOJ filed its lawsuit April 6 alleging that HAL’s acquisition of BHI – a
$34 billion deal – would eliminate head-to-head competition in markets
for 23 products or services used in both onshore and offshore oil explora-
tion in the United States.
But while the union of HAL and BHI may be in jeopardy, another happy
coupling is merrily chugging along in the oilfield services sector. Worth
about $14.5 billion, SLB’s bid to buy CAM in 2015 sailed through the gov-
ernment’s hoops. The deal closed April 1.
Which brings us to a question that admittedly might have several, highly
nuanced reasons: What’s holding up Halliburton and Baker Hughes?
I asked James West, a go-to analyst at Evercore ISI for his thoughts on
what’s put the HAL/BHI deal on the backburner.
“I think it's because there was no product overlap with CAM whereas
with HAL/BHI there is significant overlap which requires divestitures,” he
said. “We also can't rule out some political overtones as this is Halliburton
(read Dick Cheney) going up against a Democratic White House.”
Is Politics Behind Justice Department Thwarting Halliburton-Baker Hughes Deal?
The DOJ alleges that the HAL/BHI deal would
raise prices and reduce innovation in the oilfield
services industry. Halliburton and Baker Hughes
are two of the three largest integrated oilfield
service companies across the globe, and they
compete to invent and sell products and services
that are critical to energy exploration and pro-
duction, Bill Baer, an assistant attorney general
in the antitrust division, said in the statement.
“We need to maintain meaningful competi-
tions in this important sector of our economy,”
he said.
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RZNEWS DIGITAL READER APRIL 2016
When we’re talking about “meaningful competi-
tion” in the oilfield services space, let’s be clear. It’s
worth noting that in recent decades, the industry
has known a “Big Four” among its ranks. As of April
26, Schlumberger’s (NYSE: SLB) market cap was
$110.22 billion; next was HAL with $34.41 billion;
then, BHI with $19.98 billion; and lastly, Cameron
(NYSE: CAM) with $12.65 billion.
When the shale renaissance was in full swing, at
least a couple hundred smaller companies set-up
shop as oilfield services; according to Haynes and
Boone LLP’s Oilfield Services Bankruptcy Track-
er, 51 of those smaller oilfield service companies
have gone belly-up. Competition didn’t do much for
those folks.
In any event, Halliburton has pledged to vigor-
ously defend itself.
In a joint statement with BHI, the HAL said, “The
companies believe that the DOJ has reached the
wrong conclusion in its assessment of the transac-
tion and that its action is counterproductive, espe-
cially in the context of the challenges the U.S. and
global energy industry are currently experiencing.”
But, recent events suggest the deal is fading far-
ther from reality.
HAL has delayed its earnings call past its April
30 merger termination date. Before the DOJ an-
nounced its lawsuit, the date was March 1. Ana-
lysts at Raymond James and Associates (RayJa)
said in an April 25 research note that earnings call
dates typically yield little information, but this one
doesn’t bode well for the merger.
“With the change in release date, we now think
it is more likely that one party steps away from the
deal,” the analysts wrote.
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RZNEWS DIGITAL READER APRIL 2016
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