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“Meeting the Challenges of a Volatile World”

Attaining and Sustaining Operational Excellence:

A Business Case

Scott M. Shemwell, D.B.A.

The Rapid Response Institute• Scott M. Shemwell, D.B.A.

o Career in Upstream Energy Services and use of IT• Former member of Halliburton Energy

Services Leadership Team• Former Oracle Executive• COO of small public energy services

companyo Early in DOFo Technology Sales to Petroleum Industry

• 30 + Years• More than $1 Billion in Revenue

Generatedo Author and Speaker on the global stage

• Enabling our clients to posture themselves in their market segments so that they can thrive in volatile markets and capitalize on uncertainty, not suffer because of it

• Organizational Agility, Resiliency, Sustainability

www.theRRInstitute.com www.OARS360.com

DisclaimerThe views, opinions, positions or strategies expressed by the author and those referenced organizations and/or individuals are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of the conference organizer and affiliated organizations, sponsors, The Rapid Response Institute LLC, or any employee thereof. The author make no representations as to accuracy, completeness, suitability, or validity of any information contained herein and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its use.Moreover, the author does not endorse any of the organizations or products referenced in this discussion. Links to their web sites are provided only as a courtesy for those interested in additional information/research.

While much of the material has a USA focus, the same issues are being address globally!

Discussion Points• Define Operational Excellence• OE Characteristics• Attaining OE• Risks of Not Attaining OE• OE Value Proposition• Use of Technology• Change Management• Final Thoughts

“Operational Excellence is a methodology helping organizations grow and sustain

operational standards in today's environment of government regulation and consumers',

communities', and NGOs' expectations.”

- Society of Petroleum Engineers

Operational Excellence Criteria

OE Matrix

Value from OE• World-class operational execution can add up to 30 percent of

value to the production asset base.• Up to 80 percent of costs are upstream project time issues,

e.g., optimizing equipment, material and facilities, and delivery times.

• 50 - 75 percent are engineering productivity constraints, such as frequent and last minute project change orders, and “weak-performance cultures and broken leaning curves.”

- McKinsey

Risk Mitigation

Risk of Not Attaining OE

• Safety• Competitive Landscape• Loss of Business Opportunities• Stock Price

Systemic Risk Management• Systemic vs. Occupational Only

o Systemic• Human, Machine, Process, Environment

Interface• Holistic - More than Fault Tree Analysis• Linkages are Weak Points

o Include Supply Chain Linkages• The Best Perspective

o Occupational• Simplistic• Slogans and OSHA “like” reporting• Good not Great (or acceptable today)

• Systemic is ONLY Viable Approacho Real Time Systems (Smart Equipment)o Appropriate Human Trainingo Human Factors & Behavioral Economics

Human Systems Integration

Typical Operator Operations Management System (OMS) Policy

Operations Management System• More than a Website or Policy• More than a Checklist• Seamless across the Supply Chain• Standards & Regulations in the

Work Flow• Cloud-Mobility Enabled• Automatic Audit• Risk Mitigation• ISO/IEC 17021 – Conformity

Assessment

90% of field operations personnel are contractors

Today’s Major Critical Issues• Significant Crude Price Decline

o Severe Financial Crisiso Large Reduction in Force

• Operational Excellence is a Focuso Pressure on Management and Technical Staffo Layoff Results in loss of Key Industry Knowledgeo Merger & Acquisitions

• No Relief from Regulators or Publico Culture of Safety is Mandatoryo All Economic Participants ~4,500 companies

Some Key Trends• API RP-75 Recommended Practice for Development of a Safety and

Environmental Management Program for Offshore Operations and Facilities Updateo Contractor Managemento IT / Cybersecurity

• Operations Management Systems Emergingo Competency, Safety, Cost Reduction

• Technology Development Continueso Water Management

• Mergers & Acquisitions• Disruptive Big Data

o $115 million in 20 VC oil & gas deals in 2015

Oil and gas is one of the last giant industries yet to be fundamentally disrupted," said Reid Calhoon, RunTitle's chief executive officer.

Enabling Technology

Background• OARS360 is a Spin Out of The Rapid Response Institute—focus

on Operationso True Operations Management Systemo SEMS Regulations Enabledo Culture of Safetyo Cloud/Mobility

• Third Generation—developed with Industry

90% of field operations personnel are contractors

Compliance Management

Risk Mitigation

Ensuring Safety

Driving OperationEfficiencies

Study: Actual costs are 4X engineered projections

Violations: 1667 in 2011Reported: 545 oil field deaths (2008-12)

Estimate: $200M negative impact on companies

O&G Field Operations - ChallengesOARS360 – Operational Agility & Resiliency System

Collaboration

DocumentManagement

Maintenance Management

Asset Management

ERP

Complexity Creates Opportunity

Existing solutions limit operations effectiveness

Oil & Gas Field Operations today:

• Extending/leveraging existing tools • Managing Spreadsheet checklists

Resulting in the following problems:• Critical field operations data in silos• Manual consolidation/reporting • Limited actionable information• Operations lacks real time visibility Field Operations

Firewall

Empl

oyee

s

Contractors

Collaboration

DocumentManagement

Maintenance Management

Asset Management

ERP

Value Proposition

Providing a comprehensive 360⁰ view of operations

Field Operations

Firewall

Empl

oyee

s

Contractors

OARS360 is a Operations Management System (OMS) that: • Interfaces with all existing tools • Provides real-time reporting and visibility• Maintains audit history of all field activities

Delivering the following benefits• Real time actionable information• Improved operational efficiency• Compliance management • Enhanced safety of field personnel

OARS360

Demonstration

Change Management

People Resist Change

Or Do They?

Change Management• Defined Process• Three Step

o Initialo Stagedo Sustained

• Specific to ME!• Cross Culture Negotiations• Resistance Management• Online/Game Version Available Soon

Towards a Culture of Safety/OE• Competency Assurance

o More than Just Trainingo More than Record Keepingo Organizational Commitmento Demonstrable

• Change Management is a Proven “Iterative” Processo Awareness & Educationo Pilot Projectso Wide-Spread Integration

• Good Practices Availableo Inside industryo External

The Way We Do Business!

Implementation GuidelinesTransformationSustaining

Self Assessment GuideQuick Assessment anyone can conductTen Minutes or Less

Final Thoughts• Operational Excellence is not an Option• Documented Shareholder Value• No Reason Not To

o Best Practiceso Technology Enablers Available

• OE Financial Model (EVPM) Soon• Work Flows as Knowledge Management

o Drillingo Human Factorso More to Come

References Cited• SPE definition of Operational Excellence• Bain Report• McKinsey OE Paper• McKinsey Offshore Paper

Codicil• Books available on Amazon• PennEnergy Governing Energy Blog• Take the Culture of Safety

Self Assessment• Monographs• See Our Website for Links

www.theRRInstitute.com

Contact• Scott M. Shemwell• SShemwell@theRRInstitute.com• www.theRRInstitute.com• www.OARS360.com • +1.281.414.6958