Gwendolyn Fricker Senior Manager RPI Service Conference December 2003.

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Transcript of Gwendolyn Fricker Senior Manager RPI Service Conference December 2003.

  • Gwendolyn FrickerSenior ManagerRPI Service ConferenceDecember 2003

  • Session 2 The Russian Majors: Strategy in Relation to Oilfield Services

  • The Russian Majors and Oilfield ServicesInternational best-practiceOil company management time is diverted from core activities E&P company management does not have expertise in servicesOpportunity cost of capital (leads to reduced E&P CAPEX)Access to latest technologies - spread the burden of R&D spending Specialized service companies are better able to manage assets

    Improve Key Variable Performance of Oil companies also helps banks/funds do comparisonsImprove utilization of equipment and employeesReduce costs Improve quality and service timeUse of third parties adds transparency to transactions Cost of downsizing in event of downturn.

    Reasoning for Divesting Service Companies

  • The Russian Majors and Oilfield ServicesReasoning for Divesting Service CompaniesInternational best-practiceOil company management time is diverted from core activities E&P company management does not have expertise in servicesOpportunity cost of capital (leads to reduced E&P CAPEX)Access to latest technologies Specialized service companies are better able to manage assetsImprove Key Variable Performance of Oil companies helps banks/funds do comparisonsImprove utilization of equipment and employeesReduce costs Improve quality / service timeUse of third parties adds transparency to transactions Cost of downsizing in event of downturn.Issues for Oil CompaniesMaintain or reduce lifting costs especially for high-maintenance fieldsIncrease expertise in core competencies- exploration & reservoir planning/mgmt. (?)Lack of internal information to take effective decisionsAvoid being monopolized by 1-2 external companiesEnsure access to equipment when neededDecrease downtimesImprove quality and service level

    Does this same logic work for Russia?

    Key Factors: Regionally-based monopolies, infrastructure and climate considerations, cost pressures, business conduct/skills Shock therapy for oil companies or transition period?

    from a regionally-based oil production / service industry

    What Should their Strategies be for Oilfield Services?Should they sell? To whom? When? How?

  • Session 3Independent E&P Operators: Options and Challenges of Contracting Service Providers / Vendors

  • Oilfield Service Offerings and Independent OperatorsWorkovers / well servicingDrillingGeneral Infrastructure (electric lines, private roads, social assets)Pumping and TreatmentPipelines (connection to trunk pipelines)

  • The IssuesE&P CompaniesEntry Barrier to E&P sectorIncreased costs compared to majors source of delaysAdditional CAPEX to develop internal services and/or build infrastructureLimits effectiveness of operations

    Service companiesLife line for poorly financed closely-held companies.Market niche for Russian independents and Foreign oilfield service companies.

  • Session 4Growth Strategies for Service Companies

  • Growth OpportunitiesSpin-offs into separate legal entities significantDivestitures limited - the jury is still outJV successful for introducing technology* In terms of revenue.Distribution of Service Expenses - Major Russian oil company- 85%* closely-held service companies- 15%* other

  • Acquisition for Assets or Market Share 77% of Company owned-tools have been in service since 1996 and have exceeded their service life. Similar tools in west = 3-year service life.$1.8 million balance sheet liability for 1996 equipment plus inventory. Acquired equipment waspast service life at time of sale/transfer to Companysold at restated book values + 28.9% markup.Asset base agingFunds for reinvestment minimalPrice increases unavoidableOPPORTUNITIESFOR WHOM?

    Years dep past serv life

    CategoryWorkover & Rental equipment/

    Years after original dep. Period for which equipment to be amort.QuantityBook Value on 31 Dec 2002 (USD)% of Total book value of Fixed Assets

    0198$684,01658.14%

    41$1000.01%

    5655$483,40041.09%

    2$8,9930.76%

    856$1,176,509100.00%

    Workover Equipment

    CategoryWorkover & Rental equipment/

    Year producedQtyBook Value on 31 Dec 2002 (USD)% of Total book value of Fixed AssetsUnit Value (average USD)

    02$8,9930.76%

    19873$00.00%$0

    19883$00.00%$0

    1996655$483,40041.09%$0

    19979$1000.01%$0

    19994$4290.04%$0

    200037$42,9443.65%$0

    2001121$634,95653.97%$0

    200222$5,6870.48%$0

    Total856$1,176,509100.00%$0

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    Year_owner

    CategoryWorkover & Rental equipment/

    Year manufacturedOwner / QuantityBook Value on 31 Dec 2002 (USD)% of Total book value of Fixed Assets

    02$8,9930.76%

    19873$00.00%

    19883$00.00%

    1996ZAO "TORS"655$483,40041.09%

    19979$1000.01%

    19994$4290.04%

    200037$42,9443.65%?? Currently 73% of the book values of assets relates to assets over 6 years old. This is a good indication that 1) assets where transferred to TORS at inflated prices or depreciation schedules were unreasonable and 2) no investment has gone into TORS ov

    2001Samatlorneftegas (-2)110$625,73753.19%

    ZAO "TORS"11$9,2190.78%

    200222$5,6870.48%

    856$1,176,509100.00%

    Year_ Category

    Age and Book Value of Assets

    Year produced/ CategoryQuantityBook Value on 31 Dec 2002 (USD)% of Total book value of Fixed Assets

    0Office and Admin/. . 10$1,2270.09%

    Real Estate/5$00.00%

    Repairs and Maintenance/ 20$3,2690.23%

    Transport/2$2,2800.16%

    Workover & Rental equipment/ 2$8,9930.64%

    1981Real Estate/1$00.00%

    1982Real Estate/1$00.00%

    1985Repairs and Maintenance/ 1$460.00%

    1987Workover & Rental equipment/ 3$00.00%

    1988Repairs and Maintenance/ 2$5330.04%

    Workover & Rental equipment/ 3$00.00%

    1989Real Estate/1$00.00%

    Repairs and Maintenance/ 2$00.00%

    1990Real Estate/1$1070.01%

    1992Repairs and Maintenance/ 1$00.00%

    1996Office and Admin/. . 2$00.00%

    Repairs and Maintenance/ 23$41,9772.98%

    Workover & Rental equipment/ 655$483,40034.32%

    1997Office and Admin/. . 4$7580.05%

    Repairs and Maintenance/ 4$1,5950.11%

    Transport/1$1,4040.10%

    Workover & Rental equipment/ 9$1000.01%

    IT / 1$00.00%

    1998Transport/1$2,4430.17%

    1999Office and Admin/. . 193$60.00%

    Repairs and Maintenance/ 8$3,3580.24%

    Transport/13$12,1300.86%

    Workover & Rental equipment/ 4$4290.03%

    IT / 22$1560.01%

    2000Office and Admin/. . 37$9,1780.65%

    Repairs and Maintenance/ 18$22,5451.60%

    Transport/4$11,9860.85%

    Workover & Rental equipment/ 37$42,9443.05%

    IT / 14$5,3480.38%

    2001Office and Admin/. . 85$6,7790.48%

    Real Estate/1$00.00%

    Repairs and Maintenance/ 27$24,6311.75%

    Transport/5$46,3003.29%

    Workover & Rental equipment/ 121$634,95645.09%

    IT / 9$4,4380.32%

    2002Office and Admin/. . 31$1,6520.12%

    Repairs and Maintenance/ 8$10,4750.74%

    Transport/4$15,0091.07%

    Workover & Rental equipment/ 22$5,6870.40%

    IT / 5$2,2100.16%

    1,423$1,408,350100.00%

    CATEGORIES

    CategoriesSubcategoriesDescription

    Real Estate/General and Administrative Buildings and Facilities/ Office, parking lot, guard house

    Shop facilities / Shop, maintenance facilities, garage

    Infrastructureelectrical infrastructure, immovable water reservoirs, parking lots

    Warehouse /

    Office and Admin/. . Furniture/desks, chairs, bookcases, cabinets, etc.

    Communication / telephones, telephone router boxes, faxes

    General Office supplies / . calculators, paper trays,copiers

    Misc office equipment / dishware, space heaters (), blinds

    IT / Computers /

    Printers /

    Scanners /

    Graphics /

    Network equipment /

    Other IT /

    Repairs and Maintenance/ Shop tools and equipment, tools

    Safety clothing /

    Transport/Light Passenger vehicles / Volga and other sedans and small vehicles

    Buses /

    Crane (mobile)

    Dump truck

    Flatbed truck

    Mobile shop

    Social AssetsMobile housing /

    Cafeteria /

    Dormitory /

    Sanatorium /

    Workover & Rental equipment/ Casing Patch /

    Bailer /

    Clamp safety /

    Crane /

    Die collar/

    Downhole motors /

    Drill collar /

    Elevator /

    Fishing tools misc/

    Intensifier /

    Jarring device hydraulic/

    Jarring device other/

    Junk basket /

    Other /

    Overshot /

    Packers\

    Pipecutter /

    Scrapers /

    Screw motors /

    Spears /

    Spider Pneumatic /

    Spiders other /

    Tongs Hydraulic /

    Tongs Hydraulic + spider / +

    Tongs other /

    Tongs Rotary /

    Washpipe /

    FA database

    , CHECK!!! For some Fixed assets, Book value between Oct 31 and Dec. 31 does not change. NO depreciation taken.

    ""= errors/questions that need to be checked. NEED TO WAIT FOR DEPRECIATION NORMS2001-27,669,757.83

    01 2003 .1.00$1,544,800USD (31.6 RR/USD)$468,804$1,062,376$317,163$745,212$184,965$560,248$128,565$431,683$121,109$