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As we’ve witnessed, the upstream oil industry is inextricably dependent on the global barrel price of oil, and it has been in a world of hurt since the 2014 price collapse. Anadarko is one of those upstream oil companies struggling to accommodate what some believe is the “new normal.” Its revenues have declined and the company has not been posted a profit in nearly a year, but at a recent SAP Oil & Gas event, Chairman, CEO and President R.A. Walker says Anadarko has managed to maintain all full-time employees, and has nearly doubled production with a recent acquisition. This contrasts some of its competitors, who are cutting jobs or ceasing to exist altogether.
Mr. Walker, who was a keynote speaker at the Best Practices for Oil and Gas conference, said “No one could have imagined oil would go below $30 per barrel, but the industry has been very resilient.” That resilience he refers to translates into operational efficiency. He predicts that Anadarko will achieve the same profit margins at $65 per barrel that the company once took $90 per barrel to realize. “We have found ways to be more efficient, take costs out of the system, and do things quicker, better faster and cheaper,” he said.
Technology is a key driver in moving towards greater efficiencies, Mr. Walker continued. At Anadarko, the movement toward improvements in technology started with a unique addition to its board of directors, Silicon Valley software entrepreneur Sean Gourley, CEO of artificial intelligent software startup Primer. “We needed someone in the boardroom who was a good technology resource,” says the Anadarko CEO. “Someone from the tech sector doing something on the cutting edge, those are things that aren’t going to be resonant to most people 55 to 70 years old. Ideas coming out of new PhDs with engineering degrees are very different.”
Bringing on Dr. Gourley is part of what Walker calls his “can’t teach speed” philosophy of building a staff. Speed, to Anadarko, is synonymous with intelligence. “You have to hire smart people,” Mr. Walker says. “Just like you can’t teach speed, you can’t make people smarter.”Anadarko has experienced benefits from using data analytics and created more efficient processes of oil extraction from shale. Having a technology savvy resource on the board acts as a “sanity check” for investing in new technology, says Mr. Walker. Even though budget is always a factor, methodologies exist to move forward with technology investments. “At some point, the longer you delay that investment, then the investment will cost a lot more,” says Mr. Walker. “It should be easier to do it incrementally than all at once, allocated some budget every year. For our last two years, we’ve had to shrink budget lower than I would like, but we haven’t gone to zero. You can go to zero, but you’re going to have to pay a lot more later when you can least afford it.”
Technology investments, especially automation investments, are usually near the bottom of the list in fiscally challenging times. A key takeaway from Anadarko is that technology shouldn’t be ignored, because the technology will need to be upgraded or replaced. Mr. Walker suggests leveraging leadership on the board of directors as an asset to ensure that technology retains a place of importance when setting corporate budget priorities.
“The board is a resource to management, not just there for a rubber stamp,” Anadarko’s Walker says. “We now have a board member who is 36 years old, a Rhodes Scholar and a PhD working on startups, Big Data and artificial intelligence. There are a lot of things that we do today that will change what we do and lower the cost of what we do.”
If technology is so vital to competitiveness, how is the leadership in your company keeping up with it? Several technologies have advanced in such a way that businesses must transform their processes to keep up. This is what Digital Transformation is all about. In the upstream business, Digital Transformation is about survival.
Mr. Walker, who was a keynote speaker at the Best Practices for Oil and Gas conference, said “No one could have imagined oil would go below $30 per barrel, but the industry has been very resilient.” That resilience he refers to translates into operational efficiency. He predicts that Anadarko will achieve the same profit margins at $65 per barrel that the company once took $90 per barrel to realize. “We have found ways to be more efficient, take costs out of the system, and do things quicker, better faster and cheaper,” he said.
Technology is Key
Technology is a key driver in moving towards greater efficiencies, Mr. Walker continued. At Anadarko, the movement toward improvements in technology started with a unique addition to its board of directors, Silicon Valley software entrepreneur Sean Gourley, CEO of artificial intelligent software startup Primer. “We needed someone in the boardroom who was a good technology resource,” says the Anadarko CEO. “Someone from the tech sector doing something on the cutting edge, those are things that aren’t going to be resonant to most people 55 to 70 years old. Ideas coming out of new PhDs with engineering degrees are very different.”
Bringing on Dr. Gourley is part of what Walker calls his “can’t teach speed” philosophy of building a staff. Speed, to Anadarko, is synonymous with intelligence. “You have to hire smart people,” Mr. Walker says. “Just like you can’t teach speed, you can’t make people smarter.”Anadarko has experienced benefits from using data analytics and created more efficient processes of oil extraction from shale. Having a technology savvy resource on the board acts as a “sanity check” for investing in new technology, says Mr. Walker. Even though budget is always a factor, methodologies exist to move forward with technology investments. “At some point, the longer you delay that investment, then the investment will cost a lot more,” says Mr. Walker. “It should be easier to do it incrementally than all at once, allocated some budget every year. For our last two years, we’ve had to shrink budget lower than I would like, but we haven’t gone to zero. You can go to zero, but you’re going to have to pay a lot more later when you can least afford it.”
Takeaways
Technology investments, especially automation investments, are usually near the bottom of the list in fiscally challenging times. A key takeaway from Anadarko is that technology shouldn’t be ignored, because the technology will need to be upgraded or replaced. Mr. Walker suggests leveraging leadership on the board of directors as an asset to ensure that technology retains a place of importance when setting corporate budget priorities.
“The board is a resource to management, not just there for a rubber stamp,” Anadarko’s Walker says. “We now have a board member who is 36 years old, a Rhodes Scholar and a PhD working on startups, Big Data and artificial intelligence. There are a lot of things that we do today that will change what we do and lower the cost of what we do.”
If technology is so vital to competitiveness, how is the leadership in your company keeping up with it? Several technologies have advanced in such a way that businesses must transform their processes to keep up. This is what Digital Transformation is all about. In the upstream business, Digital Transformation is about survival.