Post on 24-Feb-2023
American International University – Bangladesh
(AIUB)
Term Paper on
“Santos Ltd.”
A Term Paper Presented to the Faculty of Business Administration in
Partial Fulfillment of the Requirements for the Degree of Masters of
Business Administration.
Submitted to:
Prof. Dr. Md. Mahmodul Hasan
Faculty of Business Administration (MBA Program)
American International University – Bangladesh (AIUB)
Submitted By:
1Term paper of Santos by Kochhoper Dim
KOCHHOPER DIM
Strategic Management _Code: 01164_ Section: A
Sl.
No.
Name ID Sign
01. URMI,ROWNOK AFRIN 12-95756-2 Urmi
02. KHAN,NASMA TABASSUM 14-97516-1 Tabassum
03. MD.TANVIR SOBHAN 12-95849-2 tanvir
04. DEWAN,PLATO 13-96683-1 plato
Date of Submission: 2nd December, 2014
2Term paper of Santos by Kochhoper Dim
Letter of Transmittal
2nd December, 2014
To
Prof. Dr. Md. Mahmodul Hasan
3Term paper of Santos by Kochhoper Dim
Faculty of Business Administration (MBA Program)
American International University – Bangladesh (AIUB)
Banani, Dhaka- 1213
Subject: - Submission of term paper on Santos
Dear Sir,
Here is the term paper that you have assigned us as the partial
fulfillment of the Degree of Masters of Business Administration.
We have prepared our Term paper on “Santos” which we are submitting
along with this letter. It was an energizing experience throughout
semester and preparing this term paper further enhanced our insight
about how corporate level activities are being done.
The term paper is aimed to give an overview of how Strategic
Management takes place in Santos.. We hope that the analysis that we
have carried out is up to your expectations. It has been an insightful
experience for us and we tried our best to follow the tenets of
internship report.
Sincerely yours,
Kochhoper Dim
Strategic Management _Code: 01339_ Section: A
4Term paper of Santos by Kochhoper Dim
Sl.
No.
Name ID Sign
01. Urmi,Rownok Afrin 12-95756-2 Urmi
02. Khan,Nasma Tabassum 14-97516-1 badhon
03. Md.Tanvir Sobhan 12-95849-2 Tanvir
04. Dewan Plato 13-96683-1 Plato
ACKNOWLEDGEMENT
This term paper is made possible through the help and support
from everyone, including: parents, teachers, family, friends, and
in essence, all sentient beings. Especially, please allow us to
dedicate our acknowledgment of gratitude toward the following
significant advisor:
First and foremost, we would like to thank Prof. Dr. Md. Mahmodul
Hasan for his most support and encouragement. He kindly read our
paper and offered invaluable detailed advices on grammar,
organization, and the theme of the paper.
5Term paper of Santos by Kochhoper Dim
Finally, we sincerely thank to our parents, family and friends,
who provide the advice and other support. The product of this
research paper would not be possible without all of them.
EXECUTIVE SUMMARY
This term paper on strategic analysis of the Oil & Gas industry
with Santos, to help concerned managers gain a closer review of
changing environments in which the company operates. As a result,
they are able to position themselves in the marketplace, to make
better decisions on strategic management. As in the current
global economic recession with falling demand and uncertain
economic recovery, the need for business to identify strategic
issues becomes vital. This assists managers to review their
strategies, to identify their core competence, competitive
advantage and any sources of profit available to the business. In
this effort, they are able to respond to change and overcome the
situational difficulty and possibly achieve superior performance6
Term paper of Santos by Kochhoper Dim
afterwards. The report outlines appropriate strategic options for
business sustainability. In the situation of uncertain demand,
cost management needs to be effectively executed. Consolidation
and concentration within alliances may also be necessary for
reducing costs and gaining benefits. Restructuring is needed to
focus on routes of profitability. As to the case of Santos, the
company will continue to sustain and gain competitive advantages
forwards, considering that strategic management take full
advantages of their core competences, economies of scale,
learning and experience curves gained throughout its life. Cost
reduction is a long-term necessity for a capital-intensive Oil &
gas industry. Thus, cost cutting in the value chain needs to be
strictly considered. In view of short-term effect of an economic
downturn, strategic objectives for the situation should be
emphasis on market penetration by cutting price in existing
markets and competition on price basis when customers become
price-sensitive nowadays.
7Term paper of Santos by Kochhoper Dim
Definition of Strategy
Strategy (from Greek, "art of troop leader; office of general,
command, generalship") is a high level plan to achieve one or
more goals under conditions of uncertainty. Strategy is important
because the resources available to achieve these goals are
usually limited.
Strategy Matters:
Strategy is often the difference between:
success and failure, between mediocrity and excellence
a great manager and average managers
stumbling through life and moving ahead with purpose
Strategic Management ( Theory : 2000 – 2010)
8Term paper of Santos by Kochhoper Dim
• Strategic Management can be defined as (1) the art and
science of formulating, (2) implementing, and (3) evaluating
cross-functional decisions that enable an organization to
achieve its objectives.
• Strategic Management focuses on integrating management,
marketing, finance/accounting, production/operation,
research and development (R&D) and computer information
systems to achieve organizational success.
Strategic Management ( Theory : 2011 – 2015 ± )
• Strategic management involves strategy development, which is
comprised of five stages:
1. discovery,
2. strategic thinking,
3. strategic planning,
4. strategy roll-out,
5. strategy tune-up/adjustment.
1. Discovery,”Santos” requires all members of the team to
individually gather
information on an agreed upon set of attributes affecting the
organization.
9Term paper of Santos by Kochhoper Dim
2.Strategic thinking, “Santos” can be defined as ‘the
generation and application of business insights on a continual
basis to achieve competitive advantage’.
3.Strategic planning stage, “Santos” utilizes the insights
form the strategic thinking phase to assemble a mission
statement, set goals and objectives, audit the organization for
internal strengths and weaknesses, assess the external
environment for opportunities and threats, evaluate strategic
options, and then select and operationalize an organizational
strategy
4.The strategy roll-out phase, “Santos” turns the strategy into
activities and offerings and ensures that the strategy is
communicated well throughout the organization.
5. The strategy tune-up phase, “Santos” is a meeting held
several times per year to keep track of the progress of the
implemented strategy and adjust for changes in the internal and
external climate of the organization.
6. Santos made its first significant discovery of natural gas
in the Cooper Basin with the Gidgealpa 2 well in 1963.
7. The 1980s saw Santos develop a major liquids business
following the discovery of oil at Tirraw
10Term paper of Santos by Kochhoper Dim
8. The Moomba 1 discovery in 1966 confirmed this region as a
major petroleum province in the early 1970s.
9. The gas discovery at Gidgealpa 2 flows at 3.2 million cubic
feet per day: the first encouraging discovery of natural gas in
the Cooper Basin.
According to the definition of strategic management our project
“Santos” fit into (theory 2011-2015+) as they also do strategic
planning, and thinking and strategic adjustment at the end.
Company Profile of Santos
An Australian energy pioneer since 1954, Santos is a leading oil and gas producer, supplying Australian and Asian customers.
With its origins in the Cooper Basin, Santos is one of Australia’s largest producers of gas to the domestic market and has the largest exploration and production acreage position in Australia of any company.
11Term paper of Santos by Kochhoper Dim
Inspection of Seaway Falcon pipelay vessel, Casino gas development, offshore Victoria.
Santos has also developed major oil and liquids businesses in Australia and operates in all mainland Australian states and the Northern Territory.
Santos also has an exploration-led Asian portfolio, with a focus on three core countries: Indonesia, Vietnam and Papua New Guinea.
Moomba processing plant, Cooper Basin, South Australia.
From this base, Santos is pursuing a transformational LNG strategy with interests in three LNG projects; Darwin LNG, PNG LNG and GLNG.
Our substantial pipeline of projects ensures Santos is well positioned to achieve our production goal of 80 to 90 million barrels of oil equivalent by 2020.
With over 3,000 employees across Australia and Asia, Santos’ foundations are based on safe, sustainable operations and workingin partnership with host communities, governments, business partners and shareholders.
Mission12
Term paper of Santos by Kochhoper Dim
1. Santos actively describe their mission to the communities
in which they operate. They do this through using local
suppliers, creating employment and training opportunities and
supporting community organizations and events through
community sponsorships.
Vision
Santos vision is to be a leading oil and gas exploration and production company in Australia and Asia.
4. Strategic group map:
a. Extent of product diversity(Liquid Marketing)
13Term paper of Santos by Kochhoper Dim
Exploration and production
Figure : Extent of geographic coverage
Most Strategic Management Model
15Term paper of Santos by Kochhoper Dim
PESTEL ANALYSIS OF SANTOS
Political Economical
An unprecedented collapsein world crude oil pricesto US$10 per barrel sees Santos’ Australian exploration program halved.
South Australian Government repeals legislation restricting any one shareholder from owning more than 15% of Santos’ shares.
Gas supply contract signed for Reindeer project to supply
Santos and Apache announce plans to developthe Halyard field offshore Western Australia. Sale of 15% interest in the GLNG project to France’s Totalfor $650 million.
On 22 August 2014 the company
said its oil production was at its highest level in six years.
For the first half of 2014, Santos recorded sales revenue of $1.8-billion, an increase of20% on the comparable period the previous year. Sales volumes rose by 5% to 28.9-million barrels of oil equivalent.
Santos shareholders receive their first dividend of two cents per share, 24 years afterincorporation. The Strzelecki 3well flows at 2,400 barrels of oil per day: the highest onshore flow rate recorded at that stage.
New $90 million Newmont gas supply contract signed. $300 million off-market buy-back completed.
Social/Socio-Cultural Technological
Successful appraisal of the
16Term paper of Santos by Kochhoper Dim
Mutineer and Exeter oil fields offshore Western Australia signals the beginning of Santos’ first operated offshore oil development and one of Santos’ largest projects invalue terms.
Employees and contractors have specific responsibilities for minimizing environmental impacts, as detailed in theEnvironmental Vision, Commitment and Policy..
The company-wide Environment, Health and Safety Management System (EHSMS) provides a structured framework for effective environmental andsafety practice across all of Santos' activities and operations.
Santos' activities and operations The system, based on the ISO 14001 and AS 4801 standards, has beendesigned to ensure consistent standards for all employees and contractors.
Santos made its first significantdiscovery of natural gas in the Cooper Basin with the Gidgealpa 2well in 1963.
The 1980s saw Santos develop amajor liquids business followingthe discovery of oil atTirrawarra in the early 1970s.
Santos monitors environmental performance with company-wide andsite-specific key performance indicators.Emergency contingency plans, in place at all operating areas, are tested and updated on a regular basis.
December 2009, the PNG LNG project involves the development of gas and condensate resources
Environmental/Ecological Legal/Regulatory
Moomba experiences the worst flood in its recorded Santos' activities and
17Term paper of Santos by Kochhoper Dim
history, denying road access to the area for six months..
Santos reports and investigates environmental incidents, near misses and hazards. Issues of concern are incorporated into hazard registers.
In May 2008, groundwater contamination was reported to the Environment Protection Authority (EPA) following detection at Santos' Port Bonython site,Spencer Gulf, South Australia.
In May 2006, the Sidoarjo mudflow disaster occurred in East Java, Indonesia. Controversy exists surrounding the probable cause of the disaster whichhas displaced
operations. The system, based on the ISO 14001 and AS 4801 standards, has been designed to ensure consistent standards for all employees and contractors.
To promote high standards of corporate governance and ethical conduct the Company has provided its employees with a clear set ofrules, values and guidelines to
the Board Guidelines, the Companyhas adopted a Code of Conduct which prescribes that, in addition to compliance with all applicable legal requirements, the Board expects all Directors, executives
Santos systems and procedures arebased on an understanding and respect for human rights with ourprinciples consistent with the Universal Declaration of Human Rights.
STEER Analysis:
STEER analysis systematically considers Socio-cultural,
Technological, Economic, Ecological, and Regulatory factors.
18Term paper of Santos by Kochhoper Dim
Five Forces Model:
SUPPLIER POWER
The suppliers are countries that have oil reservoirs and oilfields. It can be argued that here the bargaining power ofsuppliers is too high and they can choose the contractor.
THREAT OF SUBSTITUTES
Crude oil can’t be substituted by any other product, as it is not onlythe fuel but also the raw material for petrochemical industries.
DEGREE OF RIVALRY
number of competitors in the market : competitive rivalry ishigher as there are 3 more strong potential competitors eg.
19Term paper of Santos by Kochhoper Dim
Exxon Mobil Corporation, BHP BILLITON LIMITED,WOODSIDEPETROLEUM LTD.
market size and growth : Competition is always most intensein stagnating markets
exit barriers : it is difficult or expensive to exit oilindustry, firms will remain thus adding to the intensity ofcompetition
BUYER POWER
The buyers usually purchase in the oil markets, and the market priceis determined by the demand. The substitutes are not easily found , customers arent that sensitive to pirce change.
THREAT OF NEW ENTRANTS
As the capital for oil companies is too high, Level of technicalknowledge is too high and advanced, this has created a very highbarrier for the new entrants. So it can be concluded that thereis almost no threat of new entrants for Santos.
Degree of rivalry
1.Exxon Mobil
2.Chevron
3.Bp
4.Gasprom20
Term paper of Santos by Kochhoper Dim
5.Nexen
6.Total S.A
7.Shell Oil Company
8.Petronas
Here are the competitor of this particular industry and therivalry is very intense among the firms and if the new entrancecomes among this situation then the competition will be moreintense and very limited scope to be successful with the giants .
SWOT ANALYSIS OF SANTOS:
## Strengths ## Weaknesses
Santos is a leading oil and gas producer & supplying Australian and Asian customers.
Santos is one of Australia’s largest producers of gas to the domestic market and has the largest exploration and production acreage position in Australia of any company.
By taking personal responsibilityand pride in our work to deliver timely, quality results that benefit Santos and help achieve our vision and strategy.
Santos' values are the guiding
Incraesing operational and manufacturing cost have been affecting the companys margins.
A smaller workforce means the opportunities to grow rapidly isrestricted.
Ground water contamination was reported to the environment protection authority (EPA)following detection at Santos port Bonython site ,spencer gulf ,south
21Term paper of Santos by Kochhoper Dim
principles that define how it conducts its business and what itstands for as a company. This means working as a team that discovers,delivers,collaborates,cares.
Australia Hydrocarbons were found floating on and in the ground water.
Oil and gas company is covered by a range of regulations that limit where, when and how extraction is done.
## Opportunities ## Threats
Santos has also developed majoroil and liquids businesses inAustralia and operates in allmainland Australian states andthe Northern Territory.
over 3,000 employees acrossAustralia and Asia, Santos’foundations are based on safe,sustainable operations andworking in partnership with hostcommunities, governments,business partners andshareholders.
By recognising the value andpower in diversity of thought andcommunicating openly tounderstand the perspectives ofothers; demonstrating leadershipby sharing what we know andrespectfully challenging eachother to achieve the best resultsfor all.
Santos monitors environmentalperformance with company-wide andsite-specific key performance
volatile global prices of oiland gas in whose explorationand production the company isengaged it can adversely impactits business.
Intens competition from otherlarger firms in theindustry,which have largerreserves revenues andoutreach,can make it lose itsmarket share.
Stringent emission standardsarising from governmental lawsand regulations can adverselyimpact its operations and reducerevenue.
Large underground deposits ofoil and gas. Extracting theseoil and gas deposits can resultin lasting damage to theenvironment.
22Term paper of Santos by Kochhoper Dim
indicators. Our EnvironmentalVision: "We will continuouslyseek to find new ways to minimiseour environmental impact acrossthe lifecycle of our activities".
Blue Ocean Strategy:
Santos is the world leading independent oil and gas
exploration and production company, based on prove reserves
and production of liquid and natural gas.They explore
for ,develop and produce crude. Santos is determined to grow
production by at least 5 percent above their base level and
they are working on achieving this. the discoveries in the
first half of 2001 will help us achieve this goal. Blue
Ocean Strategies competing head-to-head with other suppliers
for known customers in an existing industry. And Santos is
doing so with competing head to head with ConocoPhillips.
Open innovation:
Santos can and should use external ideas as well as internal
ideas, and internal and external paths to market, as the
firms look to advance their technology.
23Term paper of Santos by Kochhoper Dim
McKinsey – Seven S-Model:
1. Business Environment/Strategy: Santos strategy is to be the
world’s leader in the Oil & Gas industry. Our mission is to
be the leaders in the Oil & Gas industry. They intent to
provide the eminent quality service to the clients.
2. Shared Values: Santos actively describe their mission to the
communities in which they operate. They do this through using
local suppliers, creating employment and training
opportunities and supporting community organizations and
events through community sponsorships.
3. Structure: Emirates has a very structured Organizational
Chart. They organized their organization to different
departments and different management layers so that total
organizational operations run smoothly and ensure customer
satisfaction.
Need to put the diagram over here.
4. Staff: Santos staffs are highly qualified and experienced.
Top management employees are very experienced in the oil &
gas industry. They are very experience in setting company
business plan and strategy so that they can do profit. Others
staffs are also very skilled in their respective area and
they are always working hard to improve themselves.
24Term paper of Santos by Kochhoper Dim
5. System/Infrastructure: Santos is using latest machineries
in their pool to ensure quality and quantity full oil &
Gas . They have the reward system for both of their
corporate & regular customer . They are very much concern
about their customer feedback and they respect their
customers and always try to act according to their customer
feedback.
6. Skills: Santos always choose best human resources to run
the business. They are very much skilled and their know how
on Oil & Gas business is excellent.
7. Style: Santos always emphasize on quality. They have the
best on market experts to take care of the oil & gas quality
refueling. As we know oil & gas handling itself is a risky &
dangerous work to perform so they had a very safe & sound
system for security of the employees.
so they provide excellent security system and arrangements for
the employees so that they do not feel insecure. Their
operators and management are also very helpful. The employees
are also very energetic and dedicated to their works to bring
success for the company in every aspect.
25Term paper of Santos by Kochhoper Dim
OrganogramOrganogram
Kenneth Charles BordaChairman,LLB, BA
David John Wissler KnoxManaging Director and Chief Executive OfficerBSc (Hons) Mech Eng, MBA, FIE Aust, FTSE
Roy Alexander Frankli OBEChairman of the environment,health, safty and sustainability committe and member of the people and remuneration committe of the board , BSc (Hons)
Gregory John Walton MartinChairman of the People & Remuneration and the FinanceCommittees of the Board B.Ec, LLB, FAIM, MAICD
Jane Sharman HemstritchMember of the People & Remuneration committee and Chairperson of the Audit and Risk Committee, BSc (Hons), FCA, FAICD
26Term paper of Santos by Kochhoper Dim
Hock GohMember of the Environment, Health, Safety and Sustainability Committee and the Audit and Risk Committee of the Board,B Eng (Hons) Mech Eng
Scott Sheffield member of the Finance Committee
Yasmin Allenmember of the Environment, Health, Safety and Sustainability Committee of the Board, BCom FAIC
Andrew SeatonChief Financial OfficerBEng Hons (Chem), GradDip BusAdmin
Peter ClearyVice President LNG Markets and Eastern Australia CommercialB. Comm, LLB
Petrina CoventryChief Human Resources OfficerB.ed, MBA, M.Ethics, Global EMBA, FAHRI, GAICD
James BaulderstoneVice President Eastern AustraliaLLB (Hons), BSc (Hons)
27Term paper of Santos by Kochhoper Dim
Trevor BrownVice President QueenslandBSc (Hons)
Rod DukeVice President Downstream Santos GLNGBEng (Hons) Chemical, GradDip Management
Diana HoffVice President Technical, Engineering and InnovationBSc Petroleum Engineering (Magna cum Laude)
John AndersonVice President Asia & WA/NTLLB, BEc, GDCL
Bill OvendenVice President Exploration & Subsurface (Acting)BSc (Hons) (Geology and Geophysics)
Christian PaechGeneral CounselLLB (Hons) BCom
David LimCompany SecretaryBEc, LLB, Ch.Sec
28Term paper of Santos by Kochhoper Dim
SWAN Analysis of Santos
## Strengths ## Weaknesses
1. Santos is a leading oil and gas producer, supplying Australian and Asian customers.
2. Santos is one of Australia’s largest producers of gas to the domestic market and has the largest exploration and production acreage position inAustralia of any company.
3. by taking personal responsibility and pride in our work to deliver timely, quality results that benefit Santos and help achieve our vision and strategy.
4. Santos' values are the guidingprinciples that define how it conducts its business and whatit stands for as a company.
1. incraesing operational and manufacturing cost have been affecting the company’s margins.2. A smaller workforce means the opportunities to grow rapidly is restricted.3. Ground water contamination was reported to the environment protection authority (EPA)following detection at Santosport Bonython site ,Spencer gulf ,south Australia Hydrocarbonswere found floating on and in the ground water.4.Oil and gas company is covered by a range of regulations that limit where, when and how extraction is done.
29Term paper of Santos by Kochhoper Dim
This means working as a team that discovers,delivers,collaborates,cares.
##Achievements: ## Next Step
Achievements of Santos within its
entire existence and until today,
we can tell with certainty that
this company has a very high level
of risk management. More than 600
international awards are testament
to the hard work and determination
of every member of the Santos.
Santos next step is increase their
supply in to more countries every
day in coming future.
TOWS Matrix OF SANTOS
Internal Score
30Term paper of Santos by Kochhoper Dim
## Strengths Santos is a leading oil
and gas producer,supplying Australian andAsian customers.
Santos is one ofAustralia’s largestproducers of gas to thedomestic market and hasthe largest explorationand production acreageposition in Australia ofany company
by taking personalresponsibility and pridein our work to delivertimely, quality resultsthat benefit Santos andhelp achieve our visionand strategy.
Santos' values are theguiding principles thatdefine how it conductsits business and what itstands for as a company.This means working as ateam thatdiscovers,delivers,collaborates,cares.
## Weaknesses incraesing operational
and manufacturing costhave been affecting thecompanys margins.
A smaller workforcemeans the opportunitiesto grow rapidly isrestricted
Ground watercontamination wasreported to theenvironment protectionauthority(EPA)followingdetection at Santosport Bonythonsite ,spencergulf ,south AustraliaHydrocarbons were foundfloating on and in theground water.
Oil and gas company iscovered by a range ofregulations that limitwhere, when and howextraction is done.
2.80
31Term paper of Santos by Kochhoper Dim
## Opportunities
.Santos has alsodeveloped major oil andliquids businesses inAustralia and operatesin all mainlandAustralian states andthe Northern Territory.
. over 3,000 employeesacross Australia andAsia, Santos’foundations are based onsafe, sustainableoperations and workingin partnership with hostcommunities,governments, businesspartners andshareholders.
By recognising the valueand power in diversityof thought andcommunicating openly tounderstand theperspectives of others;demonstrating leadership
## Threats
volatile global pricesof oil and gas inwhose exploration andproduction the companyis engaged it canadversely impact itsbusiness.
Intens competitionfrom other largerfirms in theindustry,which havelarger reservesrevenues andoutreach,can make itlose its market share.
Stringent emissionstandards arising fromgovernmental laws andregulations canadversely impact itsoperations and reducerevenue.
3.10
32Term paper of Santos by Kochhoper Dim
by sharing what we knowand respectfullychallenging each otherto achieve the bestresults for all.
Santos monitorsenvironmentalperformance withcompany-wide and site-specific key performanceindicators. OurEnvironmental Vision:"We will continuouslyseek to find new ways tominimise ourenvironmental impactacross the lifecycle ofour activities".
Large undergrounddeposits of oil andgas. Extracting theseoil and gas depositscan result in lastingdamage to theenvironment.
External
Value Chain Analysis
The aim of any value chain & network analysis is to understandthe systemic factors and conditions through which a valueframework and its firms can achieve higher levels ofperformance. With its origins in the Cooper Basin, Santos isone of Australia’s largest producers of gas to the domestic
33Term paper of Santos by Kochhoper Dim
market and has the largest exploration and production acreageposition in Australia of any company. Santos adopts verticalintegration into its core business structure, incorporatingdiversified properties. This resembles itself throughExploration, marketing and technology. Difficulties can arisewhen company make technology decisions independently alongtheir supply-chains. Thus, their information systems areneither coordinated nor compatible, and information is notreadily shared back and forth along the supply-chain. As it isbecoming more difficult and more challenging to find easilyaccessible new oil and gas discoveries while the existingfields are being depleted, they are being forced to take a moreintegrated approach to exploration, production, refining andmarketing operations. Thus, one way of crossing this dividetoday is by adopting better and improved secondary and tertiaryrecovery technologies across the entire Value-chain. Demandvariability amplification in a supply-chain is a big problem.Dynamics and instability in schedules are constantly amplifiedfrom downstream to upstream in a Chain and should be controlledor dampened. Without this controlling or dampening measure,instability will result to larger costs. Variability also comesfrom changes and updates of the demand forcast.Dynamic task onvariability make Santos more profitable in this field. On thebasis of this assessment, Santos outweighs competitiveadvantages over competitors, in terms of productivity, andentrepreneurial management.
34Term paper of Santos by Kochhoper Dim
Figure: Santos Value chain
Exploration
Locate underground rock formation that may contain Hydrocarbons or resources
Bidding for exploration Using technology to find new oil resources
Production
Define the well architecture and development Scheme Extract as much hydrocarbons or resources as
possible Bringing oil to the surface using natural and
artificial methods Invest Production field development
Processing
Converting crude oil into finished products Treating gas to be sent to markets
35Term paper of Santos by Kochhoper Dim
Refining
Refinery economics Catalytic cracking & refinery complexity
Transportation
Moving oil to refineries To consumers with tankers, trucks and pipelines Build and operate natural gas compressing and
processing equipment Oil spills Shipping cost
Marketing
Slogan “we have Energy” Distribution systems define Distributing and selling refined products Convenience stores/places
S=SpecificTo keep the Sustainable DevelopmentReport current, key performancemetrics are updated every year.
M=Measurable
There worldwide annual averagecrude oil sales price fromcontinuing operations remainedrelatively flat in 2012, from
36Term paper of Santos by Kochhoper Dim
$105.52 per barrel in 2011 to$105.72 per barrel in 2012
A=Achievable A strong and stable leadership
team, ambitious yet calculated
decision-making and ground-
breaking ideas all contribute
to the creation of great
companies.
R=RealisticEach of Santos businesses isresponsible for integratingsustainability issues into day-to-day operations, projectdevelopment and decision making.
T=TimeSantos is one of the successfulindustries. They have talentworkforce those are responsibleto do the work effectively andefficiently in timely.
E=EncompassingSantos is evaluating anddeveloping technologies for
37Term paper of Santos by Kochhoper Dim
renewable energy, and isleveraging expertise,intellectual property andphysical assets in pursuit ofeconomically feasible, renewableenergy business opportunities.
R=ReviewedA career with Santos is arewarding one. They value theirpeople and ensure that therewards and benefits arecomprehensive, competitive inthe market.
GREAT Model
By using GREAT Model, Santos will create the long term proposal.
G=Goals Santos is pursuing a transformational LNG strategy with interests in three LNG projects;
Santos is well positioned to achieve theirproduction goal of 80 to 90 million barrels of oil equivalent by 2020.
38Term paper of Santos by Kochhoper Dim
R=Result The main role is to ensure economic andsocial benefits
oil and gas production with good, safestewardship of the country’s naturalresources and environmental care.
E=Expectations
conducted in accordance with thelaws and regulations of the variousjurisdictions
Santos will preclude discriminationbased on gender, region, race,national or ethnic origin, culturalbackground, social group,disability, sexual orientation,marital status, age or politicalopinion.
A=Abilities
The ability to adapt a new environment andstrong cultural awareness and people.
T=Timing At the end of 2013, Santos announced thatproved plus probable (2P) petroleum reserveswere 1,368 million barrels of oil equivalent(mmboe).
39Term paper of Santos by Kochhoper Dim
VISA Model
Vi-Vision Vision; Our vision is to be a leading oil and gas
exploration and production company in Australia and
Asia.
S =
Strategy
Santos has a good and effective business model
which is very helpful to gain company objectives
and help to company become leader in the oil & Gas
Industry .
A =Action
Plan
• “Santos is working on a action plan to
ensure that they get more market coverage &
moving as a quality & efficient company.
40Term paper of Santos by Kochhoper Dim
This will include more employees.
PURE Objective
P=Positive Increase market share as much as possible
Retain and improve frequent to business
class travelers market share
Tap competitive cost carriers market
achieve company’s return on investment
Committed to promoting positive social &
economic Impact
U=UnderstoodSantos treats also all the employees equally.Talent is not nationality exclusive, andtheir diversity of nationalities, cultures,religious and ethnic
R=Recorded The key to the Santos success has been the CONTINUITY of its management team.
41Term paper of Santos by Kochhoper Dim
E=EthicalTo promote high standards of corporategovernance and ethical conduct the Company hasprovided its employees with a clear set ofrules, values and guidelines to follow whencarrying out their work as a Santos employeeand representative.
42Term paper of Santos by Kochhoper Dim
The BCG Matrix
High
43Term paper of Santos by Kochhoper Dim
BCG STARS ( )
(high growth, high market
share)
BCG QUESTION MARKES (?)
(high growth, low
market share)
BCG CASH COWS ($)
(low growth,high market
share)
BCG DOGS
(low growth, low market
share)
Business
Gro
wth Ra
te (
Mark
et
Growth)
Low
High
Low
IMPLEMENTATION:
According to BCG matrix Santos relative position (Market Share) is
high and business Growth rate (Market growth) is low that means Santos
BCG matrix position is in CASH COWS ($).
Market Analysis Including Market
Segmentation
Market Analysis
Market risks are occurred in a specific market and associatedwith the market’s characters.
1) The effects of changing commodity prices
The revenues, operating results and future rate of growth arehighly dependent on the prices that the Company receives for
44Term paper of Santos by Kochhoper Dim
Relative Position (Market
the crude oil, natural gas, condensate, naphtha, liquidpetroleum gas,and Liquefied Natural Gas (LNG). The factorsinfluencing these prices are beyond the Company’s control.
2) Any material change in the factors and assumptionsunderlying Santos’s estimates of crude oil, and natural gasreserves could impair the quantity and value of thosereserves.
Reserve estimation is a process that involves estimatingvolumes to be recovered from underground accumulations ofcrude oil, and natural gas that cannot be directly measured.
3) Without a successful addition to Santos’s proved reserves,its future crude oil, and natural gas production will decline,resulting in an adverse impact to the business. This istypical of energy companies.
The rate of production generally declines as reserves arereduced. This depends on the extent whether Santos conductssuccessful exploration and development activities, or, throughengineering studies, identifies additional or secondaryrecovery reserves.
Market Segmentation
Demographic segmentation:
The Group has identified its operating segments to be the fourbusiness units of Eastern Australia; Western Australia andNorthern Territory (“WA & NT”); Asia Pacific; and GladstoneLNG (“GLNG”), based on the different geographical regions andthe similarity of assets within those regions.
45Term paper of Santos by Kochhoper Dim
The Asia Pacific operating segment includes operations inIndonesia, Papua New Guinea, Vietnam, India and Bangladesh.
Behavioral segmentation:
Segment performance is measured based on earnings beforeinterest, tax, impairment, exploration and evaluation, andgains or losses on sale of non-current assets and controlledentities (“EBITX”). Corporate and exploration expenditure andinter-segment eliminations are included in the segmentdisclosure for reconciliation purposes.
Competitor Analysis
Chevron:
Chevron Corporation is an American multinational energy corporation. One of the successor companies of Standard Oil, it is headquartered in San Ramon, California, and active in more than 180 countries. Chevron is engaged in every aspect ofthe oil, gas, and geothermal energy industries, including exploration and production; refining, marketing and transport;chemicals manufacturing and sales; and power generation.
Conoco Phillips:
ConocoPhillips Co. is an American multinational energy corporation with its headquarters located in the Energy Corridor district of Houston, Texas in the United States. Conoco Inc. founded in 1875 as the Continental Oil and Transportation Co. Based in Ogden, Utah, the company was a coal, oil, kerosene, grease and candles distributor in the West. It is the world's largest independent pure-play
46Term paper of Santos by Kochhoper Dim
exploration and production company and is also one of the Fortune 500 companies.
Exxon Mobil:
Exxon Mobil Corp., or ExxonMobil, is an American multinationaloil and gas corporation headquartered in Irving, Texas, UnitedStates. It is a direct descendant of John D. Rockefeller'sStandard Oil company, and was formed on November 30, 1999, bythe merger of Exxon and Mobil (formerly Standard Oil of NewJersey and Standard Oil of New York). It is affiliated withImperial Oil which operates in Canada. The world's largestcompany by revenue, ExxonMobil is also the second largestpublicly traded company by market capitalization
Profitability ratios Return on Asset(ROA):
Chevron:
Conoco Phillips:
Exxon Mobil:
Santos
00.10.2
ROA
Series1
Company name
Ratio
Return on Equity(ROE):
47Term paper of Santos by Kochhoper Dim
Chevron:
Conoco Phillips:
Exxon Mobil:
Santos
00.150.3
ROE
Series1
Company name
Ratio
Debt to Equity Ratio:
48Term paper of Santos by Kochhoper Dim
Chevron:
Conoco Phillips:
Exxon Mobil:
Santos
00.61.2
Debt to Equity
Series1
Company name
Ratio
Intensity of Rivalry Among EstablishedFirms
Company Name ChevronConocoPhillips
Exxon
Mobil Santos
Reserve(billion barrels) 11.2 4.3 1.6 1.4
Employee(thousands) 64.5 19 75 78.4
Operated country 180 27 50 77
49Term paper of Santos by Kochhoper Dim
EFE Matrix
The External Factor Evaluation (EFE) Matrix of SANTOS
Key External Factors Weight Rating WeightedScore
OPPORTUNITIES1. Santos has also developed major oil andliquids businesses in Australia andoperates in all mainland Australian statesand the Northern Territory.
0.10 4 0.40
2. over 3,000 employees across Australia and Asia, Santos’ foundations are based onsafe, sustainable operations and working in partnership with host communities, governments, business partners and shareholders.
0.20 4 0.80
3. By recognising the value and power in diversity of thought and communicating openly to understand the perspectives of others; demonstrating leadership by sharing what we know and respectfully challenging each other to achieve the bestresults for all.
0.15 4 0.60
4. Santos monitors environmental performance with company-wide and site-specific key performance indicators. Our Environmental Vision: "We will continuously seek to find new ways to minimise our environmental impact across the lifecycle of our activities".
0.10 2 0.20
50Term paper of Santos by Kochhoper Dim
THREATS1. volatile global prices of oil and gas in whose exploration and production the company is engaged it can adversely impactits business.
0.20 3 0.60
2.Intens competition from other largerfirms in the industry,which have largerreserves revenues and outreach,can make itlose its market share.
0.10 2 0.20
3.Stringent emission standards arising from governmental laws and regulations canadversely impact its operations and reducerevenue.
0.05 2 0.10
4.Large underground deposits of oil and gas. Extracting these oil and gas depositscan result in lasting damage to the environment.
0.10 2 0.20
4= the response is superior3= the response is above average2= the response is average1= the response is poor Rating
TOTAL 1.00 2.55
The total weighted score of this matrix reveals that SANTOShave a strong score of 3.10 which is higher than normal. The
51Term paper of Santos by Kochhoper Dim
3.10
company’s ability in responding to external forces issufficient.
CPM Matrix
The Competitive Profile Matrix (CPM) MATRIX OF SANTOS
SANTOS
EXXON
MOBIL
CONOCO
PHILIIPS
Critical Success
Factors
Weight Rating Score Rating Score Rating Score
Advertising 0.153
0.454 0.60 3
0.45Quality of
Services
0.104 0.40 4 0.40 4 0.40
Price
Competitiveness
0.104 0.40 4
0.404 0.40
52Term paper of Santos by Kochhoper Dim
Management 0.15 4 0.60 4 0.60 4 0.60
Financial
Position
0.154
0.604 0.60 3 0.45
Global Expansion 0.203 0.60
40.80 4 0.80
Customer Loyalty 0.104
0.403 0.30 3 0.30
Market Share 0.05 4 0.20 3 0.15 3 0.15
Total 1.00 3.65 3.85 3.55
4 = Major Strength; 3 = Minor Strength; 2 = Minor Weakness; 1 = Major
Weakness
QSPM (Quantitative Strategic Planning
Matrix) for SANTOS
Key Factors
Alternative 1-Exploration In AUSTRALIA
Alternative 2- Exploration In ASIA
Weight
Alternatives
Scores
TotalAlternatives
Weight
AlternativesScores
TotalAlternatives
53Term paper of Santos by Kochhoper Dim
Scores ScoresStrengths:Santos is a leading oil and gas producer, supplying Australian and Asian customers. 0.10 4 0.40 0.10 3
0.30Santos is one of Australia’s largest producers of gas to the domestic market and has the largest exploration and production acreage position inAustralia of any company. 0.20
4
0.80 0.20 3 0.60
by taking personal responsibility and pride in our work to deliver timely, quality results that benefit Santos and help achieve our vision and strategy.
0.15 30.45 0.15 2
0.30Santos' values are the guidingprinciples that define how it conducts its business and whatit stands for as a company. This means working as a team that discovers,delivers,collaborates,cares. 0.10 3 0.30 0.10
2 0.20
Weaknesses:incraesing operational and manufacturing cost have been affecting the companys margins.A smaller workforce means the opportunities to grow rapidly
0.20
1
0.20
0.30
0.20
0.10
1
0.20
0.20
54Term paper of Santos by Kochhoper Dim
is restricted. 0.10 3 3
2
Ground water contamination wasreported to the environment protection authority (EPA)following detection at Santos port Bonython site ,spencer gulf ,south Australia Hydrocarbons were found floating on and in the ground water.
0.05
1
0.05 0.05 1 0.05
Oil and gas company is coveredby a range of regulations thatlimit where, when and how extraction is done. 0.10 3 0.30 0.10 1
0.10
Sum Weights 100% 100%
OpportunitiesSantos has also developed major oil and liquids businesses in Australia and operates in all mainland Australian states and the Northern Territory.
0.15 30.45 0.15 2
0.30 over 3,000 employees across Australia and Asia, Santos’ foundations are based on safe,sustainable operations and working in partnership with host communities, governments,business partners and 4
0.80 0.20 2 0.40
55Term paper of Santos by Kochhoper Dim
shareholders. 0.20By recognising the value and power in diversity of thought and communicating openly to understand the perspectives ofothers; demonstrating leadership by sharing what we know and respectfully challenging each other to achieve the best results for all.
0.15 2
0.30 0.15 1
0.15Santos monitors environmental performance with company-wide and site-specific key performance indicators. Our Environmental Vision: "We willcontinuously seek to find new ways to minimise our environmental impact across the lifecycle of our activities".
0.10 4
0.40 0.10 3
0.30Threatsvolatile global prices of oil and gas in whose exploration and production the company is engaged it can adversely impact its business.
0.15 10.15
0.152
0.30Intens competition from other larger firms in the industry,which have larger reserves revenues and outreach,can make it lose its market share.
0.15 20.30 0.15 2
0.30Stringent emission standards arising from governmental laws
0.05
56Term paper of Santos by Kochhoper Dim
and regulations can adversely impact its operations and reduce revenue. 0.05 2 0.10 0.05 1
Large underground deposits of oil and gas. Extracting these oil and gas deposits can result in lasting damage to the environment.
0.05 2 0.10
0.05 1
0.05
Sum Weights 100% 100%
Sum Total Alternatives Scores 5.40 > 3.50
From above calculation we can see that exploration in Australia is better than exploration in AUSTRALIA is better than exploration in ASIA for SANTOS company.that means Alternative -1 is better than Alternative -2
Financial Analysis
Profit Margin:
57Term paper of Santos by Kochhoper Dim
2011 2012 2013
0.00%5.00%
10.00%15.00%20.00%25.00%30.00% 27.06%
16.08%14.33%
Profit Margin
Profit Margin
Year
Profit Margin
(Percentage)
Profit margin was lower compare to the previous year
Earning per share
2011 2012 2013
020406080
100 85
54 53
Earning Per Share
Earning Per share
Year
EPS(cents)
58Term paper of Santos by Kochhoper Dim
In 2013 Earning per share was 53cents which is almost in a linewith the prior year
Return on Investment
2011 2012 2013
0.00%10.00%20.00%30.00%40.00%50.00%
48.07%
33.48%25.64%
Return On Investment
Return of Investment
Year
ROI(Percentage
)
Return on invesment is not enough compare to the previous year.
Dividends per share
59Term paper of Santos by Kochhoper Dim
2011 2012 2013
05
1015202530
30 30
22
Dividends Per Share
dividends Per share
Year
DPS(cents)
.
Breakeven Analysis
We also know, Break Even Point ¿ ¿CostPrice–VariableCost
Santos BEP, 2013 =22573÷(3600-2194)* GM
=16.054
In AED Million 2013
Revenue 3600 100%
COGS 2194 60.94%
60Term paper of Santos by Kochhoper Dim
Gross Margin 140639.05%
Fixed Cost 22573
Break EvenPoint
16.05Xof GM
It is observed that for year 2013, the company was incurringmanaged to have a positive gross margin of 1406 AED million.On year 2013 the Fixed Cost of Santos was 22573 AED millionmeaning to achieve the break-even point the company will haveto make sure that it has at least a sales volume that givesaround 16.05 times of the gross margin in year 2013.
The company earned AED 39.05 AED for each Revenue of 100 AED.In 2013 the Fixed cost of the company is 22573 AED Million
So we have to earn (100/39.05) * 22573 = 57805.37 Million
In percentile format, the cost equation for the company foryear 2013 would be:
Cost = 0.60X + 22573 Million
In percentile format, Revenue = 1X
1X = 0.60X + 22573Million
or, X = 57805.37 Million
However, traditionally, a costs around AED 100061
Term paper of Santos by Kochhoper Dim
Cost Revenue = 1X
Cost = 0.60X + 22573 AED Million
Break Even Sales Volume 57805.37 or5.7 Billion AEDMillion
22573
Number of barrels
Figure:Break Even Analysis For Santos
KSF Analysis (Industry key Success Factor)1. Technology – related KSFs
After a thorough technical evaluation of the available solutions
on the market, Santos selected Intergraph® SmartPlant® Enterprise
because of its integrated lifecycle approach, which is aligned
with the company's vision. The new information management system
is established using SmartPlant Enteprise for Owner Operators
(SPO), which is then integrated with the other SmartPlant
Enterprise design and engineering solutions.
62Term paper of Santos by Kochhoper Dim
With the integrated suite of SmartPlant Enterprise
solutions, including SPO, Santos is able to view, manage,
and control the continuously changing engineering design
basis more easily. An integrated system ensures
synchronization of information, so that the "virtual plant",
along with in-plant documentation and IT systems, is always
consistent, accurate, and up-to-date.
Using Intergraph technology, Santos has established an
engineering information management system across the entire
project life cycle while supporting improved business
processes.
Production - related KSFs
Santos has continued to deliver a strong forward
production profile by having focused on developing
significant optionality in portfolios across both
Australia and Asia.
2. Skills and Capability – related KSFs
The company were committed to open, honest and
collaborative engagement to reassure and provide
confidence that its proposed operations were safe,
sustainable and delivered a positive outcome for the
local community and shareholders.
63Term paper of Santos by Kochhoper Dim
3. Other types of KSFs
Establishing constructive partnerships with both local and
global organisations is an important part of achieving
success in the oil and gas business.
A number of acquisitions in the 1990s provided Santos with
additional opportunities onshore and offshore Australia,
Indonesia and Papua New Guinea.
The Board acknowledges that a key determinant of success
relied on the ability of Santos to gain the trust of the
communities in which it operates.
Strategy Evaluation and Contingency Plan
Substantial pipeline of projects ensures Santos is well
positioned to achieve our production goal of 80 to 90 million
barrels of oil equivalent by 2020.
Business strategy:
Australia:
Growing strong domestic base business
Exploration success offshore Western Australia with the Bianchi and Winchester wells.
Fletcher Finucane project (Western Australia) first oil ahead of
64Term paper of Santos by Kochhoper Dim
schedule and under budget. Further shale gas success in the
Cooper Basin with the Moomba-194 unconventional well.
Santos uniquely positioned to meet higher demand for domestic and exportnatural gas.
LNG:
Delivering our transformational
LNG portfolio
PNG LNG more than 90% complete and ontrack for first LNG in the third quarter of 2014.
GLNG approaching 75% complete and on track for first LNG in 2015.
Capital cost estimates for both projects unchanged.
Asia:
Building a focused exploration-led portfolio
Dua (Vietnam) and Peluang (Indonesia)projects on track for first production by mid-2014.
Acquisition of a 50% interest in the Ande Ande Lumut oil field offshore Indonesia.
Farm-in to exploration licenses in the PNG Foreland.
Multiple options for PNG LNG expansion.
Recommendation:
65Term paper of Santos by Kochhoper Dim
Santos need to find out sustainable energy field wherethey can produce long term oil and gas and supply inmarket.
Like others energy producing company they should operateon shore project in Bangladesh to increase their businessvolume.
Santos need to focus on increasing their operations in different countries.through this they can increase more porfit for organization.
Conclusion:In long lasting business a company should develop a strongstrategy to survive in the market competing with othercompetitors and achieved it goodwill from customers as well asshareholders, stakeholders. Santos should manage those thingsin its long lasting business. There are few environmentconscious group who are activated in environmental problem andthey should take care about this matter and not work such away so sea creature fall in danger. As their selling becomehigher they should increase their supply of oil and gascontinuously. They should search new wells for increase ofproduction and brand employee for attracting perfect employeein their company for better output. Then they can developthemselves and make them top supplier of oil and gas in Asiaand Australia.
According to Rumelt’s 4 criteria SANTOS evaluation criteria is“ADVANTAGE” (Creation or maintenace of competitive advantage).
66Term paper of Santos by Kochhoper Dim
References:Fred R.David, Strategic management (12th edition) concepts andcases, prentice-hall
http://www.santos.com/company-profile.aspx
http://www.santos.com/exploration-acreage/bangladesh.aspx
http://en.wikipedia.org/wiki/Santos_(company)
http://www.mbaskool.com/brandguide/energy/7987-santos-energy.html
http://www.santos.com/company-profile/directors-management.aspx
http://www.investopedia.com/features/industryhandbook/porter.asp
http://www.energy-business-review.com/archive/4294542555
http://au.investsmart.com.au/shares/asx/Santos-STO.asp
Annual Report of Santos 2013.
67Term paper of Santos by Kochhoper Dim