Premier Oil Company during 2014-2016 phase

Change management process involves the redirections of several processes by a company or organizations (Hayes, 2014). The change management operations involve processes such as changing the way the resource is used, changes in the business procedures, reallocation of the budget and the additional changes that are required to change the organizational shape of the company when needed. The change management involves various disciplines related to Oil Company. Change management is an important policy that is needed, by an organization during a period of crisis. An effective implementation of the change management strategies can provide the company sustainability even in a case of extreme crisis.

The report consists of an analysis of the change management techniques implemented by Premier Oil for tackling the oil price drop during the period from 2014 to 2016.

The report contains, brief information about the change management models, the change management policies adopted by the company, analysis of the policies adopted by the company, recommendations for improving the change management policies of the company.

Premier Oil is a UK based oil company. It was founded in the year 1934. It was listed on London Stock Exchange in 1936 as Premier Oilfields (MacLaurin, 2013). The company is based mainly on the ‘upstream’ sector of the industry. They are only involved in the extraction of gas and oil. In 1971, the company engaged itself in the North Sea (Noreng, 2016). In 1984, the company bought stakes in the oil fields of Wytch Farm located in Dorset. In 1995, Petronas bought 25% stakes in the company (Jiang, et al., 2014). However, they gave it up later in 2002. During the 2014-2016 phase, the oil companies faced a difficult situation involving a drop in the price of oil during the period. The earnings of the companies had diminished to a great extent. Many oil companies went bankrupt. More than 250,000 workers lost their job. Even Premier oils faced the crisis. The main reason for the price drop in oil prices was due to various events occurring all over the world. The Nigerian and the Algerian oil companies had started competing for the Asian market, and this acted as a catalyst for the drop in oil prices across the world. However, there are also signs that the exploration for oil has reduced in the last few years. In addition to all these people are influenced to opt for alternate sources of resources. As a result, the demand for oil is decreasing more rapidly. The drop in oil prices has also helped a large number of people in the world, especially the motorists and the poor individuals who consume the most amount of oil. Hence, the scope for the rise in the prices of the oil is very limited.

Advancements made by Premier Oil Company during the period of crisis

The Premier Oil Company implemented many changes in order to attain sustainability in the period of crisis.

Delivering Solan, sanctioning Catcher and the right-sized Sea Lion were some of the functions that helped in the development. Installation of facilities on the Solan field situated in the West of Shetlands that were operated by Premier was very significant for the project. The Catcher project that was conducted received the approval of the government in June was now in the execution phase. The floating production, storage and off take (FPSO) construction started in January 2015 (Wang, et al., 2014). Both the Solan and the Catcher projects made an immense contribution to the cash flow (Mitsou, 2015). And, the company also had also gained an advantage from their position of taxation in UK (Alexeev & Chernyavskiy, 2014). The company also completed their pre-assigned projects during 2014. The company benefitted hugely from these projects. FEED worked on the FPSO project in Norway. However, due to the sharp reduction in the oil productions the company could not make a final decision on the investment. The investment was made in 2015, enabling the company to re-engage the supply chain which helped, in lowering the costs for the project (Wieland & Handfield, 2016). The company opted for a lower CAPEX solution for their development in Sea Lion, which will utilize, the FPSO (Fischetti & Pisinger, 2017). The projects will help the company for securing further cost reductions in the future.

The company hedged 50 percent of their liquid benefit productions at an average price only. They did it for just under $98/BBL. This in return would protect their investment program. The reduction in the prices of the oil had made the companies realize the importance of maintaining a stable funding situation and maintain a conservative approach financially. In July, the financial team of the company had taken advantage of the strong banking market of the company. As a result, the company did not have any debt maturity until the end of the year 2017. In addition to this, the company has enough amount of cash with $1.9 billion in the bank.

In 2014, Premier produced a record 63.6kbeob of oil (Hughes, 2014). It was assisted by improving the operation efficiency of the majority of the assets of the group. Higher production in UK was driven by the improvement of the uptime in the Balmorals area. In Asia, the Chim Sao asset in Vietnam had produced an excellent performance as they received benefits from various projects that were undertaken, to maximize the operating efficiency (Mickler, et al., 2015).

The McKinsey 7s change management model

The company does not have any short term debt-maturity. The company can obtain cash flows in an abundance as they do not have any debt maturing before the end of 2017. They can continue the compliance and that is the key focus of the organization.

The Premier Oil Company adopted the McKinsey 7s change management model for implementing their change management in an efficient way (Hayes, 2014). McKinsey model was created in the year 1980. It is very useful for the analysis of an organization. It has the following seven steps:

• Structure
• Strategy
• Systems
• Staff
• Skills
• Style
• Shared Values

Source: (Anon, 2017)

Structure: Structure is the shape of the organization. It is the basic protocol on which the company operates. At Premier Oil the head office generally us responsible for the giving direction to the extended branches. The CEO performs all the major functions.

Strategy: Strategy is the planning and execution of process for achieving the organizational goals. The strategy of the Premier Company is to counter the effects of oil price drop with the increase in production efficiency. They are trying to increase their rate of production and expand their business as well with new discoveries (Noreng, 2016). The Premier Oil Company is look to expand their business. Therefore they would require to appoint new staffs and appoint appropriate people in the positions of project managers and team leaders.

Systems: System is generally the procedures and the everyday process that are used for the daily operations of the company. The processes are designed in way so that the effectiveness can be maximized (Jiang, et al., 2014). At Premier Oil procedural models is set up with frequent feedback provided to the subordinates so that knowledge of the outcomes can be obtained. In addition to this reward and incentive system is also present in the current system.

Staffs: The staff are the category of the personnel of the company, such as engineers, project managers, team leaders and sale persons. The companies arrange rigorous training and monitoring support, and implement incentive systems for their staffs. Tony Durrant, the former Financing director of the company, had accepted the role of Chief Executive during the period of crisis. Richard Rose was appointed as the new Financing director.

Skill: The skill is the overall potential of the staff and the organization as a whole. The Premier Oil Company has very skilled employees at their disposal. In addition to this, the company has very efficient financing team at their disposal. Moreover, the company has very steady bank balance to support their extension programs.

Implementation of the Strategic changes adopted by the company

Style: It is the process in which the higher authorities and the officials of the company work to achieve the goals set by the organization. It includes the beliefs, norms and the values of the company that develop over the course of time. At Premier Oil the company believes in growing their business and earning profit even in extreme crisis.

Shared Values:  Shared Values are the values and the common goals that are set for the organizations so that employees share the same idea among them with that of the company (Hughes, 2014). The main aim of the company remains to deliver consistently and incur efficient monetary growth for the stakeholders of the company.

For implementing the Strategic changes adopted by the company an efficient leadership team is required. (Hill, et al., 2014) Each member that is associated, with the change management of the organization, has to understand their role and responsibilities required for carrying out the procedures of change management effectively.  

Involvement: For implementing the change management procedures the company requires the participation of all the departments with equal interest (Johnston & Marshall, 2016). The company needs to identify the particular departments that are more efficient for the process, and implement proper structure and tea policies for carrying out the process with effect. The Premier Oil Company appointed Tony Durrant as the Chief Executive and Richard Rose as the Finance Director.

Interest: For implementing the change management procedure the company needs to create an urgency for all its members. The company needs to explain the requirements that will drive the employees to work more efficiently.

Monitoring: The strategic Management is the procedure in which the company needs to monitor each and every process. There needs to be a thorough checking method at each and every step of the change management procedure. The Premier Oil Company does a thorough evaluation and auditing of their change management process.

Next Step: The change of strategy of an organization is done is this phase (Hayes, 2014). The company needs to identify the next process after implementation of a certain process. The Premier Oil Company focuses on the future prospects after attaining the required stability during the recession period.

The Premier Oil Company needs to develop certain policies for their change management process:

The Premier Oil needs to identify if the organization is ready for the change management process. They need to analyze their resources before moving forward in their change management procedure.

Conclusion

The company needs to create an urgency in the organization. They need to influence their employees to work more efficiently. The company needs to introduce some incentive system for the employees with good performances (Cameron & Green, 2015). They also need to motivate the employees by providing them examples of the company in the past and tell them the story of the successes the company had achieved in the past.

 The Premier Oil Company generally focuses on the growth financially and moving forward even in tough times. The company needs to instill these values I their employees. This as a result will urge the employees to work more efficiently.

 A proper communication in between the company and its employees is very necessary. The Premier Oil Company is looking to expand their business. Hence communication is very necessary. In addition to this, the company is going through a change management procedure. Therefore it is very necessary to perform proper auditing and evaluation of the all the processes that are concerned with change management. Therefor the feedback of the employees would be essential for the company. Hence the company needs to have a proper communication system in place.

 It is necessary for the company to produce a visualization of the procedures that the Company is going to perform (Baumineister, et al., 2015). This will help the employees of the Premier Oil Company to understand and to get accustomed to the change management process.

Conclusion

From the above analysis, it have been identified that oil companies all over the world faced difficulties in tackling with a drop in oil prices in the recession period. The Premier Oil also faced these problems like other companies. Hence, they developed some effective change management policies to counter the effect of the depreciation of the oil prices, and maintain the stability of the company. They tried to increase the production and also the quality of their product so that the company is not affected by the present predicament to a great extent. They also made some new discoveries and opted for newer projects so that, they can increase their product efficiency. There change management procedure was very efficient which, has aided by their bank strength. However, their policies were very future oriented, and a significant portion of the stability of the company depended on the returns that would be produced in the future. Hence, it is recommended for the company to keep a focus on the current projects as well. They must have a perfect vision for development. In addition to this, the company must make their employees understand the change process that the firm is going through. They have to provide encouragement for their employees so that, they cooperate with the company to make the change management process a bit easier for the company to implement. In addition to this, the company the company must also implement successful project management, risk management technique, and incorporate them into the change management procedure. This would help the company maintain stability in the long run.

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