Premier Oil Strategic Management

CONTENTS

Executive Summary

Introduction

The Vision and Strategy of Premier Oil

Stakeholders Analysis

Performance Measures

Analysis of Financial Report

Balanced Scorecard

Perspective: Financial

Perspective: Customer

Perspective: Internal Business Processes

Perspective: Innovation & Learning

Strategy Map

Critical Evaluation of Balance Scorecard

Summary of Recommendations

References

Introduction

Premier Oil is a leading UK based oil and gas company. It has interests are divided in three major regions of the world namely Asia (Indonesia and Vietnam), North Sea, and Africa and Pakistan. Premier Oil is building more and more material exploration programme, aiming several of its known geologies including fissure or anterior fold belts within the company’s existing or new areas. In 2012, Premier Oil increased its production by 43 per cent, cash flow by 66 per cent and report record profitability for a fifth successive year. Reserves and resources now amount to 773 million barrels of oil equivalent (mmboe) compared to 513 mmboe at the end of 2011 (Premier Oil, 2012). All these growth and business performance enhancements were achieved mainly due to the new fields which came on-stream in Indonesia and Vietnam (Asian Region) in late 2011, 2012 (see fig.1). The figure reveals that the most significant increase in productions was contributed through operations in Vietnam and Indonesia respectively. Through this the company saw significant increase in the group’s overall production (Premier, 2012). The purpose of this report is to aid the strategic direction of the company for its operations and interests in Asia; to enable its Board of Directors to evaluate various aspects of organization’s performance within this region including financial and non-financial aspects. This report will help the directors make informed decision on the future oveall strategic objectives of the company.

Fig.1 Premier Oil’s Operation in 2012

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The Vision and Strategy of Premier Oil

Premier Oil’s strategy is to “add significant value for shareholders through exploration and appraisal success, astute commercial deals and optimal asset management” (Premier Oil, 2013, c).

Within this broader aim, there are several specific objectives. These are presented in the following Table.1

Table.1 Objectives of Premier Oil

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(Premier Oil, 2013, c)

It should be noted that most of the near-term and medium term growth targets and financial goals are heavily relied of the company’s performance in the Asian region

Stakeholders Analysis

Before moving on the key performance indicators, it is deemed important to identify the key stakeholders for the company as the strategic objectives underlying the key performance indicators are based on the relationship of the organization with its key stakeholders. The following Stakeholders have been identified for the Premier Oil.

Key Stakeholders of Premier Oil in Asia

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Performance Measures

In other to set a benchmark for evaluating the business performance of Premier Oil and monitoring it against the company’s strategic objectives and goals as well as its stakeholders’ requirements, a list of financial and non-financial performance indicators are put in place. The key performance areas are identified as follows:

Financial Control to improve shareholders returns by maintaining a strong liquid balance sheet.

For the Asian region, which accounts for more than 50% for the company’s revenue (Premier Oil, 2011), and which underwent a drastic 55% increase in revenue generation in the year 2011, the company aims to sustain the growth levels by maturing the newly developed fields for further drilling and keep exploring new revenue streams in the future.

Employee Focus: to ensure safety in all business practices and operations at all times for all employees and providing them an environment that enables their growth and development; increase engagement within business

Customer Focus: by improving the company’s collaboration with the customers, including governments and partnering with them to achieve their strategic goals.

Operational excellence by mitigating operational complexities, reducing risk and increasing safety; better collaboration with suppliers

Community Commitment: to ensure their the communities within which Premier Oil operates holds them in high regards and views them highly responsible; have an overall good reputation with all the community stakeholders

Analysis of Financial Report

Premier Oil enjoyed much success 2011 undergoing a huge profit of $171.2million. Its profit increased by 32% and operating cash flow by $485.9m (Abiola et al. 2013). Coinciding with its profitability, the company delivered significant returns to shareholders in 2011 (Premier Oil Annual Report 2012).

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