Noble Energy Inc - Essay Example

5. SWOT Analysis Noble Energy Inc. is an international energy company that is allied to the exploration, delivery and marketing of energy products. Below is the SWOT analysis. 5.1. Strengths The strengths of Noble Energy Inc. are based on their internal factors. These include: Products and assets portfolio Noble Energy Inc. has a variety of top notch products and assets in its portfolio. The products that they majorly deal with include crude oil products as well as natural gas. When it comes to their assets portfolio they have a variety of assets and/ or resources that have indeed become their strong pillars over the years. These resources include: tangible and intangible resources. The tangible recourses that have managed to make their assets portfolio solemn include: their financial stand in the market; the oil technology that they use – that is the horizontal drilling, hydraulic fracking and liquefied natural gas technology; their off-shore and on-shore resources. It is important to note that their major on-shore core operations are based in the US with specifics to the DJ Basin, Deep water Gulf of Mexico and the Marcellus Shale. The other core operations sites are not in the US; they are located in West Africa and the Eastern Mediterranean. In addition to their on-shore resources they have off-shore resources. These are not located in the US. They are specified into regions such as the North Sea and China. Their intangible resources include: the company’s leadership and their management structure. With such an asset and products portfolio, the international business that the company engages in provides them with low-costs and huge projections, thereby helping them to maintain their capital and assets (Data Monitor, 2011). Strong financial cash flows Throughout the years of its existence, the company has managed to overcome a lot of economic challenges which have encouraged and promoted them to have a strong financial cash flow system. Some of the operations that have enhanced their financial status include: their on-shore and off-shore operations that are located in different parts of the world. Strategies in their partnerships and alliances The company has been planning to expand its operations strategically by promoting partnerships that will allow it to save on costs and leverage on the expertise of the company. As a result, the company has ventured into fulfilling partnerships with several energy companies worldwide. It is without doubt that strategic partnerships and alliances always ensure that a company has a strong business foundation for years to come. Core competencies The company’s oil drilling technology is up to par with the current standards. With that, they have an added advantage over energy companies that have not yet acquired the latest drilling technologies. In addition to that, their leadership and management can be termed as solemn since they have driven the company to the level that they are in currently. 5.2 Weaknesses These are caused by the company’s inability to surpass challenges that the external environment throws in. Some of the weaknesses include: Lack of resources If the company lacks the adequate resources to either finance their projects or invest in their off-shore resources. They could stagnate and lack potential growth. Therefore, this could also lead to a standstill in their operations. Concentration of operations Noble Energy Inc. has concentrated its operations to the core on-shore resources that they have in the US. It is without doubt that a concentration of resources in a specific area could lead to a lower supply power since the number of suppliers in that region could be higher. This could also affect the income returns that the company is prone to receive. Financial debts Financial debts can lead to a standstill in a company. For the case of Noble Energy Inc., in 2012, they had an indebtedness of around $4.1 billion which represented 33% of their total capitalization (Noble Energy Incorporation, 2012). This affected their operating activities since the accumulated revenues were used to ease up their debt. From this experience, it can be concluded that financial debts can lead to a negative impact to the company. This could actually become a long term weaknesses for the company if they take time to recover from the debt due to uncertainties in the economy. Core competencies The company’s organizational culture is not solemn and this threatens the company’s sustainable advantage. Additionally, employees are not satisfied with the working conditions due to cases of bullying as well as frequent new hires. 5.3 Opportunities The opportunities of Noble Energy Inc. are based on their internal factors. These include: Competition In a bid to counter competition, Noble Energy Inc. need to introduce points of difference (POD) that will ensure that their products stand out from what other energy companies are producing. Based on POD, the company wants to solidify their products portfolio by acquiring a natural gas project in Israel. This will become a major opportunity for them to tap into various markets that few energy companies have ventured into. The results of this will be that they will gain strength in their financial cash flow system with time. Through this, they will be in a better position to engage in new investments as well as projects. Another opportunity for competition would be to invest in their off-shore resources so as to build up on their assets and/ or resources portfolio. Their main off-shore resources are located in North Sea and China. If they are to invest in these resources, this would become a fulfilling opportunity for them to counter competition since their output will be increased – this will in turn lead to a solidified financial stand with time. Other off-shore opportunities for competition are located in Israel, Cyprus and Equatorial Guinea. Such investments will ensure that they have increased their sales volume and in turn they will receive more revenue. Current energy market size The current energy market has not been fully tapped into. Despite there being overwhelming producers and consumers such as the USA, China and Russia. There is still a gap that is yet to be filled in the future. This will mostly be as a result of tapping into newer energy sources such as natural gas. If Noble Energy Inc. will be successful in implementing their POD; that is with regard to the acquisition of new resources such as the natural gas plant in Israel as well as the boosting of their current off-shore resources, it can be assured that that will increase their market size since they will be having more products to offer to their customers (they will not just be offering crude oil products). Market growth Assets are the only tangible resources that can generate more income for a company like Noble Energy Inc. If the company can be in a position to tap into new resources that will contribute to their products portfolio; that will increase their market size and with time it will lead to their market growth. Currently, the company has the capability to produce 260,000 barrels of crude oil per day. If they increase their resources, they will definitely increase their output – which will in turn lead to their market growth. Noble customers The market that is available is open for more energy options to be realized by the different energy companies. It is without doubt that if the company invests in natural gas plants they will have a variety of energy solutions to offer to their customers. Due to the fact that it is natural for consumers to always go for energy solutions that are pocket friendly; if they manage to offer the natural gas products at prices that are competitive. Then they will have gained a strong market hold of consumers as compared to their competitors. 5.4 Threats Threats can be linked to the company’s external attributes. These include: Natural disasters Natural disasters such as oil spills or weather patterns can be a threat. Economic slowdown The energy industry can sometimes be very uncertain. Economic slowdowns with regard to pricing can occur at any time thereby leading to either a hike or a decrease in the buying and selling price index. It should be noted that a decrease in the selling index will affect the company’s returns and vice versa. Supplier competition The markets for crude oil and natural gas are surrounded by high competition. Additionally, there is competition between companies that are specific to either crude oil or natural gas. Since Noble Energy Inc. want to focus on both crude oil and natural gas, competition is prone to be very intense. Political views, legal regulations and environmental laws Exploration, production and marketing of energy resources is always regulated under international laws which may cover aspects such as different legal frameworks for each country as well as environmental laws regarding the production, transportation and pollution prevention of the products. If Noble Energy Inc. does not adhere to these laws, there could be consequent penalties. Additionally, if the laws are very strict, this can be a threat to the international business of the Noble Energy Inc. 6.0. Strategy Recommendations 6.1 Evaluating Current Strategy (- ies) and Major Strategic Issues The current strategies that Noble Energy Inc. has implemented are based on the industry trends. It should be noted that these strategies have been implemented based on their company’s value and mission’s statement which is to energize the world by providing friendly energy solutions as well as promote people’s lives and those of stakeholders. These strategies include: Identify and commercialize resources: Noble Energy Inc. ensures that they carry out their energy exploration by using the best processes that are available. The aim of this is to ensure that they get the best earnings out of the resources that they have engaged in. Explore in high-potential and proven basins: The company focuses on high potential basins that have enough acreage. The aim of this strategy is to invest in energy sites that will be profitable. Recently the company announced a strategic acreage exchange in the DJ Basin. Promote global business development approach: Noble Energy Inc. energy exploration processes promote business development which in turn leads to high quality resources and/ or assets for them as well as their stakeholders. Ensure financial discipline and flexibility: This is undertaken through pro active exploration. The company seeks to engage in pro active exploration to potential sites where if they prove to be successful, they use the knowledge that they have learnt from other sites management so as to promote strength and opportunities and reduce on weaknesses and threats. Additionally, their investment ideas must be critically analyzed before the actual investment is undertaken. Through this analysis, they aim to ensure that the investment will not be a potential loss - weakness in debt or threat to competition in the future. Strategic issues include: Their business development partnerships could be short lived: This could be based on the recourses that they have acquired – they could not produce as much energy as they hope due to uncertainties that are beyond their control (environmental as well as market threats). Acreage/ Resources acquisition: In a bid to acquire too much acreage, they could lose focus on how to ensure that all of them remain stable - management. Therefore, this could force them to sell such acquired resources. As a result, this would not be good for business if the economy is not certain. Financial discipline based on acreage acquisition: As the company seeks to expand on their resources, they could utilize more than their earnings. Therefore, recovering this cash could take them a number of years. If an emergency strikes, it would cause a standstill to some of their operations. 6.2 Recommendation 1 Acreage/ Resources acquisition: As Noble Energy Inc. acquires more acreage with regard to expanding on their resources as well as catering to those of their stakeholders. They should be keen to ensure that their employee base can be in a position to manage the resources. Else the lack of proper management can lead to current and futuristic challenges within the company. In addition to that, they should be very critical so as to acquire resources that deem profitable, else they would be engaging in too much exchange of resources as well as sales. Both of these aspects would not be good for the company’s stability. 6.2.1. Proposed Strategy The strategy would be to absorb skilled and competent employees that can be in a position to manage the new resources. Secondly, the company should do critical analysis of any new ventures and/ or resources that they want to acquire. This involves market analysis and projections of up to five (5) years. 6.2.2 Recommendation Justification and Implementation Plan The aim of the proposed strategy would be to ensure that the employee base is stable for management purposes. Secondly, forecasting would ensure that any environmental challenges as well as market forces (weaknesses and threats) have been realised in due time before they actually take place and they solutions have been strategized in advance. 6.3 Recommendation 2 Financial discipline based on acreage acquisition: It is without doubt that acquisition of acreage would bring more returns and earnings for the company. However, the challenge lies in funding these resources. If they invest in too much, the company will undergo a deficit of cash to continually service these resources. As a result, a recommendation would be for the company to be keen in the resources that they will to acquire as well as to service so as to avoid tapping into their monetary reserves. 6.3.1 Proposed Strategy A strategy that Noble Energy Inc. would implement would be to perform an analysis of the resources that they wish to acquire. Once that has been carried out, they could go forward to acquire resources that are showcasing extreme returns. This is a key to carrying out financial discipline. 6.3.2 Recommendation Justification and Implementation Plan The justification for this strategy is that financial investments are very crucial to a company. Based on this analysis, if a company fails to manage their finances efficiently, they could end up being in debt. For the case of Noble Energy Inc., in 2012 they were in debt for an amount of close to $4.1 billion which actually represented about 33% of their total capitalization. The implementation plan for this strategy would be to follow the financial discipline policies that they have in place. Works Cited Data Monitor. (2011). Noble Energy Inc. Company Profile. EBSCO host Noble Energy Incorporation. (2012). Annual Report. Web. Retrieved from: www.nobleenergyinc.com/annualreport/nei12/images/NBL_10K.pdf‎ Read More