Strategic management Oil and Gas

Introduction

            The Madagascan Oil Company has been AIM independent international oil as well as a gas company focused on the exploration, development as well as production opportunities in the five onshore blocks of Madagascar. This Company is the Madagascar’s leading as well as longest operating oil-gas company that has worked in the country for over a decade. In early this year, the company was awarded Madagascar’s number one upstream mining title which resulted in a 25-year license on the Block 3104 Tsimiroro. The award of this development license remains an avenue in moving forward with development of the 1.7 billion barrels of the contingent resource that is already in Tsimiroro field. Through the use of different thermal methods, there is an opportunity that Tsimiroro will have the capability of entering the league of world’s huge oilfields. Also, this Company continues to seek further balancing of the portfolio in a sustained evaluation of prospectively of its exploration properties. Through this work, the company will particularly target the potential high gravity oil as well as the large gas opportunities.

            This oil Company remains fully committed to work closely with Madagascan Government to achieve critical strategic objectives of developing the initial commercial production as well as putting Madagascar in a league of main oil suppliers. Madagascar Oil fully engages in making positive improvements to local communities in the operations area, and the whole country through company’s commitment to the Corporate Social Responsibility using the array of community projects and programs. The Company also participates in programs that sustain healthy biodiversity of Madagascar Island This remaining the case, the Company’s main goal remains to prove up the reserves at Tsimiroro through demonstration of commercial production ability to exist, contingent as well as potential resources in fields and increasing resource volumes by extra drilling as well as testing.  Similarly, the Company actively explores conventional oil as well as gas drilling prospects on five blocks of Madagascar.

Improving revenue of Madagascar Oil Company

            Madagascar Oil has over 1.7 billion barrels with contingent resources in the field (Geological Survey, 2010). This report is according to the provided update of the strategic partnering process as well as financing initiatives. For a few months, the oil company has worked closely with the strategic advisor who is the Jefferies International Limited. This is to consider the oil company’s strategic options regarding the sourcing of strategic partners for its Tsimiroro development. Therefore, there is a need for comprehensive Memorandum to become finalized and technical data room to be opened to attract optimal strategic partners to help the Company in funding as well as delivering the first phases of Tsimiroro development (Brown, 2014).  Therefore, this strategy will help the interested parties to contact the Oil Company or Jefferies for improving the productivity of production. This remains a critical strategic option to improve the company. The company’s process of identifying potential strategic partners or the  Jefferies responsibility remain an option despite the available negative market conditions with its interest getting expressed by many credible parties.  There is a need for a clear timetable to get established and the process to be completed timely; there is also need to target the finalizing of the transaction by the first quarter of 2016 to make the company enter the market at the right time. In parallel; this company has a strategic option to continue the progress discussions with various investors to secure financing. The process can get done through among other things, proposals from some of the existing main shareholders for the provision of to requisite capital pending the completion of Jefferies Process.  This process may take debt, equity or both.  The Company needs to announce a continuation of the process of seeking as well as identifying and securing a potential strategic partner.

             The move to enter into Outrider Facility deal with the company connected to the Outrider LLC which is an existing shareholder of this oil Company remains imperative. The Outrider Facility need to get fully drawn down and be scheduled to be repayable, including accrued interest. Therefore, the main option for this company should remain to make steady progress in its search and to secure potential strategic partners despite the difficult in market conditions (Brown, 2014). This approach has high prospects in that the level of interest potentially shown by some large international companies is high. The size of its resources in Madagascar, the approval of its Development Plan for Tsimiroro block and long term nature of Tsimiroro license that is least 25 years which commenced April this year remains as an attraction to companies of scale. The company needs to continue working closely Jefferies limited to secure many transactions that will add value all shareholders. In the meantime, Madagascar oil company need to seek and secure appropriate as well as intermediate financing in near term.  The company must consider alternative funding strategies that include proposals from some of the existing main shareholders. After an approval of its field development plan in mid-2015,          Madagascar Oil needs to start the development steps of the huge 1.7bn OIP field. Further approvals like the EIA submission and the milestones need negotiation, but primary results indicate commerciality of this resource which means that staged development need to start (Brown, 2014). Development of such size is so big MOIL to fund alone, and the move to appoint Jefferies is vital to locate possible partners. Given the large resource size,   Madagascar Oil Company expects interest among several parties. Importantly, the company needs to leverage knowledge of its two experienced figures of the company, CEO, and NED following the appointments.  The company needs to have broad assumptions on possible farm-down of almost 40% with a partial carry to reach an indicative NAV of 38 per share even if material uncertainty may exist in the deal.

            Although the Madagascar oil has a better idea of the desired development from the steam float feasibility, with similarities with Kern River, Chevron – operated huge oil grounds in California, the experiences and familiarity with management in this field, identical development strategy is critical to improving Madagascar oil. The fields must get developed by use of steam flood method even if cyclic steam simulation needs to be used by the initial producers while the company awaits heat to reach producing wells.  This strategy is still an option to improve the company. The reason for using steam is that unit has many advantages over the cyclic steam simulation. The obvious being the 70 %recovery factor that is four times better than the commonly used. This strategy also has simplified operations; one site’s heat loss is adjacent to the gain as well as the capability to access many layers at a time. Their field needs to get developed in patterns of wells with every pattern consisting of a vertical injector over the two-acre surface. Early wells need to concentrate on primary prospect areas. In short the company needs 6000 to 10000 steam producer pairs for full development. This may support drilling for over 20 years. The produces water needs to be reused to generate steam to get utilized in the oil extraction. The excess water needs to get disposed of through disposal wells. Given the immaturity of the oil industry in Madagascar, there is a need for massive installation of infrastructure. This may include the not just the particular field facilities like the main processing, steam generation, the tiebreaker upgrade and the crude stations, but as well the general infrastructure like transport links, distribution grid and the power generation facilities. Tsimiroro, for instance, is located over 125 km from the shoreline from which the oil will get exported. There is a need for two pipelines to connect the field to the coastline (Clarke, 2010).              Major infrastructural installations are critical for this company success. There is a need for a firm tank, export facility, a camp and upgraded port. The company also needs to add offshore buoy as well as a mooring station for docking, loading and offloading. This needs to get connected to a terminal through the crude terminal to the offshore pipelines. Therefore, to promote and improve the productivity in this company this infrastructural needs must get met. Light oil and gas discovery will become significant. Light oil may be used as diluents for the pipeline while gas could get used in reducing open through oil consumed in the process. The impact from this is critical. On the assumption, around 33-40% of oil produced gets burned to make steam for the injection. This strategy effectively adds almost $30/bbl of open and will reduce oil for sale (Arnold, 2014). As a strategy, if the company reduces fuel used in this process to about 20%, then NAV will increase by 50%. As part of development strategy approved in this year, the company needs to get committed to appraise structures in Tsimiroro Area, like Tsimiroro Deep as well as  Deep South by seismic acquisition with drilling on deeper horizon possibilities depending on the prospectively.  The company must be able to segregate its license to many areas to farm down to many parties for the huge oil development as well as on lighter exploration activities. Other possible options to make the company strong in the market may include proper management, construction of good transport networks and keeping the mined oil proper and timing best market season for their product. Increasing share holding in the company to impress global view can make the company perform well in the market competition (Robbins & Sage Publications, 2007).

Possible strategic partners

            Strategic partners have a big role to play in making this company competitive. The fact that this company appointed Jefferies, there is needed to examine possible ways and partners to fund the company’s project development. This situation requires to be looked at in three dimensions: Anchor stage, Fast track, and Valuation. Farm-in: this becomes the most probable route in company’s view. Possible partners need to take the equity stake in all fields to compensate for development carry on a production project. Support for equity of $50m needs to get sourced from key investors and the company needs to raise cash through equity for funding operations. The company must negotiate to sell existing fuel produced. The fuel targets domestic sales with many local customers. After moving the revenues in the PSC, it will be below $4m net to the company that is very helpful though not material (Eppelbaum, Kutasov & Pilchin, 2014). The selling will generate some money as well as giving space for further production. As soon as massive production starts, the company must formally examine the leveraging of the revenues for raising debts. The easy path is by an RBL, which the company expects to increase as production goes up. Other avenues may include the corporate debt as well as bonds. Partners need to get direct equity exposure to their investment in return for the services they render.  The IFC remains a member of World Bank and must provide comprehensive answers to clients in the developing countries to solve today's development challenges' (Bastia & Radhakrishna, 2012). This strategy can take investment form in the infrastructure projects, forestry, oil &gas among others. Oil traders continue to take an increasing role in the oil developments. Their involvement needs to include taking equity in the project or through the provision of upfront capital in the return for buying the products. With this large resource of production, the company’s development will become good projects for the oil traders involved. Once the massive production is running, the company will generate cash flows. Collaboration to attract more partners can increase the base of support and improvement of the company.

Conclusions

            Apart from advancing on the technicality issues of the company, there are other basic factors which any company handles for it to survive in its operation.   This usually surrounds the relationship and the impact of the company to the local community. Madagascar Oil also needs to continue deploying the Corporate Social Responsibility strategy in all border regions to encourage concerned stakeholders to cooperate towards the sustainable development. The company has to maintain an active as well as a visible program of supporting the communities adjacent to areas of operation. The company has to contribute to economic as well as social well being the communities (Robbins & Sage Publications, 2007). The Company also needs to conducts frequent consultations to identify the needs of local communities. The main areas of investment for its program may include health, education, environmental conservation, human rights as well as economic development in the effort to promoting and improving living standards. The company must also make charitable donations to local causes and disaster funds. Rehabilitation of roads from project sites to the shore is also critical in promoting production.  Rehabilitation of worst parts may promote movement of people as well as machinery that are all critical in the oil industry. The company needs to maintain an open dialogue on the company activities to help in managing company risk and the social impacts. Having an open consultation with the local village representatives and the authorities must continue over the infrastructure projects, land use as well as employment. Madagascar Oil must continue to recognize that its activities impact the local communities, their land, homes, and their livelihoods. The company must look to avoid and minimize the impacts and develop sustainable opportunities as well as benefits for communities and the general local environment. Therefore, there exist many avenues for the company to explore. The above are just a few practical that suits the current situation of the company.

References

Arnold, G. (2014): The Resources of the Third World. Hoboken: Taylor and Francis.

Bastia, R., & Radhakrishna, M. (2012): Basin Evolution and Petroleum Prospectively of the           Continental Margins of India. Burlington: Elsevier Science.

Brown, D. E. (2014): Africa's booming oil and natural gas exploration and production:      National. S.l.: Lulu Com.

Clarke, D. (2010): Africa; Crude Continent: The Struggle for Africa's Oil Prize. London: Profile    Books.

Eppelbaum. L., Kutasov, I., & Pilchin, A. (January 01, 2014): The Thermal Field of the Earth

 Geological Survey, (2010): Minerals Yearbook 2008: Area Reports, International, Africa and       the Middle East. United States Govt Printing Office

Matthews, D. (2010): The new rules of business: Leading entrepreneurs reveal their secrets for      success. Hampshire, Great Britain: Harriman House.

Robbins, P., & Sage Publications, (2007): Encyclopedia of environment and society. Thousand      Oaks: Sage Publications.

Sherry Roberts is the author of this paper. A senior editor at MeldaResearch.Com in cheap term papers if you need a similar paper you can place your order from top research paper writing companies.