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part_1.docxRunning head: PATTERSON –UTI ENERGY INC. 1
PATTERSON –UTI ENERGY INC. 4
PART 1
Patterson –Uti Energy Inc.
Name:
Institution:
Patterson –Uti Energy Inc.
· Propose a new product or service for the new company division. The division should be customer-focused with an innovative mission statement. Ensure that you are differentiating your product or service
Patterson Energy is an oil and energy company based in New Braunfels, Texas. It is one of the leading providers of domestic land-based drilling services to the major companies. The company therefore consists of drilling rigs, pressure pumping equipment and other items or equipment’s. Being a leading company, there is the need to introduce a new product such as walking oil rig which falls under the category of drilling rig. Therefore it is customer based and other has innovative mission statement. The consumers can easily differentiate the product especially due to the market segmentation; one of the best innovations in the oil is the walking oil rig. This is because it easily move from one well to the next when drilling. It therefore saves the operator the time consuming and expensive process of assembling and disassembling the rig components. (John, 2006).
· Describe how the division addresses customer needs and achieves competitive advantage.
The customers are part of the contract drilling and the pressure pumping segments. They therefore involve both the major and independent operators. The reduction in business results to material adverse effect on the company thereby affecting the financial conditions, outcomes of the operations and the cash flows and also the customers’ needs. When it comes to Oil rig, producers are being enticed to keep drilling so that they can keep the cash coming despite of the costs being low. The oil rig number has dropped by more than half ever since the prices started to decline. However the rigs are not only the aspects that increase efficiency in the oil fields. In terms of competition, several companies have also risen such as the Halliburton Company have been having some efficient systems in order to finish the wells with the use of 3D seismic imaging which tracks cracks in the oil soaked rock underground. This is thereby making a difference in the producers especially when there were heavy debts which were used to fund exploration. Only fewer rigs are required to bring the oil production back since technology has also evolved and new systems arise. The walking rig for example allows the producers to take advantage of the pad drilling in which wells are only drilled within a small area. This therefore brings about mobility thereby cutting costs and also time in moving them. In most cases, the consumers are lucky because the day rate of renting the advanced rigs has fallen to$20,000 compared to the earlier years which was as much as $30,000. The equipment suppliers therefore have to trim their own prices in order to remain competitive. The drilling rig is highly competitive and therefore in one case there is increased demand. The price is considered as the competitive factor and also the availability, market conditions, and technical operations of the equipment. Apparently, the newer technology has led to cannibalizing demand thus there is need for a wide variety of rigs. Therefore there are able to maintain the competitive advantage as a result of the other competition firms and also due to the technology.
· Create a vision and a business model for this new division that clearly demonstrates your decision on what you want your business to become in the future.
When we consider the vision of Patterson UTI based on the walking oil rig, they can come up with a vision such as to be a world class independent. In order to achieve this, in the business model, the strategy would be to grow shareholder value through leveraging their development capabilities and also the accounts on balance sheet in order to deliver high quality projects and have successful exploration. The Patterson Inc. in future aims at delivering to increase their new asset value through investing in high quality oil and gas projects. An automated walking oil rig systems is seen to be of consistency and repeatability putting controls in order to consider the human factor. The rig is based on the connection process which differs on the skills, speed and the decision making of the producer. In order to meet the vision, the company has continuously considered upgrading the drilling fleet. In 2014, there was the 21 AC powered APEX rigs. These were the existing rigs with the walking system technology that were added to the APEX 1500 rigs and APEX 1000 rigs. This was in order to meet the needs of the customers and thereby improving their efficiency in the operation especially through pad drilling. The use of the walking rig therefore has maintained the company in the domain of the natural gas power technology used for the drilling rigs which is an achievement.
· Explain how the vision, mission, and value of the new division align with the company's mission and vision.
The company has its own mission, vision and values. As the country continues to develop huge energy resources which are available in the United States, there is a strong foundation of growing services thereby taking advantage of the available opportunities which is the mission of the Company. However, the company drilling operations has encountered a loss in the production of oil and natural gas exploration. The marketable drilling rigs ranges from electric rigs and mechanical rigs. The rigs are equipped with engines, drawbacks and pumps to circulate the oil. The walking oil rig depends on the depth and complexity of the well and also the drill conditions of the site. The drilling contracts are based on the well-established customers either on a competitive bid or negotiations. The bid of the job will therefore depend on the location, time, equipment used and the risks involved. The term contracts which are long term are considered for a specific period of time which is from six months to three years. The drilling contracts are based on the paying specific operations based on wages of the drilling personnel and the maintenance expenses. Most of the contracts are terminated by the customers on short notice. However, the drilling contracts provide indemnification rights and rules or obligations which are customary for the markets in which the operations are conducted. There is also daily payment whereby the drilling rig and crew are provided. The compensation is usually based on the rate per day where the drilling rig is utilized. There is always a lower rate when the drilling is distracted by weather conditions.
· Summarize how the vision, mission, and values guide the division's strategic direction
In summary, the product, vision and mission are to become the world class independent company. This is in line with the Company’s strategies. When we consider when President Andy joined the company, there was a wealth experience which was gleaned with one of the premier companies in the field? There is the need therefore of increasing responsibility and complexity in order to attain the business growth and also on profitability. This will also ensure that the company is able to attain its vision, mission and values. There was therefore the need of shaping the division strategic direction which would lead to a have knowledge and experience in the future.
· Define your guiding principles and values for your division in the context of culture, social responsibility, and ethics.
Businesses are mostly affected by the government and environmental regulations. This is in conjunction with the culture, social responsibility and the ethics pertaining the society. When we consider the environmental effects it involves the basic aspects that may affect the business include the drilling of the natural gas and oil, disposal of hazardous materials, hydraulic fracturing, use of underground tanks and also the employees thereby affecting the social responsibility. When we consider the government at large, considering the ethics the company is affected by the political developments such as the state, regional, local rules and regulation that affects the oil and natural gas industry. There are many hazards related to the drilling which involve weather, loss of control, pollution and reservoir damage. These hazards may lead to death or injuries, property damage. (Ring, 2007). There is the need therefore to have indemnification agreements with customers and also maintain liability and insurance. However the company is not insured to all risks it is important to have insurance coverage. The insurance coverage is based on the insurance for employer’s liability, fire, windstorm, and the physical damage of the rigs.
When we consider business operated internationally, there is obvious the incurred selling and expenses related to evaluation and preparation of the world wide opportunities. International operations are subjected to the political, economic, social and other risks. For example increased risk on social and political unrest, war, kidnapping, forced negotiations among others are not included in the U.S operations. In most cases, there is no assurance of the changes in domestic laws and regulations and thus there is an adverse effect on the entry of the international markets, and also the profitability of the new markets. When it comes to international markets, there is still no assurance on identifying new and attractive opportunities in the international markets. They may be even lack of sufficient capital to engage in the international markets.
There are also the threats based on cyber security which continue to grow rapidly. The business, financial and other systems could be compromised and the providers may not be aware. Risks associated with threats involve loss of intellectual property, loss of data delivery systems, and disclosure of personal information among others. (Cullen, 2011).
References
Cullen, E. T. (2011). Effective training: A case study from the oil & gas industry. Professional Safety, 56(03), 40-47.
Ring, R. (2007). Disposable workers of the oil and gas fields. USA TODAY-NEW YORK-, 136(2748), 16.
Increase, C., & Agreement, J. dated as of August 2, 2006, by and among Patterson-UTI Energy. Inc., the guarantors party thereto, the lenders party thereto, and Bank of America, NA as Administrative Agent, L/C Issuer and Lender (filed August 21, 2006 as Exhibit 10.1 to the Company’s Current Report on Form 8-K and incorporated herein by reference).
