Leading practices in business development: a driver of competitive advantage*

Abstract

Oil and gas companies, like most other competitive organisations, have a relentless desire to achieve high levels of growth. In an environment where drill-bit expansion is becoming harder and more expensive, asset and corporate acquisitions are becoming a viable alternative for achieving aggressive targets. While the present uncertainty in financial markets has put a brake on activity, the near-term environment is seen as being particularly conducive to mergers and acquisitions (M&A) in the oil and gas sector.

It is viewed this way for the following reasons:

1. In general, the rising costs and lowering returns associated with exploration—which are expected to continue;

2. Many producers are sitting on significant cash reserves following a period of sustained high commodity prices; and,

3. New pressures caused by tighter capital market conditions (equity and debt) on those companies that have large evaluation and development funding obligations associated with their projects.

Companies looking to grow through acquisitions should be aware that the M&A game has changed. Investors are now firmly focused on the risk aspects of their investment, heavily scrutinising any deal in terms of strategy, value, execution and delivery risk. In such an uncertain market, robust thinking and a well-thought-out acquisition process are key criteria for a successful transaction. Getting the right deal for the right reasons is essential for winning the support of your shareholders. This presentation will explore the importance of an effective business development process, drawing on our observations from recent transactions and big oil thinking around corporate strategy, decision-making processes, leadership and assessment tools.