The report is prepared with the motive to analyse the strategic issues that are majorly faced by the Junior Oil and Gas companies. The company that has been selected for the analyses is Chariot oil. This oil and gas company is currently listed in the Alternative Investment Market (AIM) on the stock exchange of London. There are different reasons due to which the company deals with strategic issues. These issues are related with the operations which are faced by Oil and Gas Company in the London market. The report includes the analyses related to the challenges and opportunities that are faced by the oil and gas company. In addition, considering the strategic issues faced by the company the recommendations for the future strategic plan to the Chariot Company are discussed with the use of the appropriate academic model.
Chariot Oil & Gas Limited is an independent oil and gas exploration company that majorly focuses in forming the transformational stakeholder value through the discovery of the material accumulations of hydrocarbons (Chariot Oil & Gas, 2018). The company is a Guernsey-based company which formed in the year 2007 with the motive to acquire 2 exploration businesses with the licence of Namibian. Currently, the company is operating their business operations in Morocco, Namibia and Brazil (Chariot Oil & Gas, 2018).
Oil and Gas Company deals with the challenge related to the safety and security of the workers working at the site. Oil rigs are considered as the notoriously dangerous places to perform the work for the employees. The use of heavy machinery, exploration and drilling equipment’s can affect the employee’s physical. This leads to the risk for the lives of the employees which leads to the challenge for the company. This issue makes the company form the guideline for the use of the machinery effectively (Bloomberg, 2018). In addition, it becomes the highest responsibility of the company to maintain the standards related to the quality.
Investment is one of the factors which affect the operations of the Chariot in the market where they conduct their working. In the exploitation and drilling, there is the use of the heavy machinery which is needed to purchase by the company that needs amount. Moreover, the introduction of the new projects on the new site includes the amount that the company needs to invest. Chariot Oil and Gas Company is at the growing pace due to which they need a huge amount of the funds which helps them in expanding their business (Burgees and Kavanagh, 2015). Though, the company is able to manage the issue effective due to which they work on their funding arrangements which offer the access to add a new exploration well to the 2017 campaign. This has been found that the sourcing of the finance will be done by the company with the use of the different sources of finance (Fraser, 2014).
The workforce challenges are one of the major challenges which are faced by oil and gas companies majorly in the market. The rise in the ageing of the workforce is increasing the issues for the company in recruiting, retaining and training of the employees. This has been found that Chariot Company is facing the challenge in pooling the skilled employees because there is a lack of talent pool who are specialised in drilling and exploration. HR of the company faces the issues while hiring employees because they are willing to hire employees who can perform the roles and responsibilities of the company (Stout, 2014). In addition to this, the budget of the company is low due to which they are not able to get the appropriate and skilled employees which might affect the company in the long-run. Though, this challenge is offering the benefit of saving the cost in the market which can be utilized by the company in different areas.
Chariot found that the rise in the cost is one of the issues which work as a challenge for the company. This is tough for the company to maintain the high cost of the operations which makes the company deal with the high cost and definitely affect the financial position of the company. This strategic issue needs the focus of the company because the company want to save their cost which can be utilized by them in the near future (Primeast, 2014). The issue has made the company to implement the strategy which helps them in reducing the cost. Oil and Gas Company is making cuts in personnel and board of directors that are citing continuously with the change in the business environment. This strategy will make a reduction in the personnel with the payroll in head office. The reduction is done by moving Matthew Taylor, David Bodecott, Non-Executive Director, Non-Executive Director, Technical Executive Director and Bill Trojan to step down from the Board (Offshore Energy Today, 2016).
Chariot mainly offer the services related to the drilling and exploration which helps them to service in the market. Though, these services are very limited in the competitive market due to which the company is able to grab effective opportunities. These limited services become a challenge for the company which needs to be resolved by a company by adding new services and the wide option to the customers.
Chariot Oil and Gas Company is expanding their business operations in different areas which include Morocco, Namibia and Brazil. Further, the company has bright future opportunities which help them to expand their reach. In the new future, the company has the opportunity to expand their business operations. Currently, the company has the opportunity of two-giant scale wells in the year 2018 which include the work related to drilling. This will help the company to enhance the profit and reach company considering the views of Larry Bottomley, Chariot chief executive (Howard, 2018). Though, this new project of the company needs a huge amount of investment which will help them to achieve success in the market. The investment of the huge amount in the business is considered as one of the biggest issues which are faced by the company.
On the other hand, the company stated that it is looking to raise the US $15mln with the help of share placing and remaining €5mln in an open offer that is offered to the existing shareholders of the company. The company also announces that they are expected to reveal the new shared that will be equal to 13p per share which is a substantial discount that is offered to the share price prior to Friday’s closing share price (Ashcroft, 2018). This reflects that the company has the ways through which they can raise the funds for the new projects. In addition to this, Chariot can also take the loans from the banks or institutional for the short as well as the long period of time.
Chariot Oil and Gas Company has developed a drill-ready inventory that offers the high margin targets for performing the diversity of plays, each with the potential of the follow-on. Moreover, the company remain able to seek the additional growth opportunities that help the company to bring the reduction in the risk which was faced by the company on their profile. In the case of the uncertainty of the economy, the company can manage their stability by taking the advantage of being able to capitalise on the possible value accretive assets and on the broader of the profile through the additional low-risk opportunities. Considering the previous year annual report, Chariot company continue to apply the rigorous screening criteria which are used to consider the effective producing, development and also the exploration new ventures which fit the profile of the company (Chariot Oil & Gas, 2016). Considering this, the company has screened a large number of the assets and owing to the position of strength they have the privilege of ensuring that will not engage in any of the transaction unless the company will trust on the fact that this opportunity will add value. The company will implement the strategy every year which helps them to capture the new venture opportunities for the company.
The large market share is possible with the rise in the opportunities for the company. This large market share for the company is possible when the company is able to maintain their profits consistently year by year. For example; In the year 2017 by December 31st, the company was able to manage their statement with the debt free and a cash balance of US $15.2 million. This reflects their liquidity and a source through which they can capture the market by expanding their business services. In addition to this, the company can also receive the farm –in the recovery of Rabat Deep investment cost which was done by the company. This reflects that the company remain with no remaining commitments across the entirety of the portfolio. In addition, the company has opened an additional net US $16.5 million in the quarter 2018 that helps in offering he finds that allow the company to offer attractive benefits to the partners (Oil Voice Press, 2018).
Strong financial positioning helps the company to get the benefit as they can involve in the different projects which help them in maintaining the effective share in the market. Therefore, this can be said that the strong financial position helps the company to gain the maximum opportunities. Though, this strong position is difficult to manage by the company because it totally depends on the effective decision making of Chariot. In case the company is not able to make the effective decision then the company will face loss which will negatively affect the company.
Chariot is Junior Oil and Gas Company in London who is able to form a good set of relations with the government. This is the reason they get the opportunity of the new license easily which is evident from the new license which says Chariot Oil & Gas is awarded the new licence for Blocks 2312A&B and 2412A&B which is renamed as Blocks 2312 and 2412A considered as Central Blocks Offshore Namibia. This effective relationship helps the company in getting the opportunity for the government (Offshore Energy Today, 2014). For example; Chariot renews Namibian licence without drilling commitment. Though, the company need to offer some amount to the government which will keep their relationship effective.
The analyses related to challenges and opportunities of the chariot Oil and gas company are discussed which help in understanding the strategies that are essential to be followed by the company. The company can make use of different models related to the strategic model but out of those it is suggested to the company to make use of Porter’s generic forces model. This model will help the company to maintain competitiveness in the market. Along with this, the use of model will help them in dealing with the challenges which are faced by the company and to grab the opportunities present in the market.
The model of Porter’s generic forces helps the company to pursue a competitive advantage in the chosen market. The strategies which are included in the model are cost focus, differentiation, differentiation focus and cost leadership (David, 2011). Chariot Company should apply this model which will further help the company to overcome the strategic issues faced by the company in the market.
Differentiation strategy
Differentiation strategy includes the offering the diverse range of services and products that satisfy the needs of the customers (Grant, 2016). Chariot company offer services which include drilling and exploration but it’s the high time for them to add new services that they should offer in the market. This is the only way through which they can get more opportunities in the market and will be able to earn high revenue. Further, the amount which is earned by the company will be utilized by them in the future investment as the part of retained earnings.
Cost leadership
In the strategy of cost leadership, the firm set out to become the low-cost producer in the industry of the Oil and Gas (Wilson and Gilligan, 2012). Low-cost leadership strategy is recommended to the company as this strategy will help the Chariot Company to become the cost leader. The company will be able to maintain the cost of leadership when they will cut the cost related to the operating expenses. This has been found that high operating cost makes the company keep high prices for the services. Chariot is also dealing with the challenge of high cost for which they took a step so that they can reduce the same. Once the cost will reduce, they can adopt this strategy which helps them to grab the new venture strategies in the market.
Cost Focus
The cost focus strategy talks about the firm that seeks a cost advantage in the target segment. Chariot should keep the cost of the services in such a way that it can offer the benefits to the customers who are targeted by the company. This will help the company in attracting customers and increasing sales.
Differentiation focus
This focused strategy talks about the differentiation in the target segment (Chernev, 2018). Chariot Company majorly targets the places of Morocco, Namibia and Brazil where they get the benefits of projects related to the drilling and exploration. This is the time when company need to expand their target market by offering the attractive deals to the government they can perform the contracts allocated by the government which will lead to opportunities for the company.
Conclusion
In the end, it can be concluded that Chariot one of the junior Oil and Gas Company who is performing the operations in London is dealing with some of the challenges and opportunities. The challenges which are majorly faced by the Oil and Gas Company include safety standards, a huge amount of investment, workforce challenges, high cost, and limited services in the market. On the other hand, the company has numerous opportunities in the market which include new projects for drilling, new venture opportunities, strong financial position and strong relationship with the government. The company need to take few steps which help them in dealing with the challenges and to grab the opportunities. It is recommended to the company to implement the porter’s generic forced model and some other factors that help in performing the effective operations of the company.
References
Ashcroft, J. (2018). Chariot Oil & Gas to launch equity funding so it can add a new well to 2018 campaign. [Online]. Available from: https://www.proactiveinvestors.co.uk/companies/news/192175 [Accessed on 2nd November 2018]
Bloomberg (2018) Oil, Gas and Consumable Fuels [Online]. Available from: https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=44463465 [Accessed on 2nd November 2018]
Burgees, K. and Kavanagh, M. (2015) Oil groups struggle on UK’s junior market [Online]. Available from: https://www.ft.com/content/af043696-a616-11e4-9bd3-00144feab7de [Accessed on 2nd November 2018]
Chariot Oil & Gas (2016) Transformational Growth Through Exploration [Online]. Available from: https://www.chariotoilandgas.com/wp-content/uploads/2017/05/Chariot-Oil-Gas-Annual-Report_2016_Online.pdf [Accessed on 2nd November 2018]
Chariot Oil & Gas (2018) Operations Overview. [Online]. Available from: https://www.chariotoilandgas.com/operations/operations-overview/ [Accessed on 2nd November 2018]
Chariot Oil & Gas (2018) Overview [Online]. Available from: https://www.chariotoilandgas.com/about-chariot/overview/ [Accessed on 2nd November 2018]
Chernev, A. (2018) Strategic marketing management. Chicago: Cerebellum Press.
David, F.R. (2011) Strategic management: Concepts and cases. India: Pearson/Prentice Hall.
Fraser, D. (2014) Oil and gas industry faces ‘biggest challenge in 50 years’ [Online]. Available from: https://www.bbc.com/news/uk-scotland-scotland-business-26337438 [Accessed on 2nd November 2018]
Grant, R.M. (2016) Contemporary strategy analysis: Text and cases edition. New Jersey: John Wiley & Sons.
Howard, T. (2018) Chariot Oil & Gas well-funded ahead of “exciting” year [Online]. Available from: https://www.proactiveinvestors.co.uk/companies/news/198340/chariot-oil-gas-well-funded-ahead-of-exciting-year-198340.html [Accessed on 2nd November 2018]
Offshore Energy Today (2014) Chariot renews Namibian licence. This time without drilling commitment. [Online]. Available from: https://www.offshoreenergytoday.com/chariot-renews-namibian-licence-this-time-without-drilling-commitment/ [Accessed on 2nd November 2018]
Offshore Energy Today (2016) Chariot Oil & Gas cuts board, personnel in a cost reduction move [Online]. Available from: https://www.offshoreenergytoday.com/chariot-oil-gas-cuts-board-personnel-in-a-cost-reduction-move/ [Accessed on 2nd November 2018]
Oil Voice Press (2018) Chariot Oil & Gas Limited – 2017 Final Results [Online]. Available from: https://oilvoice.com/Press/17865/Chariot-Oil–Gas-Limited–2017-Final-Results [Accessed on 2nd November 2018]
Primeast (2014) Top 5 challenges facing oil and gas companies. [Online]. Available from: https://www.primeast.com/top-5-challenges-facing-oil-and-gas-companies/ [Accessed on 2nd November 2018]
Stout. (2014) Trends and Challenges for the Oil and Gas Industry. [Online]. Available from: https://www.stout.com/insights/article/trends-and-challenges-oil-and-gas-industry [Accessed on 2nd November 2018]
Wilson, R.M. and Gilligan, C. (2012) Strategic marketing management. New York: Routledge.
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