The Oil & Gas Producer Industry include the Royal Dutch Shell Plc, Indus Gas Ltd and Premier Oil Plc while the Mining Industry includes the Acacia Mining Plc, Central Asia Metals Plc, Jubilee Platinum. The Oil & Gas industries are summarized as under:
Royal Dutch Shell Plc: It is a public limited company founded in the year 1907 with its headquarters in Netherlands and registered office in England. It is among the highest companies present worldwide and has listings in the London Stock Exchange. The company is an amalgamation formed with the Netherlands and United Kingdom companies namely the Royal Dutch Petroleum Company and Shell respectively.
Indus Gas Limited: The Company is the development company in the sector of exploring the oil and gas processes. The company is a limited company that had come into force from the year 2008 and is helpful in the exploration, producing and distribution of the natural gases and hydrocarbons. It has an interest in the subsidiaries that are owned wholly and the major one constitutes the partners from Mauritius and Cyprus.
Premier Oil plc: The Company is an independent company situated in United Kingdom and has major and principled interests in the sector of oil and gas that include the countries from the areas of Africa, Asia and UK. The sector has devotion in the industries of the upstream portion as compared to the portion of the downstream portions of the sector of retailing and refining industries. The company has a listing on the London Stock Exchange and is one of the well-known companies worldwide.
The chosen Mining industries are summarized as under:
Acacia Mining Plc: A public company has operations in Tanzania and has its headquarters in London after being founded in the year 2000. The company had been known as African Barrick Gold and got its name as Acacia Mining in the year 2014. The company had been operating and functioning in the country Tanzania for more than ten years and the same has taken steps in producing the most and best amount of gold from the combination of the pits and mines that are underground. Thus, the company has been the leading and best producers of gold and leading in the mining industry. The company has a widespread functioning across the western areas and regions that include Burkina Faso, Mali and Kenya.
Central Asia Metals Plc: The Company has a basis in the country London and has the extraction of solvents and project exploration in the area of Central Kazakhstan. Furthermore, in area of the northern Chile, it has huge interest in Copper Bay Ltd. The company has been situated in the country UK and had been able to raise a large amount in the IPO around central Kazakhstan. The company is free of debts and it has a position that has been maintained by the outflow of dividends and buyback of shares (Aguilera et al. 2014).
The major rationale behind the preparation of the report include the evaluation of the performance and knowing the significant part of the financial information related to the companies in the above provided industries. The interim report provides the details of the major information required in knowing the actual performance of the companies. The financial ratios are calculated and analyzed to know the overall structure of the company.
The main aim of the study is to be known with the fact that is essential to evaluate and assess the overall performance of the organizations and industries.
The comparison of the industries is done to bring about the evaluation and analysis of the chosen companies in the two industries.
The objectives of the preliminary interim report are as under:
The Five Forces of Porter has a framework that has a point of stating the competition of the overall forces that include the threats and other powers of the forces. The forces include the threats imposed by the entrants, substitutes, buyers, suppliers and the rivalry that is present among the firms of the industry. The success of the organization and the overall industry has a dependence on the relation with the industry and its structure. The structure of the industry has a manifestation in the forces of Porter that is five in number and has a nature of driving up the competition and profits. The revealing of the overall roots of the current state of the profitability of the industry and the anticipation of the trends of the future requires the understanding of the company.
The forces have an indication that the prospective entrants to the industry can bring about the latest capacities and the desire of gaining the share of market. The forces that there will be a pressure on the prices, costs and the investment rate give the suggestion. There will be an indication of the factors like the reaction of the incumbent towards the potential entrants. The major hurdles and the barriers in the oil and gas industry include the larger requirements of capital, patents, differentiation of products, regulations of government, patents, ownership of the work of innovations and reduction of cost and differentiation.
The company like the Exxon Mobile had faced the introduction of the advanced technologies towards the reduction of the cost at the time of the increment of the capacity of production. The reduction of cost enabled the company in boosting up the capacity of the production and further, created extension of the life of the oil and gas industry. The refinement, barriers of technical patents is minimized, as the involved technologies become known in a wide manner. The entry may be minimized by the monopolization of the sectors of the refinery and thus, the same can be done by the restriction of the input and output of the refinery until the equalization of the marginal costs and the revenues (Alharthy et al. 2015).
The output of the refinery will have an exceeding factor with the marginal cost that can allow the entrants of the future for the earning of the huge incomes and profits. The economies of the scale cannot create a prevention of the entry from being occurred in the efficient markets of oil. The industry can have a situation of facing a situation of limit pricing with the larger economies of scale. The same will lead to the lowering down of the prices of the market below a certain level of break even at the time of the existence of the rivals maintaining the output levels (Bagheri et al. 2014).
There has been discrimination between the two forces of porter having a relation with the rivalry and the substitutions. The rivalry gives a description about the competition that is carried on by the companies having a provision of the similar kind of products and the substitution is a best description of the products not being in a competition that is direct in nature. The substitutes has an effect on the industries by the limitations imposed by the profits anticipated incomes and revenues after the placement of a price at the upper limit. The advent of the usage of the advanced technologies has created an opportunity for finding new alternatives for the energy sources as a part of the probable substitutes. As per , there is an indication that there is a threat of substitutes that helps in creating an attraction of prices to get traded off with the products of the industry and leads to the cost of the buyers getting switched with the lower substitutes.
The suppliers have an effect on the markets that intends to charge the prices that are higher in nature and there is limitation to the production with the integration of the prices. A movement in the competitors can lead to the influence in the prices that are followed up by the modification in the strategies of the competitors. In case of the Exxon Mobile, the OPEC in the year 1959 had created an influence over the prices of the Middle East.
The suppliers of the companies of oil and gas along with the mining companies helps in bringing up the power towards the countries that get receipts of the integration with international forces. There can be injection of the cash into the industry of refining and mining towards the fostering of the competition and enhancing the customers with the security with security. There are variety of regulatory bodies that define the operations of the marketing and refinement in the industries of oil, gas and mining. The integration in the vertical manner helps in the reduction of the threats and risks that helps in the maximization of the profits at each stages resulting from the wells and fields to the stations of gas and mines. The integration helps in balancing the operations performed by the companies and thus, helps in the protection of the instability caused in the markets. Thus, for example when the prices of the oil and other products go down, there will be a positive margin of the refining and the markets.
The buyers of the products and services of the mentioned industries have an ability of slashing down the prices and demand a great amount of quality and better services by an increment in the prices of the same. The industries have a situation of playing against one another at the cost of the profitability of the industries. The industries take up operations in outsourcing the services of the oil and gases and mining. The companies gain a position that is too powerful and helps in the bargaining of the prices and that has a demand of having the best quality and services in an additional manner.
The companies of the oil, gas and mining industries look forward in obtaining the rights of investing the areas of exploring and producing internationally. Through the formation of Joint Ventures, the obstructions related to the legal and politics nature can be overcome easily. There is a joint venture among Exxon Mobil and the Shell that are markets having products and services related to the fuel, special additives and the lubricants. Thus, the forces of Porter helps in increasing the leverage of the negotiation powers of the buyers related to the competitors leading to the increment in the power of the buyers.
There is high amount of rivalry among the competitors that are in existence and can have a limit in the profits of the industry that depends on the intensity and basis of competition. There can be a relatively equivalency in sizes, capabilities and power and the same helps in increasing the overall intensity of the rivalry that helps in manifestation of the war of prices, once there will be an influence in the prices. The profitability of industry can be limited by high rivalry amongst existing competitors based on intensity of competition. Major oil companies are equal in power, capabilities and sizes aspects. If competitors influence the prices then this would result in price war due to increase intensity in rivalry amongst competitors. Oil and gas companies’ experiences slowdown in production resulting from declining reserves and falling production of net liquids. This would results in increase in rivalry within industry. There arises intense rivalry amongst competitors if they intend to perform beyond their economic performance. Organizations in oil and gas and mining industry go for joint venture to turn their rivalries into potential competitors. Competitiveness in the oil and gas industry can be increased by offering undifferentiated products and reducing the attractiveness of market.
The critical environmental analysis is done by performing SWOT and PEST analysis that highlights external and internal factors influencing the long-term aspects of key organizations in industries.
SWOT analysis helps in analyzing the weakness, opportunities, threat and strength facing the organizations in industries.
Strength- Oil and gas industry holds a strong position in market and they have vertically integrated integrations. They have downstream, upstream and mid stream of oil business and such integrations helps in improving operational efficiencies and thereby it gives competitive advantage to companies in global market. Companies in industries are local market leaders in term of production, reserves and they have strategic business plan that is in line with augmenting business and energy supply in country. Some of the factors of strength of oil, gas and mining industry are proximity to key markets, ability of controlling stocks in hand and making prompt delivery in market.
Weakness- Over the past five years, the commodity prices have been low and this has resulted in weak demand for oil, gas and mining sectors.
Opportunities- Industry can make investment in wide variety of energy resources and can make investment in advanced technologies. Companies can make exploration in production business through building mutually beneficial relationships and technological development. There can be fast track development of future and current projects without compromising the transparency and quality.
Threat- Threats to the industry arises due to risks involved in production and exploration of oil. There is high investment and more localization of exploration activities. The financial performance of companies in industries is adverse and material due to risk in commodity price. There is threat related to exploration and drilling risk. Risk is also related to increase in cost of compliance, depletion of reserves and exchange rate. In UK, there is low level of market share concentration.
Political factors- The mining, oil and gas industry is heavily influenced by political factors and there are issues related with determination of effectiveness of taxes imposed on the sector by better allocating the profits. Mining, oil and gas industry has the most powerful unions and striking coal miners are on pockets. The determination of UK oil and gas industry is ensured by the security of supply while moving forward toward moving low carbon economy. There is a suitable procedure for controlling the risks by making assessment if risks and identifying the hazards.
Economic factors- The supply and demand of oil price is influenced by different factors such as international currency exchange rate, economic stability, situation at global and regional level and crude oil price. Petrochemical industry 10% of demand of oil in UK.
Social factors- Oil industry is considered as essential sector for the development and welfare of country by most of social culture around world. Oil and gas industry is considered as major source of pollution responsible for polluting the environment. Organizations in the industry provide well-paid and highly skilled jobs. Development of overall industry is assisted by corporate tax reduction that motivates growth and would encourage innovations. The level of investment in industry is developed by oil price and short-term competitiveness. Some of the issues faced by oil and gas sector is low prices, high costs, lack of affordable credit and global recession.
Technological factors- There are challenging and harsh environment, which the oil and gas industry is working on. Organizations are able to recover maximum reserves by making investment in innovative technologies. They intend to recover from deep water and complex reservoirs by taking position in offshore and subsea technology. Mining industry are revitalized by latest technology in heavy oil, deep water and high temperature. The development of oil and gas industry is enhanced by industry technology facilitator is facilitated by innovation of collaborative technology.
Gross profit margin ratio-
Return on assets-
Debt to equity ratio-
Equity ratio-
Current ratio-
Dividend payout ratio-
Accounts receivable turnover-
Some of the non-financial ratios are staff turnover ratio and customer reorder ratio.
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Choice of firms |
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Critical environmental analysis |
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Ratios justification Calculation for determining failure and success |
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Submitting draft of the project |
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Printing and final submission |
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