Drilling forecast for 2016 is more than grim

In November news, the Canadian Association of Oilwell Drilling Contractors (CAODC) released a negative forecast for 2016 that promises a prolonged downturn in the drilling sector.  CAODC projects that only 4,728 wells will be drilled in 2016, which represents a decrease of 58 per cent from 2014.  Many rig companies have already downsized to less than one half of their 2014 levels and consolidations have begun.  The drilling industry expects to lose 28,485 jobs compared to 2014, a decline of 57 per cent.

CAODC president, Mark Scholz, was quoted as saying “The oil and gas services industry is facing one of the most difficult economic times in a generation.”  One of the worst periods in the industry’s history was 1983 and rig counts in Western Canada during 2016 are expected to drop to that level.

Besides the decline in demand for drilling rigs, there is a triple whammy facing the drilling companies.  Corporate taxes have already been hiked in Alberta.  There are possible royalty hikes on the horizon as the new NDP government in Alberta reviews the current royalty regime.  And, finally, who knows for sure what the final impact will be of proposed environmental standards.  One thing that is for sure is that only the most resilient companies are likely to survive.  How long that will take is anyone’s guess at the moment.

As service companies adjust their cost structure to match the new reality of low oil prices, this will reduce the costs to their customers, which will hopefully make more projects economically feasible.  An article in the Calgary Herald on December 17, 2015 suggested that costs have already dropped 9 per cent, with more in store for 2016.  This will be a critical factor moving forward as costs in the Western Canadian Sedimentary Basin and the oil sands are generally higher than for the shale formations found in the United States, which makes them our most immediate competitor as we struggle out of this recession.

Despite the continuing bad news, the best advice is not to panic and ride out the storm.  It will take some creativity to re-position business strategies but Western Canada has done this many times before.

Reduce your costs with the effective management of your oilfield service business in order to maintain your operations.

When will oil prices recover

As mentioned in my previous blog post, “Oversupply driving low oil prices, not weak demand”, even though the world economies are relatively healthy, we have a glut of oil on the market and it is not likely we will see an end soon. With prior drops in the oil prices, we have become accustomed to see prices rebound with 1-2 years at the most. In the past we could always count on the Saudis cutting back production or some world crisis to threaten supply. Well, things have changed and in some long-term ways, especially for the oilsands in Canada.

In order to stave off the inevitable, crude stockpiles have been increased to levels not seen in the United States since the 1930’s.  As of the beginning of November, overall oil inventories have climbed to three billion barrels. OPEC has been pumping above its collective quota while Russian output has climbed to a post-Soviet high. Iran is seeking to increase its output now that sanctions are being lifted, although that will take some time to reverse the neglect in its oil infrastructure. Iraq output has been climbing. Shale output in the US and from the oilsands in Canada have both been setting production records. The Saudi strategy of attempting to stimulate additional demand through low prices has little chance of absorbing the surplus in oil production.

While the drop in oil prices over the past year by more than one half has certainly hurt the Saudis and others, the Saudis, even with an annual budget deficit of over $100 billion, are well-positioned with reserved of approximately $600 billion to see this through several years. With no immediate crisis on the horizon in the Middle East, it is unlikely that there will be conflict anytime soon on the battlefield. At some point, the damage from low oil prices will become too much and there will have to be a truce eventually, but that could be several years off. While an increase in oil prices in unlikely to take six years to kick in, the same economics will apply once the price goes up to $60 per barrel. Shale production in the US will kick in again, as will lower cost production in Canada. Both of these factors and the additional growth expected out of Iraq and Iran will generate long-term downward pressure on the price of oil. Demand will also suffer as the new mileage standards kick in over the next few years for automotive fleets.

We had all better figure out how to survive and prosper in an era of low oil prices as they likely won’t improve anytime soon.

Streamlining your business process could be the key to the effective management of your oilfield service business, which will see you through these slow economic times.

By Malcolm Roach, President, Open Door Technology

Oversupply driving low oil prices, not weak demand

It was back in October of 1973 when I was still in high school that the world encountered its first major oil crisis when the members of the Organization of Arab Petroleum Exporting Countries (OPEC) proclaimed an oil embargo. By the end of the embargo in March 1974 oil prices had risen from $3 per barrel to nearly $12 globally with prices in the United States were even higher. To those of us impacted by this change, it was natural to assume there was a shortage of oil. I can remember thinking that we would be lucky to have any oil left by the mid-1980’s but at the time I knew little of economics and the principles of supply and demand.

Since then we have gone through a number of price spikes and crashes, either created by supply or demand challenges. The most recent, in 2009, was driven by weak demand after the crash in a number of important economies. Today’s low oil prices, however, are driven by oversupply, not weak demand. Saudi Arabia appears to finally gotten weary of cutting its own production while other members of OPEC and non-members continued to pump out as much oil as they could. OPEC continues to pump out its full quote of 30,000,000 barrels per day or even more to drive the price down. While many readers are aware that the Saudis are trying to punish the higher cost producers, such as shale oil in the United States or the oilsands in Canada, there is a second element to this strategy, which is to increase demand through lower prices. For now they seem content to let the market determine oil prices rather than manipulate supply.

While many suspect this OPEC strategy as being purely political, it is more of a market-driven decision. Whether it will bring any positive benefits to the Saudis is debatable at this point. They are running $100 billion deficits but with $600 billion in savings, they can afford to wait awhile. Some accuse the Saudis of attempting to weaken their neighbors, especially Iran, and there is probably some truth to that with the two of them waging a proxy war in Yemen and being involved in competing interests elsewhere.

The current oversupply means oil prices are on a slow recovery, but how long will it take? We will explore this topic further in a future post.

The right oilfield software creates a foundation for success through the effective management of units, people, and jobs.

By Malcolm Roach, President and CEO of Open Door Technology

What Dynamics NAV 2016 means for the Oilfield Service Industry

Microsoft’s release of Microsoft Dynamics NAV 2016 in October offers exciting new capability for oilfield service organizations.

Microsoft continues to invest heavily in the Microsoft Dynamics NAV product and have been rewarded to the point where Dynamics NAV is the most popular mid-market system in the world with over 110,000 customers worldwide as of June 2015. This new release continues down the path of the product’s original mantra of building a superior technology platform capable of being adapted to fit varying customer needs. That design makes Dynamics NAV an ideal choice for oilfield service organizations for whom the only constant seems to be the need to adapt to continuous change.

Versions 2009 through 2015 added significant changes including three-tier architecture, web services, SQL Server reporting services, improved scalability, and a choice of clients to better fit a variety of users including mobile staff. Dynamics NAV 2016 has continued the enhancement of this platform while adding a few key features, some of which take advantage of the changes.

These are just some of the new features in Microsoft Dynamics NAV 2016:

  • One of the most exciting features for organizations is the addition of a configurable workflow engine. While there was rudimentary document workflow capability before in purchasing and sales, the workflow engine now goes much further into virtually of the application suite and adds user configurability.
  • Integration to the web has been enhanced by taking the NAV 2015 tablet client, enhancing it, and making it the standard platform for web browser and phone clients, giving mobile and distributed users a consistent experience, regardless of platform. The new web client offers significant enhancements to the configuration capability.
  • Utilizing the web services capability of the three-tier architecture, Dynamics NAV can now automatically retrieve foreign exchange rates for anyone involved in international business.
  • A new Dynamics NAV content pack enables Power BI to provide end users with a more powerful business intelligence and dashboard capabilities for little or no additional cost.
  • Staff can now submit printed expense receipts by taking a photo with a smartphone and then scanning it directly into Dynamics NAV using OCR.
  • New code extensions allow partner add-on products or customer enhancements to be added to customer databases in a multi-tenant environment, which usually limits modifications. The code extensions can survive upgrades, which is a real benefit for many organizations.
  • Users will now have access to posting previews, which allows them to see the effects of posting the document or transactions in question.
  • A very exciting development for Dynamics CRM users is the native integration between Dynamics NAV and Dynamics CRM where customers can configure the integration from the Dynamics NAV toolkit instead of a separate and limited connector. System integrators will no longer have to rely on third party integration tools, such as Scribe, if they need to deal with advanced business rules.

Whether you are an existing or new Dynamics NAV customer, Dynamics NAV 2016 brings much to the table, with promises of more to come in “Madeira”, their next generation of the NAV product due in 2017.

See why Microsoft Dynamics NAV for the Oilfield Industry is a great fit.

Windows 10 Release Promising for Mobile Users

Microsoft releases its highly anticipated Windows 10 operating system amidst skepticism of whether it will allow the company to remain the king of desktops as well as become a real contender in the mobile space. Among other exciting features, Windows 10 boasts of one operating system for any device with universal apps to keep the user experience consistent across platforms.

The Continuum feature of Windows 10 could be a game changer for Microsoft as Windows 10 makes it possible to adjust the user interface at will. A Microsoft tablet automatically can switch back and forth from a desktop or tablet interface by connecting a keyboard or other accessories. A smartphone can function as essentially a mini computer by connecting a monitor and keyboard and having all applications accommodate the larger screen for a seamless experience. In fact, the experience of working on a PC or a phone connected to a monitor is exactly the same.

Continuum alone should be enough to get you excited about Windows 10 and the direction Microsoft is leading. We’ve seen a shift from desktops to laptops, to tablets, and now to mobile and Windows 10. Universal apps will keep you up to date across any device with a consistent user interface. Down the road employees could simply be issued smartphones and Office 365 corporate memberships with a desk station equipped with a monitor, Bluetooth keyboard and mouse. Mobile workers armed with smartphones in the field will be able to see exactly what their counterparts in the office see. The potential efficiency is intoxicating for organizations willing to embrace these new concepts.

A goal expressed by Microsoft CEO Satya Nadella of 1 billion Windows powered devices by 2019 may seem like a stretch with the worldwide shipments of desktops expected to fall by 5% in 2015 and an ever-growing trend towards mobile. Microsoft isn’t relinquishing control just yet, however, with more than 9 in 10 desktops currently running Windows operating systems and free upgrades to Windows 10 being offered until Summer 2016. The corporate market remains cornered by Microsoft and with greater integration offered with universal apps including the Office Suite with Office 365, organizations will soon adopt Windows 10 as an enterprise IT standard.

The real success for Windows 10 and Microsoft will be based on how users respond to the new functionality and use the technology in creative and groundbreaking ways.

Why being part of the Microsoft’s President’s Club is a big deal

We are pleased to announce that Open Door Technology has been included in Microsoft’s 2015 President’s Club. This is an exciting time for us as this achievement is difficult to obtain and one that doesn’t happen every year. It is personally very pleasing to see our staff gain recognition for all of the hard work done throughout the year.

For those of who don’t know about Microsoft’s President’s Club, it is a program to recognize the highest performing Microsoft Dynamics partners who are acknowledged by Microsoft for exceptional levels of total revenue or customer adds while growing their revenue from year to year. It can be a tool for customers or business partners, existing or prospective, who are trying to determine the Microsoft Dynamics partner that best fits their needs. It is different and unrelated to Gold competency certifications available from Microsoft as each one has its own value and limitations.

President’s Club is a useful for being a rough indicator that a partner is committed to the Microsoft Dynamics product line and has experienced significant success in the last Microsoft fiscal year, which ends on June 30th. Traditionally, it has represented the top 5% or so of Microsoft Dynamics partners, so it is not a trivial achievement. What it doesn’t do is provide any guarantee of the quality of services or software provided to customers as there is no element of customer satisfaction other than presumably in the long-term a partner with low customer satisfaction is unlikely to be able to consistently achieve President’s Club status. It does require either a Silver or Gold certification in a particular competency such as ERM (Enterprise Resource Management), which does contain elements of both sales achievement and customer satisfaction. It is, however, achievable by a much higher percentage of the partners, at one point over 50% for Gold, which renders it less useful in identifying high achievers. President’s Club status can also be extremely difficult to achieve consistently as it requires an increase in sales each year. If the partner has an exceptional year or is caught in a struggling economy or industry, it is extremely unlikely they will make President’s Club in the succeeding year, which may be no fault of their own. Gold certification is generally easily attainable each year for qualified partners, regardless of the economy or sales cycles.

So if someone is looking for a high achieving Microsoft Dynamics partner with some guarantee of customer satisfaction, it is best to consider both President’s Club and a Gold certification in the required competency.

By Malcolm Roach, President of Open Door Technology

New Canadian Data Centers Ensures Cloud Access For All

Microsoft announced last week that commercial cloud services will be available to Canadian customers on new local data centers in Canada coming in 2016. The previous lack of Canadian data centers meant many customers with rigorous data compliance needs were unable to host their data outside of Canada and therefore unable to deploy Azure or Office 365.

A primary roadblock to the adoption of these services has traditionally been accessibility of the Internet services and location of data.  Now that data will remain in Canada and Internet speeds are in excess of 100MB, the cloud is definitely the future for many organizations. The advantages to choosing the cloud means organizations will not have to spend valuable capital investment dollars upfront to allow them to scale up infrastructure as their business grows.

“We are very excited about the arrival of Canadian data centers and have been asking Microsoft for this for a long time in order to better serve the needs of our clients,” according to Christian Roach, Vice President of Open Door Technology.

“Now every Canadian customer has the option of deploying Microsoft Cloud services and we couldn’t be more thrilled,” Mr. Roach said.

The local Alberta floods of June 2013 are an excellent example of how a cloud solution can add incredible value to an organization. Several clients of Open Door Technology were directly affected by the loss of power and access to their local business and servers. Other clients who were utilizing cloud services including for ERP and Office 365 simply continued their daily business, but from their kitchen table.

The data centers will be located in Toronto, ON and Quebec City, QC. Availability for Azure is expected in early 2016 with access for Office 365 and Dynamics CRM Online to follow later in 2016. There are already more than 80,000 Canadian businesses using cloud-based email, Office 365, and CRM Online.

New Vice President of Open Door Technology

Christian Roach now Vice President of Open Door Technology

Open Door Technology is pleased to announce that Christian Roach, former Account Manager, has been promoted to Vice President of Open Door Technology effective immediately.

“Christian has been a key part of Open Door Technology for more than 17 years. He has grown into an outstanding individual who is well-qualified to provide leadership as we continue to grow and shape our firm,” said Malcolm Roach, President of Open Door Technology.

“Christian has an excellent knowledge of technology and has shown a keen interest in ways to expand and improve our business. He will be counted on to provide technology leadership with regards to the delivery of our applications,” Malcolm said.

Prepare to Acquire or be Acquired

It used to be you could start up a business and merrily work away until you were ready to sell out and retire.  Things change so quickly now that this often just isn’t the case.  New competitors arise, technology changes, the economy frequently moves up and down…you name it and it’s bound to happen.  The Bureau of Labor Statistics in the United States has released information that shows just over fifty percent of new businesses survive five years and around one-third survive ten years.

So how is this relevant to the subject of acquisition?  The pace of change is so quick these days that growth often comes from acquiring new or similar businesses.  The changes are very likely, if you are one of the survivors, that you will acquire someone or be acquired.  Depending on your exit strategy, that might be a good thing or a bad thing.  Either way, there are some standard principles you should follow in order to make sure the acquisition succeeds.

First, you need to have the right people.  If you’re going to acquire someone, your people need to be able to handle the needs of a more complex organization.  If you’re going to be acquired, the purchaser will normally be very interested in the quality and commitment of your staff.

Secondly, you need the right systems in place, both processes and software.  The arguments apply as for your staff.  A properly running organization with modern systems will be much more capable.  Purchasers will want to make sure they’re not acquiring a firm working in the Stone Age.

And, finally, sit down with your key advisors and stakeholders and really determine both what your short and long-term objectives are and how you see yourself growing or exiting.  You need to be prepared for both eventualities.  Talk to your accountant, your lawyer, your spouse, business partners, etc.  Be prepared!  The opportunity will come and your direction needs to be crystal clear in order to properly evaluate the situation.

Points to Consider When Selecting an ERP System

By Open Door Technology

Choosing an ERP system can be overwhelming when trying to match up features with key requirements identified by all departments of your organization. Finding an ERP system that will not only meet your needs, but also improve your business is paramount. We’ve identified some key considerations when selecting a new ERP system.

Evaluate your current operation processes

  • A new ERP system will not solve flawed processes within your organization if you don’t first identify the issues and how to resolve them. Make a list of specific system requirements by department so you will be ready to match those requirements to ERP systems that will improve your current operations.

Choose your customizations carefully

  • Highly customized ERP systems can become quite costly not only during the initial implementation, but during future upgrades as well. Although customizations add an additional expense there are circumstances where the benefits of having a flexible ERP system to match your unique processes could be a game changer in your industry. The key is choosing an ERP system that has impressive core functionality with the ability to quickly add customizations if and when needed.

Determine your resources and commitment to the project

  • The success of your ERP implementation will depend on adequately planning your time and resources. The buy in of your team to learn and adapt to a new system is crucial. When implementing a new system you must provide the necessary time and resources for training. You might also consider providing extra training for your employees with strong technical skills so they can become experts and resources for assisting fellow employees.

Consider appointing an ERP champion and product expert

  • Select an employee who can act as the champion and project manager for the new ERP system. They should concentrate on learning the system inside and out so he or she can be the point of contact for the vendor and the employees.

Make sure you factor in change management

  • Change Management may sound like a fancy buzzword, but do not underestimate the importance of planning out the finer details of how your organization will deploy its new ERP system. The implementation of a new system brings about a lot of changes and can be a stressful time for staff as they learn a new system and business processes. Many implementations fail because of inadequate planning and lack of buy-in from staff. You can minimize issues by deploying communication plans and workshops to ensure a positive reaction and adoption to the new ERP system.