Alberta Energy Sector: Comparisons to the Drop-Step Tactic

April 1st, 2009 by

By Pat Hinds

I have lived in Calgary most of my life and am old enough to have experienced two recessions, the first in the early 1980’s when my dad lost his job at a local engineering company.  The second was in the early 1990’s when I was starting out as a salesperson selling Xerox technology solutions to the oil & gas industry. Today we are obviously emerged in a full-blown recession, but I am starting to see the recovery process taking shape; the challenge is we are in the early stages and the process does not happen overnight. 

The recovery process is similar to a blocking technique I used in football called the “drop-step”. When I was an offensive lineman, my job was to block a defensive lineman that was lined up directly in front me.  To achieve this task, I would take one or two steps back depending in the distance I had to travel to make contact with my opponent. This process allowed me to get directly in front of the opponent so I could start the process of moving forward. 

This was one most difficult blocks to execute as it was against the fundamental principle of an offensive minded player wanting to move forward all the time.   The oil & gas industry is like a football offensive game plan; the industry is always in exploration mode so they can maintain and grow reserves.  In a recession where access to capital is limited and cash flow is reduced by low commodity prices, the industry needs to take a “drop-step” to get into position to move forward.

The following is the oil & gas sector “drop-step” to recovery:

·         Mergers (step back) – The announcement of the Suncor and Petro-Canada merger is large companies consolidating costs; this will allow them to reposition themselves to operate with lower earnings: see recent article at: http://www.cbc.ca/money/story/2009/03/23/suncor-petro-canada-merge.html.

·         Employee loss (step back) – Company mergers and bankruptcies lead to job loss or employees becoming disgruntled with a new organizational structure. 

·         New Companies  (move sideways)– As a result of job losses, you now have educated, experienced, and motivated people looking for opportunities to start something new.  One example is a company I have mentioned in a previous blog: Pengrowth, which started in 1992 in the middle of a recession.

·         Economy Improves (square-up)– The global economy starts to improve resulting in higher commodity prices.

·         Finance (move forward) – Investors are looking for investments that offer high yields; the new companies have ideas how they can capitalize on the assets that were divested in the mergers and company defaults.

·         Growth (move forward) – The industry moves into a growth phase of new exploration.

Topics: Sales Consulting