Fall 2014 Deloitte Consulting Project

December 5th, 2014

2

Team Leaders

Neil Jones

Class of 2017

IT Management

Entrepreneurship

Raina Kim

Class of 2016

Finance

Chinese

SIBC

3

Founded by Father

Hesburgh & Frank

Potenziani with the

vision “Peace Through

Commerce”

Officially known as the

Student International

Business Council at the

University of Notre

Dame

The largest student run

organization

500+ members

30+ client companies

10+ international

internships

1989 2000 2014

4

Agenda

1. Defining the Situation

2. Team A Solutions

3. Team B Solutions

Situation: Two merging oil and gas firms

are operating on different ERP systems

5

Location

Canada, US, Eastern Europe, North Africa

Annual Revenue

$13 Billion

Total Employees

12,000

Location

Canada

Annual Revenue

$9 Billion

Total Employees

7,000

Industry overall

Oil and gas industry is capital intensive

• Imperative to control operational costs, given high costs of exploration

Unscheduled downtime will hinder growth

• High exploration costs must be offset by continuous production

Must stay focused on gaining competitive advantage

• Minimizing change impacts from ERP integration will keep Atlas’ competitive edge

7

Deloitte Project Goals

Develop and implement a consolidated ERP system

across the new company, post merger

Minimize change impacts on

employees and day-to-day operations

Enhance business

continuity across the

merger

Team A

8

Lucrecia Siman

Class of 2017

Management Consulting

Political Science

Kyle McHugh

Class of 2017

Finance

Economics

Monica Barboza

Class of 2017

Management Consulting

Portuguese

Team A

9

Tiphaine Delepine

Class of 2017

Finance

Elizabeth Principe

Class of 2017

Finance

Applied Math

Lake Heckaman

Class of 2017

Finance

Mathematics

Presentation Outline

Solution

Implementation

Benefits

Conclusion

Solving Atlas’s ERP issues will position

Atlas for future success

Atlas Energy

(Oracle)

Alberta Oil

(SAP)

Oursolution

Deloitte’sTask

Standardize business processes

Enhance business continuity

Minimize change impacts

Increase operational efficiencies

Retain top talent

Cut costs

Employees : 7,000

Annual revenue : $9 billion

Region: Canada

Alberta Oil

Employees : 12,000

Annual revenue : $13 billion

Region: Canada, US Eastern

Europe and North Africa

Atlas Energy Inc

What is an ERP system?

ERP

Business process management

software

Enterprise

Resource

Planning

Automation and integration of

data

Improves effectiveness

and productivity

ERP modules include: HR, financials, supply chain,

manufacturing, among others

13

Potential Solutions

Translate Alberta to Oracle

Translate Atlas to SAP

Alternative Option

ERP Deployment Options

Multiple sites or geographic locations

Single Tier becomes too large and costly to customize, maintain and upgrade

Increasing number of M&A’s entering or leaving the organization

Two-Tier

Drivers

What is a two-tier ERP system?

Two-tier ERP

Corporate level ERP system acting as global standard

Other subsidiary level ERP systems for divisions

1

2

27%32%

48%

0%

10%

20%

30%

40%

50%

60%

2009 2010 2011

Companies considering a two-tier strategy

Trend towards two-tier ERP

According to Constellation Research, the amount of buyers considering two-tier ERP strategies is increasing consistently

Two-tier ERP strategies have been gaining popularity since the 2008 recession

Ventana Research found that 2/3 of companies with over 1000 employees use ERP systems from more than one vendor

Our solution: a two-tier ERP

Maintain Tier 1 ERP system at corporate level and continue operating multiple Tier 2

ERPs at the secondary level. This simplifies future acquisitions and sales of divisions.

Oracle Hyperion Financial Management

Atlas Energy (Updated Oracle)

Alberta (SAP)

Future Acquisitions

Future Acquisitions

External

reporting

Senior Management

reporting

18

Many companies have already

successfully adopted two-tier strategies

Support for big and small business units

•Solved a $2B problem –domestic and foreign subdivisions were in need of ERP

•Lower TCO, under $100,000/year to operate

Rapid global expansion efforts

•140 locations worldwide running on different software systems

•Streamlined management

•Support for future expansion

Fast growing company

•$670 million between 2009 & 2010

•Two-tier ERP went live in 6 months

•Plans for 26 international markets in 3 months

Establish Oracle Hyperion Financial Management System

Update Oracle base system in Atlas

Map data from SAP to Oracle

How we will implement our solution

20

Use comprehensive suite to merge

Oracle and SAP repositories

Oracle Hyperion Financial

Management Close Suite

Data Relationship Management

Administration tool

Patches

Hyperion Disclosure

Management

xBRL

“Hyperion is the latest move in our strategy to expand Oracle’s offerings to SAP customers.”

Charles PhillipsOracle President

0%

5%

10%

15%

20%

25%

30%

35%

40%

% E

RP

USE

RS E

XP

ER

IEN

CIN

G S

AV

ING

S

SAVINGS AMOUNT

SAVINGS FROM CLOUD USAGE

0-20% 21-40% 41-60% 61-80% Over 80%

21

Use cloud storage and computing to

handle big data

Lower ownership

cost

Higher return

Total cost savings

22

Benefits of a two-tiered solution

Minimal Disruption

Human Resources

Lower overall costs

Mergers & Acquisitions

Trends in Global

Economy

23

Two-tier helps maintain culture and

retain top talent

Maintain unique culture of companies

Retain Atlas’ top talent

Take care of local issues

Two-tier increases efficiency and savings

Minimal Disruption

Training only for high-level

management

Business operations continue and

improve

Cost Savings

Massive reduction in training costs

Lower purchase price

No lost revenue

Our solution will streamline future M&A

activities

Lower cost

Shorter time

Ease of acquisition

33% reduction in implementation costs

50% decrease in full implementation time

Large-scale ERP systems cannot keep pace with

a changing environment

26

Global economic trends will yield

increasing revenue streams for Atlas

Canadian Dollar

Weakens

Canadian exports seem

cheaper

Foreign Countries

Import Canadian Oil

0

5

10

15

Barrels per day (millions)

Oil imports by countryUnited States

China

Japan

Germany

Netherlands

Canada

Atlas will capitalize on this market growth by not halting

business operations

27

Potential drawbacks of a two tier system

Complexity

Operating systems from

different manufacturers

Upkeep

Both systems will need periodic updates

Industry Precedent

First to deal with potential

issues

Two-tiered solution addresses concerns

• Implementing a two-tier ERP system is less costly than converting all divisions to a single system

•The unique culture of each division is not compromised and local issues are easily resolved

•Standardizing top management while divisions remain separate facilitates future M&As

•Low-level operations are not interrupted while high-level management is in training

Disruptions are

avoided

M&A is prevalent in the oil industry

Costs are minimized

HR remains division-specific

A two-tier ERP system creates standardization that promotes growth while

facilitating interaction between divisions.

Recap

Enhance

business

continuity

Increase

operational

efficiencies

Minimize

cost

Minimize

change

impacts

Retain top

talent

QUESTIONS?

TEAM A APPENDIX

32Source: Stikeman Elliott 2014 Energy M&A Trends in Canada

Canadian M&A Energy Trends

Resistance to proposed pipeline projects will continue

Increase in consolidation and M&A of smaller companies expected to continue in 2014

Low natural gas prices and oversupply have led many industry leaders to sell assets

33Source: IBIS

Energy Trends – Industry Overlook

To 2019, industry revenue of global oil and gas is forecast to grow at an annualized rate of 4.3% to $5.6 trillion

A steady increase in price of energy production is expected, as the world economy recovers from recession

Industry employment is projected to increase over next 5 years, a sign of positive growth

34Bp.com

Africa is the next big thing in natural

gas

0%

20%

40%

60%

80%

100%

120%

140%

160%

2012 2015 2020 2025 2030 2035

Natural Gas Production Projection

North America Europe & Eurasia Africa

Drawbacks

• Lack of infrastructure and stability

Highlights

• Africa shows over 140% growth by 2035

Conclusion

• If infrastructure can be secured, investment recommended

Share of Total Oil Consumption and

production (2013)

Source: http://www.bp.com/content/dam/bp/pdf/Energy-economics/statistical-review-2014/BP-statistical-review-of-world-energy-2014-full-

report.pdf

25%

7%

21%9%4%

34%

ConsumptionNorthAmerica

South &CentralAmericaEurope &Eurasia

Middle East

Africa

19%

9%

20%32%

10%

10%

Production

36Source: http://www.bp.com/content/dam/bp/pdf/Energy-economics/statistical-review-2014/BP-statistical-review-of-world-energy-2014-full-

report.pdf

Oil Change 2013 over 2012

NorthAmerica

South &CentralAmerica

Europe&

Eurasia

MiddleEast

AfricaAsia

PacificWORLD

Production 8.70% 0.20% 0.20% -0.70% -5.70% -1.70% 0.60%

Consumption 1.30% 4.40% -0.40% 2.20% 3.20% 1.50% 1.40%

-8.00%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

Perc

enta

ge

37http://www.srr.com/article/trends-and-challenges-oil-and-gas-industry

Oil and Gas Industry New Technologies

Focus on

developing

technological

solutions,

increasing

the world’s

producible

reserves.

Development of the Subsea Oilfields

Moving processing to the ocean floor reduces infrastructure costs and production costs, greatly improving return on investment.

The Shale Play

Exploitation of shale basins using hydraulic fracturing and horizontal drilling techniques has increased U.S. crude output.

Enhanced Oil Recovery

Boosting oil recovery could unlock around 300 billion barrels of oil, reducing the risk and the infrastructure cost.

38

Comparing Oracle and SAP ERP systems

Oracle

•Low market share

•Need more through vetting

SAP

•Customization cumbersome

•High personnel requirement

90% of users realize ROI in 5 years

Software is trending towards cloud and big data

Projects have a larger scope and scale

Moving toward increased IT capabilities

39Source: http://www.eia.gov/todayinenergy/detail.cfm?id=15251

Need for Minimal Disruption

With low volatility, North American oil is primed for high sales, meaning minimal disruption is a must

Atlas Net daily production of 261.3 million equivalents per day (6% increase over 2014 Q1)

33% Increase in Q2 to 2,100 barrels per day

20% increase in production capacity

Alberta Strong economic growth with an expected trend of 3% growth

Massive spending on oil sands projects is now translating into sharply higher production and exports

With more takeaway capacity (given by Atlas) Alberta can raise prices and turn a higher profit margin

40

Two-Tier Systems Lower Costs and

Implementation Time

Average Tier 1 Oracle

Implementation

Time frame: 22.5 mos

Cost: $2.25 M

50% of users reported

operational disruption

Disruption lasted 3 months

Average 2 Tier Implementation

50% decrease in time frame

33% reduction in cost

Team B

41

Lauren Janek

Class of 2017

Finance

Cynthia Qu

Class of 2017

Economics

Liberal Studies

Kevin Schmitt

Class of 2017

Accounting

Theology

Team B

42

Taryn Stamper

Class of 2017

Finance

Applied Math

Paulina Eberts

Class of 2017

Chemical Engineering

Niki Dirksen

Class of 2017

Marketing

43

Atlas and Alberta Oil will become

united through an ERP implementation

Atlas Energy Inc.-ERP System: Oracle

-Employees: 12,000

-Annual Revenue: $13 Billion

-Regions: Canada, US, Eastern Europe, and North Africa

Alberta Oil-ERP System: SAP

-Employees: 7,000

-Annual Revenue: $9 Billion

-Regions: Canada

44

Oracle ERP will unify Alberta and Atlas

and lead to future success

ERP consolidation for Atlas Energy Inc. and Alberta Oil

Analysis of top ERP competitors

Oracle

Comparison of implementation

strategies

Rapid bottom-up approach

Effects of ERP in the merger

Minimize disruptions, maximize efficiency

Future market expansion

Africa, natural gas

45

ERP System

ERP Implementation

Strategy

Factors of an Effective

Implementation

Future Success

46

Enterprise Resource Planning promotes

business synergy

Mobile Cloud Big Data

ERP

Improved Data Flow

- Creates improved supply and demand management

- Produces real time insight for financials

Increased Efficiency

- Helps in planning and optimizing business operations

- Captures customer information efficiently

Internal Company Relations

- Allows for complete employee database

- Structures levels of management and employee expectations

Integration

- Connects all aspects of business in a centralized source

- Creates streamlined business model and processes

47

Oracle and SAP offer the greatest resources

for expanding Atlas Energy over competitors

Microsoft Dynamics • Lowest market share of all three

• Mostly used in small and mid-sized

companies

• Less complex ERP system

11%

32%

26%

17%

14%

Vendor Market Share in 2013

Microsoft Dynamics

Tier III and others

SAP

Oracle

Tier II

Oracle and SAP’s proven track records lead to more potential

opportunities for the newly merged company

Tier II and Tier III• Provide solutions for small to medium

companies

• Few locations, simple location structures

• Less customization options

48

Oracle and SAP are the most logical ERP

solutions

ERP System Strengths Weaknesses

• 17% of market share

• Research and development

capabilities

• Highest success rate at 71%

• Oracle implementations

take approximately 4

months longer

• Slow in adapting cloud

services

• 26% market share

• Strong customer support

• Highest short list-rate at

51%

• High licensing costs

• SAP has a 13% difference

between planned and

actual costs

• Implementations have 69%

material operation

disruptions

49

Oracle allows for the most efficient

merger between Atlas and Alberta

Company Size

Smaller implementation needed due to Atlas’s larger presence

Location

Alberta’s location allows for reduced training and implementation costs

International Market

Atlas’s international activity will not be affected during

implementation

Costs

Oracle has a smaller differential between planned and actual costs

by 9%

50

Oracle’s implementation led to many

benefits for Southwestern Energy

“ With Deloitte Consulting’s

implementations and Oracle’s

consolidated financial platforms,

SWN can now scale to new ventures

domestically and internationally.”

-CRAIG OWEN, Chief Financial Officer

20% reduction in totalcosts

50% increase inbottom-line benefitover the next five

years

One of the lowestoperational cost

companies in Oil andGas industry within US

51

An effective ERP implementation can

minimize Oracle’s drawbacks

Length of Implementation

Overall CostsFuture Cloud Implications

52

ERP System

ERP Implementation

Strategy

Factors of an Effective

Implementation

Future Success

53

Phased Roll-out and Big Bang are two

common ERP implementation strategies

Phased Roll-out

Pros:

•Less risk

•Skills and experiences aregained with each phasewhich can help smooth theprocess

Cons:

•Taker longer to be fullyconverted•Not as focused as Big Bang

Big Bang

Pros:

•Shorter implementationtime

•Lower costs

Cons:

•High risk

•Failure in one part of thesystem may cause problemsin other

A rapid bottom-up approach leads to

success in the oil and gas industry

“Integrate then transform” vs.

“transform then integrate”

Necessity of rapid

implementation

Top down vs Bottom up

“The ‘integrate, then transform’

strategy…facilitates the process

of creating a single, high

functioning, and

communicative

organization.”

“The business

of actually

creating a single

corporate culture…

depends largely on

Implementing measures

Which prompt participants at all

levels and throughout every business

unit to begin working off the same page”

55

Rapid bottom-up implementation of

Oracle leads to efficient standardization

3. Allow for integrating business processes to increase operational

efficiency

2. Reduce culture clash and create company unity in order to retain top talent

1. Remove overlapping divisions and increase communication in order to cut costs

56

ERP System

ERP Implementation

Strategy

Factors of an Effective

Implementation

Future Success

57

Different sub-divisions have varying

definitions of implementation success

•ERP system is successful when the company achieves business improvements and other predetermined goals

Executive Leadership

•ERP system is successful when the project is implemented within budget and on time

Project Managers

•ERP system is successful if there are smooth operations within the system

Users

An ERP implementation is successful for all parties when there is top

management level support, ERP training and education, Enterprise-

wide communication.

58

Efficient communication is necessary in

carrying out the implementation

Communicate:

Technical team and

subject matter experts

Top management

Project Managers

Training Staff

• Scope

• Objectives

• Timeline

• Budget

59

Proper ERP implementation correlates

with merger success

Hardware and Software Installation

Programming

User Training

Documentation

Communication

60

ERP System

ERP Implementation

Strategy

Factors of an Effective

Implementation

Future Success

61

Canada’s increasing oil production will

positively affect newly united Atlas

2012 2015 2020 2025 2030 2035

North America 0% 16% 30% 33% 35% 37%

Europe & Eurasia 0% 0% -2% -4% -6% -5%

Africa 0% -3% 5% 4% 3% 4%

-10%

0%

10%

20%

30%

40%

Oil Production Projection

North America Europe & Eurasia Africa

By 2019, industry revenue of global oil and gas is forecast to grow at an annualized rate of 4.3% to $5.6 trillion

Canadian Oil Production expected to increase by 37% by 2035

62

Successful ERP integration will lead to

future market success

Natural Gas Production in Africa predicted to increase by 140%

Integration of ERPs will increase company’s revenue in increasing markets

0%

20%

40%

60%

80%

100%

120%

140%

160%

2012 2015 2020 2025 2030 2035

Natural Gas Production Projection

North America Europe & Eurasia Africa

63

Unified Atlas Energy Inc. under Oracle

leads to merger and market success

ERP consolidation for Atlas Energy Inc. and Alberta Oil

Analysis of top ERP competitors

Oracle

Comparison of implementation

strategies

Rapid bottom-up approach

Effects of ERP in the merger

Minimize disruptions, maximize efficiency

Future market expansion

Africa, natural gas

QUESTIONS?

TEAM B APPENDIX

66

2014 SAP vs Oracle Data

CLASH OF THE TITANS 2014

An Independent Comparison of SAP,

Oracle and Microsoft Dynamics

67

Implementation Focus

• Increase operational efficiencyManufacturing

• Implement cost-cutting solutionsFinances

• Retain top talent and unify the company

Internal Organization

68

Oracle’s effect on Manufacturing

Oracle Production Scheduling

Maximize Shop Floor Throughout

Maximize Utilization of

Critical Resources

Maximize Inventory Turnover

Minimize Inventory

Minimize Unnecessary Time Usage

Oracle Production Scheduling

Increase in Productivity

Optimization

69

Oracle’s effect on Finances

Simplify

Extensivespreadsheetintegration

across financefunctions

Control

Imagingintegration for

supplierinvoices

Accelerate

Innovativeembedded

multi-dimensional

reportingplatform

Collaborate

Simultaneousaccounting of

multiplereporting

requirements

70

Oracle’s financial applications cut

down costs

•Oracle allows companyto grow withoutworrying about findingskilled IT staff

•Oracle’s advancedfinancial applicationsstreamline operationsand optimize supplyand distribution

•Oracle’ s financial cloudturns data received into information morequickly

•Oracle’s centralizedaccounting engine canprovide real-timeaccounting results forvery large data volumes.

Lower operational

costs infinancial

consolidations

Reducewasted

resources onunpromising

projects

Diminish ITcosts

Decreasecosts in supply

anddistribution