Analysis of Petrochem's offshore Service Division

ANALYSIS OF PETROCHEM'S OFFSHORE SERVICE DIVISION

Introduction

I will analyze a significant drop in market share in the Gulf of Mexico. The scope of the report will define how price and poor performance are the major problems that are plaguing the company. In conclusion, the recommendations proposed should increase a much needed cash flow situation.

I)PROBLEM

The most recent problem that is hurting the company is the drop in market share since the decline in the industry. Before the downturn, the company was operating 45 vessels in the Gulf of Mexico and all were under service contract. As the industry decline, we dropped to having only 16 vessels operating with the remaining 29 vessels idle. This drop indicated a 14% market share.

II)CAUSES

The first and most prevalent cause was that our company was receiving a higher price than any of our competitors. We lost perspective of the customer's needs. We operated only out of one port and it was the responsibility of the customer to pay for mobilization to another area of the Gulf of Mexico. Also, we experienced poor communication between crew personnel and clients due to the poor morale of our crews. Because the crews had not received any increases or incentives over the past 18 months due to the downturn.

III)RECOMMENDATION

The first solution is to reduce our rate for services to the current market rate to be more competitive in the industry. We must extend incentive plans to all operating personnel to increase job performance and service to the customers. We need to develop a better preventive maintenance program to reduce repairs and downtime on the vessels. We must reduce the number of vessels available for charter. This will decrease the supply available and reduce operating costs on a monthly basis. If all competitors follow this trend, and as active vessels go on charter, there will be less vessels available during this downturn in the industry. The last recommendation necessary to survive in this downturn is to institute and objective and strategy for operating personnel and upper level management to work as a team to increase the corporate climate.

IV)SOLUTION

The most important recommendation for immediate impact on the declining market share is to reduce the prices of vessels presently on charter to the current market price in order to keep the currents contracts. We should offer new service contracts at the current market price to show our willingness and desire to revive our old market position. We are experiencing a tremendous amount of negative cash flow. One way to turn this around would be to sell our services at slightly lower than current market price or at the current market price. We should reduce