Tag: business strategy plans

Why Customer Engagement Should Be Every Business’s Top Priority in 2020

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Everyone’s talking about customer engagement — but why is it so important, and what does it really mean? How does customer engagement look in action, when you’re a business trying to connect with your customers today?

We already know a lot about the customer journey — how it’s made up of numerous touch points, from search to purchase to post-purchase support. And we know that providing a good customer experience at each of those touch points is critical to building and maintaining a solid reputation for your brand. But customer engagement is often overlooked, even though it’s critical to nudging customers along their journey.

Customer Engagement Impacts Profitability

Customer engagement is about inspiring your customers to interact with your brand and willingly take part in the experiences you’re creating for them. If you do it right, you’ll grow your brand and build customer loyalty — and, in turn, drive revenue.

In fact, there’s a direct and proven correlation between the level of customer engagement and business profitability. A study by Constellation Research reported that companies who improve engagement can increase cross-sell revenue by 22 percent, up-sell revenue by 38 percent and order size by 5 to 85 percent. Reputation.com research backs up these findings —  a high rate of customer engagement increases Reputation Score, and we’ve found direct links between high Scores and revenue in multiple industries, including Automotive and Healthcare.

Today In: Small Business

Despite the immense financial impact engaging with customers can have, some companies are still not doing it.

Case in Point: Retail

In the recently released Retail Reputation Report, data scientists at Reputaiton.com found that most retailers simply don’t respond to reviews — particularly negative ones. Think about the message that sends! I’m a customer who’s had a bad experience with a business, so I do the only constructive thing I can do to express my frustration: I write a review.

Probably like most consumers, I assume the business will care if I have had a negative experience and try to fix it. If they do, they’re better off. If they don’t, I might be left feeling like they simply don’t care what kind of experience I’ve had. Am I likely to buy products from that business again? Well, much less likely, right? And if I do, I’m not going to feel good about it. I may tell my friends I dislike that business, and they’ll probably avoid it in the future, too. Perhaps most importantly, I will almost certainly not say GOOD things about the business to my friends.

When someone takes time to leave a review — good or (especially) bad — it’s the ideal time to engage. We all get this, but surprisingly, the average response rate to negative reviews among leading retailers is just 2 percent. It’s no wonder Amazon is eating away at retailers’ market share, with their frictionless shopping experience and infinite inventory.

Now let’s consider a brand who does a good job of engaging with customers. Nordstrom and Nordstrom Rack scored exceptionally high for engagement, compared to many other retailers (61% and 79% respectively). That’s because they place a premium on delivering exceptional service and ensuring their customers are happy and engaged. And maybe that’s one of the reasons that, while many retailers are struggling to keep their doors open, Nordstrom and Nordstrom Rack are still reporting strong profits.

Investing In Customer Experience Is a Huge Lever for Revenue

The power of engaging and connecting with customers isn’t limited to the B2C world. According to Econsultancy’s Annual Digital Trends report, B2B companies identify customer experience — the product of meaningful customer engagement — as the single most exciting opportunity for 2020.

Temkin Group reports that companies that earn $1 billion annually can earn $775 million more within three years of investing in customer experience with “modest” results. The report found that to be true across industries, with software companies earning the most ($1 billion over three years). Success, effort and emotion, according to the report, were the three factors impacting customer loyalty, and an improvement in emotion increases loyalty more than any other factor. A meaningful customer engagement is the best way to stir up the positive emotions that keep customers coming back.

Take a Walk In Your Customer’s Shoes

So how do you connect with customers on an emotional level and improve customer engagement? Here are a few starting points:

  • Analyze the customer journey. How else can you know what the customer’s experience with your brand or locations is like? Take their journey, and take note of and sticking points or frustrating interactions. Are the emails you’re sending helpful and informative, or intrusive and self-serving? Are your locations easy to get to and welcoming? Is your staff friendly and professional? Do you follow up after customer interactions and respond to reviews? Every one of these customer touchpoints presents an opportunity for engaging with your customers in a mutually beneficial way. Make sure you’re doing that, and if you’re not, it’s time to start.
  • Listen to what customers say about you. Today’s customers are vocal, and it’s easy to find feedback on Google, Facebook, G2 and other review sites. You should also invest in social media management, so you can actively monitor social commentary and reviews as they come in — 42% of customers expect a response within 60 minutes, and a delayed response is almost as bad as no response.
  • Deliver seamless omnichannel experiences. If you analyze the customer journey properly, you’ll find brand interactions occur across many channels — search results, emails, websites, physical locations and even text. Make sure to deliver a consistent and pleasant experience every time you engage with your customer, regardless of channel. One bad or confusing interaction can ruin the opportunity to engage effectively, and could even begin to break down the trust and loyalty you’ve invested in building.
  • Pay attention to all factors that comprise your Reputation Score. Increasingly, brands are turning to Reputation Score as the most accurate measurement of customer experience. It’s more thorough than NPS, because it takes into account all the factors affecting your reputation. A critical component of the score is engagement, as measured by your brand’s performance across every customer touch point. Knowing and monitoring your Reputation Score is an essential step to mastering the art  — and reaping the benefits — of customer engagement.

Don’t Force It

An important thing to remember is you can’t force your customers to engage with you. As HubSpot’s Paul Greenberg said, “Customer engagement is the ongoing interactions between company and customer, offered by the company, chosen by the customer.” The customer decides how to interact and engage — you can only create the opportunities, and ensure that your diligent effort and reputation inspire people to take action.

Follow me on Twitter. Check out my website.

Michael Fertik

I’m the Founder and Chairman of Reputation.com. I started my business because digital privacy, Big Data and online reputation are issues that impact everyone from individuals to massive corporations. People should be the center of the Internet machine – not cogs in its wheel. More empowerment online, not less, not what we have now. Follow me @michaelfertik.

Source:https://www.forbes.com

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Session recording from Industry Preview 2018. Session abstract: Salesforce Marketing Cloud Chief Strategy Officer, Jon Suarez-Davis (“JSD”) keynotes an engaging session drawing upon real life examples from working with some of the world’s biggest brands, shares Salesforce’s vision for the future of marketing, and makes some predictions about what’s coming next.

Key Points To Consider When Developing An International Business Strategy

Let us take a minute to salute the international companies, those that have gone multi-market or are on that path. They deserve our applause and respect. When I led market entry programs , I observed that these international firms tended to outperform the purely domestic firms, but for a reason you might not expect.

Companies that were operating in many markets tended to do better than those that had a presence only in their home market, but this had more to do with the international journey than the additional revenue.

The process of going international forced a company to adapt for each new market. As a result, the international firm became a learning organization which encompassed several different successful models, and the lessons from each new market could be applied in other markets. So the international company tended to develop a feedback mechanism and process improvements more readily than the purely domestic company.

Indeed, if you ask the leadership of that purely domestic firm what they want to do tomorrow, you are more likely to hear that they want to do tomorrow what they did yesterday. In other words, many business people (like all of us) have a bias for the familiar. We all like patterns of behavior and we like to stay in our comfort zone. I see this regularly when I discuss China opportunities. We will have a nice conversation with a lovely mid-size company, but unless it has an international culture it will have an overwhelming focus on building out a successful domestic model. The management philosophy at these firms tends to be:

Today In: Asia

— Reliant on the organic growth that has served them well over the years;

— Highly structured organization, task-driven, with people looking at monthly and quarterly results;

— Heavily product-focused.

These companies tend to dominate their space or be a segment leader. All of this means these companies have a strong incentive not to expand their current set of activities, and not to think about what changes might be in order. The key principle at these firms is MOTS – More of the Same. We do what we did last year, but we do more.

More revenue, more customers, more market share, more net. A pretty common-sense approach. But this is not a strategy. This is a behavior pattern. Let’s do what we have always done, presumably because it has more-or-less worked. This approach makes sense if the world is static. If the world is standing still, if society is standing still, if technology is standing still, and if competitors are standing still– then it is ok if the business stands still as well. But there are moving pieces out there, so you had better move as well. Unless the business incorporates a bit of a change culture, it risks falling behind.

Therefore, some sort of strategy is in order. Strategy can mean the allocation of resources without the normal formula for a return, displaying some capacity for experimentation. Strategy can mean you are doing something different, and the constituency for this change has not yet been established. Strategy can mean clearer costs than benefits.

Strategy can mean a journey into the unknown. You are taking steps that require you to stretch beyond current capabilities. A new product launch could represent a strategy. A new sales channel. Or a new market.

For most companies, the decision to go into a new market is a matter of strategy, because growth is no longer MOTS. The best expression of this might be a decision to go to China. On any given day it might not make sense to have a strategy. It makes sense to do what you did yesterday. But cumulatively, this could lead to a disaster.

On any given day, it might not make sense to go into a new market. But over the long run it could cripple the company to stay only in its home market. I caught up with Jack Ma recently at the Forbes Global CEO Conference. Jack has stepped down as Alibaba ($BABA) chairman, but he is still fiercely passionate about helping companies enter the China market. I had not seen him in almost a year, but we immediately saw this issue eye-to-eye.

Sooner or later, every company needs an international strategy. Sooner or later, every company needs a China strategy. Strategy is possible. Cost-free strategy is not. Those companies that are taking the international journey, we salute you.

Follow me on Twitter or LinkedIn. Check out my website.

Frank Lavin

Whether in banking, communications, trade negotiations, or e-commerce, my professional life is helping companies enter and succeed in new markets, with a particular focus on China. As Founder and CEO of Export Now, I run the largest international firm in China e-commerce. Export Now provides turn-key services for international brands in China e-commerce, including market strategy and competitive analysis, regulatory approval, store operations and fulfillment, financial settlement and remittance. Previously, I served as Asia Pacific Chair for Edelman Public Affairs and in my last role in government, I served as Undersecretary for International Trade at the U.S. Department of Commerce. Previously, I served as U.S. Ambassador to Singapore. Earlier, I served in Hong Kong and Singapore with Citibank and Bank of America and on the White House and National Security Council staff. New market book: http://amzn.to/2py3kqm WWII history book: http://amzn.to/2qtk0wK

Source: Key Points To Consider When Developing An International Business Strategy

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Welcome to the Vodcasts of the IUBH correspondence courses. (http://www.iubh-fernstudium.de). In this video of the course “Managing in a Global Economy”, part of the “Master of Business Administration” program, Jürgen-Mathias Seeler discusses the topic “Strategy Development in International Business”. By the end of this lecture you will be able to understand the meaning of strategy in international business, the potential benefits from global strategies, the most important strategic choices in globalized business operations and how to manage strategy development and strategy adoption successfully. To find out more about the “Master of Business Administration” program, please visit http://www.iubh-fernstudium.de/unsere….

Your Bank Could Be Holding Your Business Back From Growth. Here’s When You Should Consider Breaking Up

The bankers you work with may seem like great men and women, and they probably are truly nice people. They greet you by name, ask about your spouse and kids and appear to take a real interest in how well your enterprise is doing. Their financial products may be meeting your needs to a T.

But how strongly do you feel about your relationship with your bank? How do you think they’ll cooperate with you when the stuff hits the fan — which it most certainly will at some point? That’s the real test.

True colors

Here’s a true-life example: I’ve been working with an entrepreneur who finds himself in a down cycle. The company’s business plan is sound, the management team is experienced, and the product remains viable, so the problem isn’t terminal. But it may be awhile before the company’s prospects brighten.

The company works with a popular bank, which is starting to get nervous about its loans and is considering adding demanding conditions or even calling the loans.

The entrepreneur, however, feels a sense of loyalty to the bank, which has worked with him for several years. I have counseled him to consider other options. The reality is that bankers seven states away that he’s never met, not his local team — are the ones making the decisions.

He’s holding fast– and that’s a big mistake.

The entrepreneur has the opportunity to move to a smaller, regional bank. That bank’s rates may be slightly higher, but they’re more interested in a relationship.

And there’s certainly value in being in the room with the actual decision-makers — for both sides. Yes, your financials are going to be the primary determinant in lending decisions, but the human element can sway an on-the-fence lender to your team. Meantime, you’ll be able to tell a lot about the banker by meeting in person. Sometimes, it’s okay to trust your gut.

Loyalty only takes you so far

I get why entrepreneurs are loyal to bankers that have brought them success, but passing up the opportunity for a better financial situation is a kin to resting on your laurels.

As an entrepreneur, your best chances for success are by finding every possible edge you can. Incremental gains add up nicely over time, you should be taking advantage of them.

As for your spurned banker — they will get over it. Yes, that’s cynical, but that’s the way the business world works, especially with the larger banks. Remember also that your financial needs are a living, changing thing. What worked for you at one point may not be the most appropriate thing for you now.

The most successful entrepreneurs and companies are never satisfied with the status quo. Neither should you.

By: Ami Kassar CEO, MultiFunding.com

Source: Your Bank Could Be Holding Your Business Back From Growth. Here’s When You Should Consider Breaking Up

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Are you struggling in your business? Does each month feel like it’s a mad dash to figure out who’s going to get paid? I want to teach you what I do to turn around businesses to make them profitable again. Are you an entrepreneur? Get free weekly video training here: http://www.danmartell.com/newsletter + Join me on FB: http://FB.com/DanMartell + Connect w/ me live: http://periscope.tv/danmartell + Tweet me: http://twitter.com/danmartell + Instagram awesomeness: http://instagram.com/danmartell I’m the guy that gets the call when a business is in trouble… … when a business is on the verge of bankruptcy. Friends call me. Banks call me. If I’m lucky, the entrepreneur calls me before it’s too late. The truth is, it’s always challenging for me to see another entrepreneur failing… … especially when they have major debt owed, personal guarantees and their biggest dreams hanging in the air as collateral. It’s even more heartbreaking when kids are involved. It crushes me inside. That being said, the game plan to turn things around is ALWAYS the same. The #1 thing it takes is uncomfortable discussions, honest assessments and quick decisions. Hard? You have no idea. However, staring at the light waiting for the train to hit you isn’t the right move either. Recently I was able to take a company losing tens of thousands each month, to profitable in 14 days. In this week’s video I provide a step by step process for getting you off the tracks, and pulling a sharp 180 regardless of the challenges you’re facing. When it comes to the steps and process they go like this: 1) Get clarity on the numbers (scary as hell, but necessary) 2) Test the business model 3) Cut deep but not the bone 4) Focus on the customers 5) Write the rules 6) Build it back up The truth is, this strategy is something most companies should use to evaluate their real success. Too many times I’ve had founders tell me their business is doing “GREAT” only to ask a few questions and have them realize they’re way below the market norm. Stop being romantic about your business and get serious about how you’re measuring your progress. Leave a comment below with your business, industry and top question you have about your business model or challenges and I’ll be sure to provide some insights to help you evaluate your progress! Dan “saving businesses daily” Martell Don’t forget to share this entrepreneurial advice with your friends, so they can learn too: https://youtu.be/JyfE6jzcOGI ===================== ABOUT DAN MARTELL ===================== “You can only keep what you give away.” That’s the mantra that’s shaped Dan Martell from a struggling 20-something business owner in the Canadian Maritimes (which is waaay out east) to a successful startup founder who’s raised more than $3 million in venture funding and exited not one… not two… but three tech businesses: Clarity.fm, Spheric and Flowtown. You can only keep what you give away. That philosophy has led Dan to invest in 33+ early stage startups such as Udemy, Intercom, Unbounce and Foodspotting. It’s also helped him shape the future of Hootsuite as an advisor to the social media tour de force. An activator, a tech geek, an adrenaline junkie and, yes, a romantic (ask his wife Renee), Dan has recently turned his attention to teaching startups a fundamental, little-discussed lesson that directly impacts their growth: how to scale. You’ll find not only incredible insights in every moment of every talk Dan gives – but also highly actionable takeaways that will propel your business forward. Because Dan gives freely of all that he knows. After all, you can only keep what you give away. Get free training videos, invites to private events, and cutting edge business strategies: http://www.danmartell.com/newsletter

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Howto & Style

10 Small Business Apps, Services And Tech Platforms Every Entrepreneur Should Know About

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If you want to know the best place to keep up with technology for your business, follow my weekly tech roundups for entrepreneurs each week. You’ll learn because I’m always learning.

So what have I learned? Businesses that invest in the right technologies are assuring future growth and success.  I’ve also learned that there are a few apps, services and technologies – about ten categories in all – that are critical for small businesses in 2019. So in honor of National Small Business Week, I thought it would be helpful to share.

Customer Relationship Management

Don’t be fooled by CRM. People like to complicate this stuff and it’s not that complicated. It’s just a database of every person and company who you do business with – from prospects and customers to vendors, suppliers and partners. A great CRM system will integrate with your email and calendars and ensure that nothing falls the cracks and everyone in your company is sharing the right information. It will be mobile, include workflows and automation and integrates with tons of other great apps to do marketing and other functions. If implemented the right way (which is easier said than done) it will be an instrumental asset to your organization. There are many great CRMs for small businesses. I recommend looking at Salesforce.com, Microsoft Dynamics and Zoho CRM.

Managed Service Providers

If your inventory, order entry or other business critical application is older or located on your internal server you need to move it out of your office and into the hands of a managed service provider. Well-managed service providers will ensure that your data is secured as best possible and will likely have better security tools that you have internally. Your applications can be accessed by your team from anywhere and on any device. Many of them rely on public cloud services from Amazon, Google and Microsoft and that’s fine. With internet speeds hitting 5G, a well-managed service provider will deliver the performance, reliability and accessibility of your data at a cost that makes sense. Recommended providers include Right Networks, CloudJumper or any number of information technology firms.

Cloud Accounting

If your accounting application is located on your server, it won’t be for long. That’s because most accounting vendors are moving quickly to the cloud. It makes sense for them, and for you. You pay a monthly fee and they get a revenue stream. In return, the software provider can provide faster support, upgrades and technical services. Cloud applications are also much easier to integrate with each other. Today’s cloud accounting apps provide the added benefit of doing invoicing, cash receipts or retrieving reports from any device, anywhere. It’s a crowded field of cloud accounting options so do your due diligence and lean towards good companies with big communities. I see QuickBooks Online, Xero, and FreshBooks being used often by business owners.

Back in the day, there wasn’t much you could do with a scanned invoice or document other than file it away. But with today’s Optical Character Recognition technology there’s a growing crop of applications that can extract data from any scanned document – from vendor invoices to airline receipts – and put it in a format so that someone in your office can easily review and then import into most popular accounting applications. This saves time, improves accuracy and cuts overhead. Recommended applications: Bill.com, EntryLess, Expensify.

Human Resources

HR platforms are exploding and, in my opinion, any company with more than five employees should have one. Why? Because they’re affordable and with a good HR platform your employees will be able to – usually through a mobile app – track payroll, update forms, schedule vacation, alert for sick days and even manage their performance reviews. The more your employees use the application, the less administrative time will be needed by your office staff – and that means less overhead and more productivity. Check out: Paychex, Gusto and BambooHR.

Office Collaboration

Back in the day, there were telephone calls, instant messaging, text messaging, emailing and lots and lots of yelling. Yes, we’re still yelling. But the good news is that today’s office applications have brought all those other things together under one umbrella so that your employees can conduct their communication, document management and collaboration activities – including video calls, file storage and sharing, messaging as well as alerting and reminders – from any device and wherever they are. Not only that, but today’s collaboration and communication systems have powerful searching tools to find old conversations and exchanges. The systems can even be configured for outsiders to access too. Applications that focus on collaboration include Microsoft Office 365, Google G-Suite, Box.

Virtual Phones

Our company, like many small businesses, uses contractors and employees who frequently work out of the office. The thought of maintaining an on-premise phone system seems expensive…because it is. That’s why, for the past ten years, we’ve been using a virtual phone service. Our service provides a toll-free number, dial by name directory, voicemail for all users including transcription and archive recordings and…well, you get it: a total phone system (even hardware) that makes my small business look like a big business. I pay by the mailbox (about $12 per month) and love it. Recommended applications: Grasshopper, VirtualPBX and Ooma.

E-Commerce and Payment

If you’re in retail then please pay attention to this word: convergence. It means getting a point of sale system that not only works in your store but works online too. That’s because you want to sell your products both from your store and over the web because that’s what successful retailers are doing to thrive. The best point of sale systems not only use tablets (a must for good customer service) and integrate with popular payment services, but they also provide the ability of setting up an ecommerce site that relies on the very same database you’re using in-store. Recommended applications: Paypal, Square, Shopify, Magento.

Yeah, yeah, I’m leaving some stuff out. Like email apps (but don’t we all have them by now?) and project management solutions such as Basecamp and Asana.

Cloud Storage

There was once a time when everyone in my company would be saving multiple versions of multiple documents and spreadsheets on their laptops, desktops and our servers. That…was a mess. But not today. Today, we all save to a cloud storage service which synchronizes the files (that we choose) to our respective devices. Everything is updated and I no longer fear what happens if someone leaves their device on the subway. To me, a business without a cloud storage service is a business that’s losing money. Applications that focus on this space: Dropbox, Microsoft OneDrive, Google Drive.

Security

Ransomware has become a billion-dollar business and that makes sense: it’s finally a way for clever hackers to actually make money with their malware. We read about the stories of hotels, transit systems and city governments brought to their knees by security breaches like this, but we don’t hear of the thousands of small businesses that are also affected. To protect yourself you need to use a good cloud backup service, keep your operating systems updated and use a good security application in your company.  Recommended applications: Carbonite (for backup), Malware Bytes,Barracuda.

What else am I missing? You tell me and maybe I can expand this list in a future column.  In the meantime, take a moment to review the techs, services and apps you’re using in your business. Have you got all the bases covered?

Author’s Note: I have not been compensated by any of the companies listed above to be mentioned in this article. 

 

Gene Marks owns The Marks Group PC, a 10-person technology consulting firm and is also a small business expert, speaker and columnist at other major outlets.

Gene Marks

Contributor

I was a former senior manager at KPMG and since 1994 the owner of the Marks Group PC, a 10-person customer relationship management consulting firm based outside Philadel

 

Source: 10 Small Business Apps, Services And Tech Platforms Every Entrepreneur Should Know About

Which Company Could Be The Next Permian Basin Acquisition Target?

Following the news that Chevron had agreed to pay a nearly 40% premium to acquire Anadarko Petroleum, investors quickly bid up the shares of other potential acquisition targets.

As I argued in the previous article, I believe the Permian was the key to the Anadarko acquisition, but there are plenty of other targets in the region. There are also several companies with the capability of making acquisitions.

In recent years, the few mergers and acquisitions in the oil and gas industry have been largely focused on the Permian Basin. The supermajor integrated oil and gas companies have been increasingly making forays into the Permian.

In addition to Chevron’s new acquisition, in 2017 ExxonMobil paid $6.6 billion to acquire Permian acreage from the Bass family of Fort Worth, Texas. ExxonMobil also spent $41 billion in 2009 to acquire XTO, which has a major presence in the Permian.

Permian Players

Today major acreage holders in the Permian Basin include the supermajors Chevron and ExxonMobil, as well as Occidental, Apache and Concho Resources. Occidental, in fact, reportedly attempted to acquire Anadarko prior to Chevron sealing the deal. But Occidental may now find itself in the crosshairs of a bigger player looking to shore up their Permian portfolio.

But there are many other major producers in the region, including ConocoPhillips, EOG Resources, Pioneer Natural Resources, Noble Energy, Devon Energy, and Diamondback Energy. Smaller producers in the region include WPX Energy, Parsley Energy, Cimarex Energy, Callon Petroleum, Centennial Resource Development, Jagged Peak Energy and Laredo Petroleum.

Let’s first take a look at the largest companies operating in the Permian according to enterprise value. This metric is preferred over market capitalization, because it includes a company’s debt. In the case of a potential acquisition, the acquiring company would be responsible for this debt in addition to the purchase price. Hence, it is a more comprehensive representation of a company’s market value.

I have included the integrated supermajors that could have the ability to make major acquisitions, three of the larger exploration and production companies (which could make an acquisition or be a target themselves), and Anadarko for comparison. All data were retrieved from the S&P Capital IQ database.

Metrics for major oil companies operating in the Permian Basin.

Metrics for major oil companies operating in the Permian Basin.

Robert Rapier

  • EV – Enterprise value at the close on April 12, 2019 in billions of U.S. dollars
  • EBITDA – TTM earnings before interest, tax, depreciation, and amortization in billions of U.S. dollars
  • TTM – Trailing 12 months
  • FCF – Free cash flow in billions of U.S. dollars
  • Debt – Net debt at the end of the previous fiscal quarter
  • 2018 Res – Total proved oil and gas reserves in billion barrels of oil equivalent at year-end 2018
  • EV/Res – The value of the company divided by its proved reserves

Potential Buyers

Based on their size and debt metrics, ExxonMobil and Chevron still appear to be the most capable of pulling off a major deal. Shell has been moving in the direction of becoming a natural gas company, and has already made major capital expenditures in this area in recent years. Further, in 2016 they made their own major acquisition — a $70 billion deal for BG Group.  Meanwhile, Total hasn’t shown much interest in the Permian.

BP may not have an appetite for an acquisition as it continues to be weighed down by its obligations from the 2010 Deepwater Horizon oil spill. As an aside, the continued fallout from that disaster has also resulted in BP having the cheapest reserves on the books by far of any company listed in the table. Also note that the EV/Res metric for integrated supermajors isn’t directly comparable to pure oil producers like Anadarko, as the former also have midstream and refining assets.

ConocoPhillips appears to be the most attractive target for an acquisition from a pure valuation perspective, but as the largest pure oil company it would be a large bite for even ExxonMobil. With respect to making an acquisition, ConocoPhillips CEO Ryan Lance stated earlier this year that the company isn’t feeling any pressure to do so.

Occidental also falls into the category of potentially making an acquisition or of being acquired. On a relative basis, they are more expensive than ConocoPhillips, but on an absolute basis the price would be more manageable.

What about smaller players like Parsley, WPX Energy, or Cimarex Energy? Based on the price movement following the announcement of the Chevron-Anadarko deal, investors are clearly betting that more deals will follow. Below are some of the metrics of potential acquisition targets (with Anadarko for comparison), including some of the large players listed in the previous table:

Metrics for smaller oil companies operating in the Permian Basin.

Metrics for smaller oil companies operating in the Permian Basin.

Robert Rapier

  • 1-Day Change – Change in share price on April 12, 2019, the day the Chevron-Anadarko deal was announced

Note that the double-digit gains of both Pioneer Natural Resources and Parley Energy imply that investors believe they could be next on the acquisition list. Parsley looks attractively priced according to its enterprise value and total reserves. Several other companies stand out, such as Devon Energy and Cimarex, although all of these companies outspent their cash flow in 2018. An acquisition by one of the larger players could give them the efficiencies and economies of scale to rectify that.

Another name on the list that stands out is Diamondback Energy, which has long been one of my favorite Permian Basin oil companies. Diamondback has been an outstanding performer in recent years, but now looks to be the most richly valued according to several metrics following its 2018 acquisition of Energen.

The biggest challenge with the smaller players is that they may not have enough reserves to really move the profit needle for the biggest players. Laredo Petroleum’s 200+ million barrels of oil and gas reserves might not be sufficiently appealing to ExxonMobil, which had 24 billion barrels of reserves at the end of 2018. But it could be appealing to a company like EOG Resources, which closed the year with 2.8 billion barrels of reserves.

Ultimately, price and valuation are only part of the equation. Anadarko wasn’t the cheapest acquisition target for Chevron, but Chevron liked the synergies of Anadarko’s locations. Thus, every major operator in the Permian is more likely to acquire companies whose properties are adjacent to their own. A deeper dive thus becomes an exercise in not only value, but in studying maps of the Permian producers — large and small.

Robert Rapier has over 25 years of experience in the energy industry as an engineer and an investor. Follow him on Twitter @rrapier or at Investing Daily.

Robert Rapier

Contributor

Robert Rapier is a chemical engineer in the energy industry. Robert has 25 years of international engineering experience in the chemicals, oil and gas, and renewable ene…

Source: Which Company Could Be The Next Permian Basin Acquisition Target?

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