Presentation Type

Oral Presentation

Keywords

Energy industry, acquisitions, SM Energy, growth strategy, Chevron Corporation

Department

Business Administration

Major

International Studies

Abstract

The Energy Industry is worth $7.5 Trillion. As traditional sources of energy production become more costly to obtain due to scarcity of natural resources and a volatile international political climate, it is imperative that the United States be able to self-sufficiently produce sustainable energy. Chevron Corp. is a global company in the Energy Industry with Net Sales of $230.09 B and a market share of 3.60% in 2012. Extensive analysis of the External Industry Environment and a Company Assessment lead to the formation of the acquisition of SM Energy as a proposed strategy for Chevron Corp. growth. The acquisition would increase Chevron Corp.’s Exploration and Production Market Segment with domestic production of natural gas, allowing Chevron Corp. to recapture lost market share, while maintaining its commitment to “finding newer, cleaner ways to power the world” (Chevron, 2013).

Chevron Corp. is ranked as the eighth producer of Energy in the world, facing competition from Royal Dutch Shell, ExxonMobil, British Petroleum, PetroChina, Eni S.P.A, Conocco Phillips, Occidental Petroleum, and others. The Industry as a whole is experiencing increasing demand for energy as populations and standards of living rise in developing countries. Access to the oil supply is becoming increasingly difficult, so employing competitive technology is vital for success in maintaining and sustaining market share. The threat of Global Warming drives innovative technologies as sustainability becomes central to solving not only the environmental problems, but also to meet increasing demand. Chevron Corp.’s largest market segment is Exploration and Production, and it has been increasing revenue for the last ten years. Chevron Corp.’s net sales for 2012 were $230.09 billion. Chevron Corp. expects global energy demand to increase 53% between 2008 and 2035.

The price of Natural Gas has experienced a 5.6% growth from 2013 to 2014, while Natural Gas Exports have increased by 5.9%. Due to increased domestic production and low prices relative to markets outside of the United States, projected exports have increased by 140% between the Annual Energy Report of 2013 and 2014. SM Energy is an independently competitive company that operates in four regions of the United States and is engaged in the Exploration and Production of crude oil, natural gas, and natural gas liquids in onshore North America. It operates in the Mid-Continent, Rocky Mountain, Permian, and South Texas & Gulf Coast regions. The acquisition of SM Energy, with domestic natural gas resources, is a way for Chevron Corp. to maintain and increase its market share.

This Undergraduate Research project examined the External Environment, Industry Analysis, and Company Assessment using Strategic Management Methodologies. Then applied these findings to real strategies for our case subject, Chevron Corporation, in order to maintain competitive market advantage and increase or maintain market share.

Faculty Mentor

V. Seshan

Funding Source or Research Program

Academic Year Undergraduate Research Initiative

Presentation Session

Session B

Location

Plaza Classroom 189

Start Date

21-3-2014 4:30 PM

Share

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Mar 21st, 4:30 PM

The Acquisition of SM Energy as a Proposed Strategy of Growth for Chevron Corporation

Plaza Classroom 189

The Energy Industry is worth $7.5 Trillion. As traditional sources of energy production become more costly to obtain due to scarcity of natural resources and a volatile international political climate, it is imperative that the United States be able to self-sufficiently produce sustainable energy. Chevron Corp. is a global company in the Energy Industry with Net Sales of $230.09 B and a market share of 3.60% in 2012. Extensive analysis of the External Industry Environment and a Company Assessment lead to the formation of the acquisition of SM Energy as a proposed strategy for Chevron Corp. growth. The acquisition would increase Chevron Corp.’s Exploration and Production Market Segment with domestic production of natural gas, allowing Chevron Corp. to recapture lost market share, while maintaining its commitment to “finding newer, cleaner ways to power the world” (Chevron, 2013).

Chevron Corp. is ranked as the eighth producer of Energy in the world, facing competition from Royal Dutch Shell, ExxonMobil, British Petroleum, PetroChina, Eni S.P.A, Conocco Phillips, Occidental Petroleum, and others. The Industry as a whole is experiencing increasing demand for energy as populations and standards of living rise in developing countries. Access to the oil supply is becoming increasingly difficult, so employing competitive technology is vital for success in maintaining and sustaining market share. The threat of Global Warming drives innovative technologies as sustainability becomes central to solving not only the environmental problems, but also to meet increasing demand. Chevron Corp.’s largest market segment is Exploration and Production, and it has been increasing revenue for the last ten years. Chevron Corp.’s net sales for 2012 were $230.09 billion. Chevron Corp. expects global energy demand to increase 53% between 2008 and 2035.

The price of Natural Gas has experienced a 5.6% growth from 2013 to 2014, while Natural Gas Exports have increased by 5.9%. Due to increased domestic production and low prices relative to markets outside of the United States, projected exports have increased by 140% between the Annual Energy Report of 2013 and 2014. SM Energy is an independently competitive company that operates in four regions of the United States and is engaged in the Exploration and Production of crude oil, natural gas, and natural gas liquids in onshore North America. It operates in the Mid-Continent, Rocky Mountain, Permian, and South Texas & Gulf Coast regions. The acquisition of SM Energy, with domestic natural gas resources, is a way for Chevron Corp. to maintain and increase its market share.

This Undergraduate Research project examined the External Environment, Industry Analysis, and Company Assessment using Strategic Management Methodologies. Then applied these findings to real strategies for our case subject, Chevron Corporation, in order to maintain competitive market advantage and increase or maintain market share.