Table of Contents

Introducing

Current Challenges in BP

Strategies for Creative Thought and Problem Resolution

Management Competencies

Judging/Decision Making

Management

Examination

Teamwork

Corporate Governance & CSR

Moral principles, values, and behavior

Openness

Afficient and effective control

Independence

Corporate Social Responsibilities (CSR).

In conclusion

An opening statement

Deepwater Horizon (2016) is a Peter Berg film. Based on the Gulf of Mexico Deepwater Horizon Oil Rig Explosion of April 20, 2010, 11 of 126 people were killed. It was the worst US oil disaster, with the explosion lasting 87 days and spilling approximately 210 million Gallons (estimation). Transocean, a privately owned offshore oil drilling company, had begun drilling off Louisiana’s Southern Coast. Mark Wahlberg (the Chief Electrics Technician) was the one who filmed the film. His job was to supervise the rig’s electrical and computers. He was among the first workers to escape the rig. James “Mr Jimmy” Harrell plays the Offshore Inst. Manager. Caleb Holloway (Dylan Ozbrien) is part of Andrea Fleytas (Gina Rodriguez), the Dynamic Position Operator. BP managers Donald Vidrine(John Malkovich) & Robert Kaluza (“Brad Leland”) are also included in the film. The film shows what went wrong and how the workers were rescued. Below is research that details the events and causes of these incidents. Many of these events are caused by a lack or high level of management competencies and poor corporate governance. This project will analyze the business’s failures and identify reasons. BP also receives strategies to help plan for the future.

Current Challenges facing BPThe Deepwater Horizon exploded oil, causing an estimated 210,000,000 gallons of damage to the Gulf of Mexico. According to Smithsonian, this was the worst accidental ocean spillage ever recorded. The oil plume lasted 22 miles and allowed oil to mix with the seawater, settling just below the surface. 20% of oil spilled onto the seafloor and on the surface. Deep sea corals and ecosystems below the surface were also affected. According to biologicaldiversity.org, BP is responsible for the harming/killing of 82 000 birds, 6 165 sea turtles and 25 900 marine mammals.When the facts about how the oil spill started reached the public BP faced a bad image being created. Customers were not willing to stay loyal to a company that did not follow safety procedures and caused such severe damage to the environment, marine life and the environment. Experian Simmons DataStream’s statistics prove this: BP lost a large number of American clients. Between April 26th and June 28th 2010, the percentage dropped from 26.4% down to 16.4%, which represents a 38% loss in their customer base over nine weeks. BP lost 56% of its loyal customers during this time. BP has to regain lost customers. BP suffered a $6.26 billion loss due to customers.

BP was forced to pay $61 million in damages. This is more than the market cap of ConocoPhillips or Occidental Petroleum’s next largest independent U.S. petroleum companies and twice the amount of Anadarko Petroleum the largest U.S. independently owned oil company. Various parties received damages costs, including hundreds, 400 local governments, thousands, Transocean, the Environmental Protection Agency, (EPA) for Clean Water Act penalty and natural resources damages. The EPA payment covers all costs associated with medical and cleanup, as well as economic losses. Fadel Gheit from Oppenheimer & Co said that BP was worth $180 billion prior to the accident. One-third was lost in the company’s capitalization due to the accident. It is amazing that the company remains in business.

BP initially tried to challenge the Supreme Court’s decision to settle claimants, but it was rejected. The company now has uncertainty about how much additional they will have pay, beyond $18.7billion in the initial settlement claim. Five years later, half the parties to BP’s monetary claims have still not been paid. This could mean that BP could be sued and pay out more than was originally agreed.

After the spillage of the oil, BP’s stock plummeted by 51% in just forty days. It fell from $60.57 Billion to $29.20 Billion. They had 30 billion assets to sell and nearly $22 trillion in disposals. Their company’s stock price dropped and their value fell. Since the 20th April 2010 oil spillage, BP has lost $105 billion.

The Delphi Technique allows for creative thinking and problem-solving strategies. BP could organize an international forum to get experts to give their input and advise on the best way to clean up oil. BP could act as facilitator and create a questionnaire to gather lots of information. BP can analyze every questionnaire and make a decision once all options have been considered and the best option has been chosen. BP might place barriers in the ocean that trap oil, making it easier for it to be cleaned up.

The negative image that BP created was a danger. They could lose a lot clients and suffer a loss. This was exactly what happened. They lost 38% and suffered a loss totaling $6.26 billion. BP could use the SWOT analysis strategy to identify external threats. BP can use the strategy of performing an external SWOT analysis to identify potential threats and create new opportunities. Reporters must be brought on board to report on the clean-up initiative. BP can show the world that they care about the environment by announcing it in this advertisement. This strategy is crucial for BP in order to identify the problems and fix them.

BP was required to pay $61 Billion in damages. They now have to pay back the money and rebuild the company’s value to benefit their shareholders and customers. The Decision Tree strategy is a way to encourage rational decision-making and clarify the options available and their consequences. A process can be used to calculate each option and then determine the probability that each one will succeed. This will allow BP to make a decision about how to address this issue. This will increase their customer base and result in increased sales. The Decision Tree will help them make the right decisions regarding how to improve their image. BP needs to have options that will improve their image.

BP may be sued and have to pay more money due to the fact that they did not pay claimants. BP needs to create a Pros and Cons Chart in order to determine if paying claimants is a long-term strategy. BP has two cons. They could be sued and have to pay more than they had planned. Additional cons they could add are that customers won’t support businesses who don’t care about the victims of the spillage. They would save money on the amount that would have been spent. This strategy is critical for BP. It will enable them to clearly understand the consequences of their decision and better analyze it. The pros and cons of this chart will outweigh the cons. BP will then realize that they made a mistake in not paying claimants initially. The strategy can be formulated to meet this challenge. They can increase their sales by making their initiative known to the public. This will help them regain some lost clients.

BP’s share price fell and the company’s shares prices declined. To help with this problem, a Value Chain Analysis could be useful. BP must be careful with how and where they spend their money after the spillage. This strategy allows them to determine where there is value in their overall business operations. This will allow them to cut costs and stop spending on activities that aren’t creating value. You can begin by analysing each sector’s activity and determining where value is/isn’t created.

Management CompetenciesJudgement/Decision MakingThere is mud in the pipe drilled into the seabed to pump up oil. This mud can be called “cement” by the film as it helps to prevent gasses and flammable oils being released onto the rig. Vidrine and Kaluza, BP managers, sent the Schlumberger team away. They were supposed to test the mud for strength and allow drilling to begin (cement log test). This decision was taken because BP was on schedule for 43 days but $50 million ahead of budget. BP decided to skip the test in order to reduce expenses and avoid losing money. Although they are supposed be risk-oriented companies, BP sacrificed the test that would have ensured safety for their employees prior to performing hazardous work. Schlumberger would’ve known that the mud was too weak to withstand excessive pressure, and could have prevented an explosion. Vidrine, Kaluza should have examined the situation and decided if they were right before they took action. Instead of acting with integrity, they acted out selfishly. They were unable to pass the test because they thought it was stupid and would have put their safety at risk.

The unexpected outcomes of the two failed tests on the drill pipe posed a difficulty on the rig. It was found to be high in pressure and no mud was seen leaking into the rig. Normaly, high pressure indicates a leak. The drill pipe will then rise with mud. Vidrine assumed leadership qualities to handle the situation. Vidrine came up with a solution. He did another test, but this time it was on the killline and not the drillpipe. It is a sign that the drill pipe’s sensor was not working correctly. Vidrine insisted that this was the right solution, as no-one had provided another. He initiated the test regardless of disagreements. As a leader, he needs to ensure everything runs smoothly. Accepting that there was another reason that the mud wouldn’t leak through would have increased the costs of returning the Schlumberger team, stopping drilling operations and performing the cement bond test log. Because BP was running behind schedule and exceeding budget, he attributed the problem to his employees. This demoralized them.

Analysis In case of emergency, no safety procedure test had been performed. Vidrine Kaluza ought to have documented all system checks. This would have allowed them to see how problems could have developed and lead to solutions. They would have created alternate plans and practiced the safety procedures in an emergency to prevent any problems. The aftermath of an explosion is where all this comes into play. The mud exploded when it was first. Caleb Holloway called out to engineers asking “what do you do?”. An engineer advised an employee that the EDS (also known by the AMF Deadman system) could be used to cut the pipe. Holloway saved an employee and instructed them to get to the lifeboats. Vidrine and Kaluza would have made sure that employees were trained in emergency procedures.

Teamwork Jimmy Harrell from BP and his managers didn’t work together. Each party had a different opinion about the situation. BP managers didn’t listen to Harrell and his point about safety for employees. BP defended themselves by saying that they believed in the integrity their cement job. Although each party may have different goals, they should work together towards the same goal. The disagreements were not constructive and led to Harrell accusing them of being wrong and Harrell defending Harrell. Jimmy, trying his best to protect the safety employees, forced them to find a method of working together. Managers and Harrell are of a different opinion. Harrell is worried about the rig and its crew. Managers focus on the company’s financial performance and do not care about its employees.

Corporate Governance & CSREthics Harrell confronts BP Managers Vidrine and Kaluza on their unethical conduct in sending the Schlumberger team away without performing a cement bond test, fearing that they would discover a problem. It would cause additional delays and incur additional costs. Mineral Management Service (MMS), though it is allowed, did not perform this test and was therefore unethical. Managers should ensure that their employees work in safe environments. This is something they have to do. Harrell is insisting on the compliance of ethical standards by requiring managers and supervisors to carry out a negative test to ascertain the cement’s integrity. This test is vital for certifying that employees are safe. Safety was not considered and risk analysis wasn’t done thoroughly, which would have helped prepare the employees in an emergency.

During the Negative Pressure test scene in the movie, the people working were perplexed by the fact that the pipe had an unusually high pressure, yet nothing was coming out. The lack of transparency was the reason. The lack of transparency meant that the Schlumberger crew and BP managers didn’t give the workers accurate information about the pipe, its condition and the quality. The employees would have been able to plan and execute their next steps if they had had this information. Vidrine’s insistence resulted, however, in the inability to provide transparency which caused uncertainty among the workers. The BP managers ought to have ensured that the cement bond log test was conducted so that they could trust and make informed decisions.

Adequate, effective control One of them is helping the other by putting on the jacket and telling him what to do. Because of the absence of safety evacuation protocols in an emergency, BP managers didn’t have effective and adequate control. This is the result. The employees were unsure what to do when they got into shock. Managers must have made sure all employees have the necessary skills and knowledge to maintain a safe culture. Managers should have ensured that there was an evacuation team ready in case of an emergency. There was no oversight over training, which resulted in no knowledge about how to evacuate this rig. The National Commission report reveals that the senior management was not responsible for the accident’s prevention, response, or recovery. Instead of BP ensuring safety, there was a culture whereby risk assessments were abandoned and complacency was encouraged.

IndependenceWhen there’s an explosion on a rig, there is one last procedure that shuts down the pipe. This happens when there’s no hydraulic pressure or electric power. This is known as the AMF Deadman System (or the EDS in movie). It cuts the drillpipe to prevent oil and gases from rising. Andrea Fleytas had been in the control rooms and was planning to push the EDS buttons that would disengage the oil rig. She is a strong independent worker. Although she was willing for her to be independent and take the right decision that would have prevented the gases from reaching the surface to ignite on the rigs, an employee stopped it. She reminded her that she wasn’t authorized to press the button. The system wasn’t working because it was defective, and the batteries were drained.

Corporate Social Responsibility (CSR). Vidrine at BP tells Harrell that their goal in the office is to increase profits and eliminate expenses like the cement bond log testing. They did not follow ethical guidelines in achieving CSR. They wanted shareholders to be satisfied by increasing BP’s value. They made a lot of cuts, which could have dangerous consequences for the safety of their workers.

Analyzing the events that led to the oil explosion and spillage can show that BP’s management team did not possess the right management skills and corporate governance characteristics. These attributes are critical for managers in order to run a business efficiently and effectively. BP is responsible for the Deepwater Horizon oil leakage. This was due to poor management practices and teamwork. Their management team failed to set BP the right goal and this has caused severe problems for BP. The problems were solved using problem-solving techniques and strategies. This movie is relevant to Grade 12, Business Studies. It gives us a close-up look at the business of the oil industry. It is clear to see the negative consequences of not being a leader/manager or engaging in unethical behavior. Students need to learn this lesson as they can see the consequences of poor decision-making. Vidrine (the film’s main character) and Kaluza (the movie’s supporting characters) embody characteristics taught in Business Studies’ Management and Corporate Governance syllabus.