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Steering Team Meeting Wednesday, January 17

Steering Team Meeting Wednesday, January 17. Mary Kole ... email: mlko@chevron.com cell: 713 569 0606 voicemail: 713 754 4728 Marty Stetzer … email: marty.stetzer@us.pwcglobal.com cell: 713 419 6912 voicemail: 713 356 4164

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Steering Team Meeting Wednesday, January 17

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  1. Steering Team MeetingWednesday, January 17 Mary Kole ... email:mlko@chevron.com cell: 713 569 0606 voicemail: 713 754 4728 Marty Stetzer … email:marty.stetzer@us.pwcglobal.comcell: 713 419 6912 voicemail: 713 356 4164 Amanda Diaz … email: amanda.diaz@us.pwcglobal.comcell: 832 754 3368 voicemail: 713 356 5224 The New Industry Model --The Book Club --

  2. Welcome! • Steering Team Members ... Mike Gothard for Cliff Cook … Andy Esterer … John Fitzgerald … Dave Kirshner … Mary Kole … Ray Kurkjy … Bill Esslinger for Gretchen Watkins…Herb Whitney … Hal Zesch • Extended Steering Team Members … Jim Wood for Don Hinderhofer … Randy Boelkes for Doug Gleason … Tom Nichta … Marty Power… Jeff McCall for Eric Schlueter … Bob Werner • Legal Counsel …David Ivey • Legal Liaison …Tommy Stuchell • Work Team Leaders ... Marty Stetzer ... Wilson Haddow … Chuck Chakravarthy … Shannon Johnson … Eric Rich ... Amanda Diaz 2

  3. Today’s Agenda(all times in CST) 1:00 Welcome, Roll-call, Housekeeping 1:10 Week’s Theme, Newsworthy Events, Results 1:20 Today’s Key Note Topics: • NewCo Business Case: Economics & Sensitivities • Understanding the IT Impact • What to do after January 24th to rapidly achieve benefits • Definitive Agreement: Business Principles Approach 3:30 Preview of Coming Attractions 3:45 Wrap-Up 4:00 Done! 3

  4. Highlights and Results:Week 12 (This Week) • Theme: “ The Home Stretch ” • Governance is the Subject for January • Today’s Highlights: • Business conference feedback positive • Extended Steering Team is decision group • ST & AC Meetings led to this session • Working to define options to rapidly achieve benefits 4

  5. NewCo Economic Assumptions…for each case, these values are held constant… • Prize/Revenue • Average Company Prize $8.5MM annually • Prize/Revenue Split 70% users / 30% NewCo • Rollout Phased • Adoption Rate 2 years • Growth Rate over 5 Years 11 investors / 5 subscribers • Information Technology • Quality of Service Medium • User Interface Costs Not included • NewCo Operation • Entity Structure Onshore LLC w/passthru • Manage and Direct Insourced • Staff and Operate Outsourced • Financials • Discount Rate 10% • Cash Flow Projection (Base Case) 7 years 5

  6. Base Case Upside Case* Downside Case* Investor User** IRR 35% 54% 23% NPV $65MM $93MM $39MM NewCo IRR 20% 31% 12% NPV $25MM $43MM $6MM Funding $77MM $54MM $99MM “What’s In It For Me” (WIIFM)… The Economics, Based on 7 years ... 6 ** interface costs and sytem prize pending * More on next slide

  7. NewCo IT Sensitivities…the primary costs driving economics… IT Negotiating Leverage • Base Case • Source Code Cost $12MM • Multi-Company & Web Capability Cost $25MM • Upside Case (lower CAPEX) • Source Code Cost $0MM • Multi-Company & Web Capability Cost $17MM • Downside Case (higher CAPEX) • Source Code Cost $24MM • Multi-Company & Web Capability Cost $33MM 7

  8. Base Case IT CAPEX … Eric Rich, Chuck Chakravarthy ... $MM • Base Application Software 12 • Modify to handle multi-company 25 • Modify to fill gaps 16 • Communications & Interfaces5 • Misc. Items 1 • Document Management (Hold for now) - • Contingency @ 10% 6 Base Case Estimate: IT Capex 65 8

  9. IT Vendors Selection Process…Eric Rich, Marty Stetzer ... • Current IT estimate is $65 Million (next slide) • Objective: Select IT vendors & award in 60-90 days • Vendors types include: • Application software • Hardware outsourcing &/or ASP • Integration software • Communication • Middleware • Typical decision steps include: • Detailed requirements • RFI/RFP process • Proof of concept, site visits, orals • Final recommendation • Contract negotiations • As required, select integration general contractor 9

  10. Post-Vendor, Rollout Begins ...…Eric Rich, Marty Stetzer... Rollout Assumptions: • Functionality delivery begins 12 months after Vendor Selection • Enough client resources are available • The Rollout Strategy is focused only on USA refined products • Each Rollout Stage is complete with 6 essential elements: • Communication / Messaging • Standards • Translation • Security • Business Rules / Validation • Data Management 10

  11. Our Real Strength is Our 14 Members Or … as Ben Franklin said at the Continental Congress … “Either we hang together or we hang separately.” Remember … investor IRR is 25-57%!! 11

  12. To Be Determined by 8/01/01 Introduction to NewCo Funding… and “What’s In It For Me” ... 12

  13. What’s Next after Jan 24th?… Two Options ... 13

  14. $ to Start-Up… what’s in the numbers ... 14

  15. Every Vote Counts… As long as it goes M & M’s way! ... • After Jan 24, we will move ... Vote: • From a Club to a Company • To Get All the Answers 15

  16. We Need Your Help!…Definitive Agreement Questionnaire … • Questionnaire Objectives: • To clarify business issues to be addressed in the Definitive Agreement • To understand each company’s viewpoint • Timeline: • Distributed questionnaire - 01/16 • Responses due - 01/18 • Present analysis to EST - 01/23 16

  17. Preview of Coming Attractions NOTE: Extended Steering Team (EST) in all meetings in January Key Dates: • Monday, January 22: EST Dinner + Meeting 8:00 - 11:00 pm • Tuesday, Jan 23: EST Meeting(s) • Early Morning: General Q/A session • Mid Morning: Individual company Q/A session • Wednesday, Jan 24: AC Meeting all day LOCATIONS: EST Tuesday - Book Club Camp, 777 Eldridge, 5th Floor AC Wednesday - Conoco offices in West Houston Rooms reserved at the Omni (old Marriott)on Eldridge 17

  18. Meeting Wrap-Up • Meeting   18

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