The ferocity of declining crude prices caused by global supply imbalances created a market disruption that forced O&G companies to quickly change their operating models to adapt. O&G HR LEADERS RESPONDED — BUT AT WHAT LONG-TERM COST? HR leaders focused on meeting the requirements of the business with short-term strategies of cost cutting and organizational ‘build down.’ Yet longer- term fundamental O&G workforce challenges loom on the horizon no matter the price of oil. ENTER THE ERA OF REBALANCING BUSINESS PORTFOLIOS, HUMAN CAPITAL STRATEGIES, AND HUMAN RESOURCE DELIVERY MODELS HR leaders now drive toward lean, agile, productive, and engaged workforces. As the demographics of the O&G industry prepare for a tectonic shift, human capital strategies must be adaptive to a new workforce reality. This requires an analytics-based, long-term workforce plan, an elastic talent deployment model, and an enterprise-unique solution. Mercer’s recent global O&G market disruption survey – representing over 250 companies from around the world and across the value chain will explore and answer critical questions to help prepare HR for the rebalance era ahead •How did HR leaders respond to the 2015 disruption and were those responses effective? •What approaches are proving most effective to design cost savings strategies that will also preserve the ability to compete in the future? •What are the human capital challenges in the future and how do HR leaders plan to address future challenges? •What innovative practices and approaches are on the horizon to further enhance HR,

1. M A N A G I N G H U M A N C A P I T A L I N O I L & G A S
T H R I V I N G
I N A
R E B A L A N C E
E R A
ME RCE R E NE RG Y
2 0 1 5 O V E R V I E W A N D F O R W A R D O U T L O O K

2. THRIVING IN A REBALANCE ERA | 2
IN 2015 A MARKET DISRUPTION
OCCURRED LIKE NO OTHER
O&G HR LEADERS RESPONDED,
BUT AT WHAT LONG-TERM COST
ENTER THE ERA OF
REBALANCING BUSINESS
PORTFOLIOS, HUMAN CAPITAL
STRATEGIES, AND HUMAN
RESOURCE DELIVERY MODELS

3. INTRODUCTION
Throughout 2015, Mercer conducted a
detailed examination of the human capital
strategies, tactics, and actions utilized by
O&G companies to address the market
disruption. The analysis looked to
understand five core questions.
 How did HR leaders respond to the
disruption?
 Were those responses effective?
 What are the human capital challenges
in the future?
 What responses did HR leaders offer to
address future challenges?
 What strategies should HR leaders
utilize to meet those future challenges?
• Experiences from our global,
650-plus community of energy
consultants
• Global labor market analysis for
the entire value chain
• Three-part, detailed survey with
HR leaders from more than 250
O&G companies around the
world
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4. MERCER’S INSIGHTS INFORMED BY REAL-WORLD EXPERIENCES
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2015 O&G PROJECTS OVERVIEW
• 550 clients across 40 countries
• 2,055 unique projects
• averaging ~4 projects per client
• Project types
− 20 M&A
− 367 health & benefits
− 83 investments
− 621 retirement
− 964 talent

5. BUSINESS CONTEXT – A MARKET IN DISRUPTION
THRIVING IN A REBALANCE ERA | 5
3000
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7000
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9000
1/16/2015
2/15/2015
3/17/2015
4/16/2015
5/16/2015
6/15/2015
7/15/2015
8/14/2015
9/13/2015
10/13/2015
11/12/2015
12/12/2015
UPSTREAM
S&P Oil and Gas E&P Select Index
Performance
$200
$250
$300
$350
$400
$450
$500
1/26/2015
2/25/2015
3/27/2015
4/26/2015
5/26/2015
6/25/2015
7/25/2015
8/24/2015
9/23/2015
10/23/2015
11/22/2015
12/22/2015
MIDSTREAM
Alerian MLP Index
ClosePrice
DOWNSTREAM
Refining annual margins
18.00
16.00
14.00
12.00
10.00
8.00
2011 2012 2013 2014 2015E 2016E 2017E
18.00
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
$/bbl gross margin $/bbl Brent-WTI spread
Services
Oil field services revenue by quarter

6. OIL & GAS NOVATIONS
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Throughout 2015 we witnessed complete novations (the substitution of a
new obligation for an old one) in terms of business direction, portfolio,
investment patterns, priorities, core competencies, and the resulting
requirements for HR, individual employees, and the organization at large.
HYPER GROWTH COST CUTTING BUILD DOWN
TRANSFORMATION /
OPTIMIZATION
BUILD UP RETURN TO GROWTH

7. RESPONSE TO MARKET DISRUPTION
2015
THRIVING IN A REBALANCE ERA | 7 Mercer 2015 O&G Market Disruption Survey

8. IMPACT OF HEADCOUNT REDUCTIONS IN 2015
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9. TWO CONDITIONS / THEMES FOR SUCCESS
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1. HR and business leadership collaborated
on the best set of actions and those actions
were staged across three or more ‘rounds’
of cost-management efforts.
2. Actions were most effective when they were
taken with deep understanding of the
current environment, and considering the
future business growth and potential
portfolio rebalance scenarios.

10. HOW WILL O&G HR LEADERS ADDRESS FUTURE CHALLENGES
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Mercer 2015 O&G Market Disruption Survey
1
3
2
4
5
1

11. THREE CENTRAL THEMES GUIDE HR’S FORWARD AGENDA
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The first includes priorities of developing strategic workforce plans
leveraging analytics; developing a renewed total rewards program; and
assessing and reshaping the employee value proposition.
The second theme falls squarely within the space of HR governance, where
respondents prioritize reshaping HR service delivery and measuring the
effectiveness of HR investments.
Respondents also placed a great deal of importance on optimizing
employee engagement and enhancing leadership capability.
Interestingly, respondents placed essentially equal weight on these two
priorities, supporting Mercer’s research that leadership effectiveness is a core
driver of a highly engaged workforce.
1
2
3
Respondents overwhelmingly intend to focus on building internal capability and
further optimizing their organizations to operate in a sustained low-price
environment. These actions coincide with the current industry call for “lean” while
driving for step-change improvements in operational productivity.

12. THE VALUE OF WORKFORCE PLANNING
THRIVING IN A REBALANCE ERA | 12
The workforce plan is the one of the cornerstones of effective human capital
management, helping to ensure that HR strategies deliver on business goals and
requirements. For companies hoping to survive and remain competitive in the current
market, building workforce planning capability is now more important than ever.

13. ENTER THE REBALANCE ERA
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14. FUNDAMENTAL WORKFORCE CHALLENGES FACING O&G
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1 | DEMOGRAPHIC IMBALANCES
2 | SHORTAGE OF SKILLED WORKERS
3 | TIME TO PROFICIENCY

15. DEMOGRAPHIC IMBALANCES
REGIONAL PROFILES 2014
• Both present and forward
challenges
• These challenges will be
compounded for companies that
acquire talent only within a single
region
• Projecting retirements to 2020,
Europe will lose 18% of its
overall workforce and 20% of
geoscientists and engineers
while USA and Canada will lose
46% of workers ages 50+ equal
to 570,965 person-years of
experience leaving the sector by
2020
• Leveraging the available talent of
one region to balance the needs
of another region will challenge
companies as they seek to
embrace mobility and manage a
more diverse workforce
THRIVING IN A REBALANCE ERA | 15
Mercer 2015 O&G Talent Outlook

16. TALENT SHORTAGE FOR CRITICAL ROLES
SUPPLY AND DEMAND
• As the sector aggressively shed
headcount in 2015, and
continues down that path in early
2016, it is understandably difficult
to accept that there is a global
talent shortage of critical roles
across the O&G sector
• Mercer’s Oil and Gas Talent
Outlook 2015–2025 of 10 critical
roles in O&G projected to 2025
reveals a substantial shortage of
six critical positions, short-to-
balanced in three and a potential
surplus in only one critical role
• Those countries with surplus
simply do not have the supply to
fulfill the demand requirements of
the world’s operations
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Mercer 2015 O&G Talent Outlook

17. TIME TO PROFICIENCY
DEVELOPING EXPERTISE IN KEY
FUNCTIONS • This gap risk compounds when
the time to proficiency and
expertise for key functions is
taken into account
• Value-driving roles such as
engineer and geoscientist take a
decade to develop to a
proficiency level and decades to
develop to an expert level
• As HR leaders consider and plan
their workforce of the future,
building capability becomes a
core driver of future success
• Accelerating the velocity of
development – without
compromising quality – becomes
a mandate for all organizations
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Mercer 2015 O&G Talent Outlook

18. MERCER’S TALENT CONTINUUM
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• The holistic nature of the
continuum ensures that leaders
think past singular programs in
isolation, and move towards a
systems thinking perspective.
• The Continuum provides a
pathway for current-state
analysis and diagnosis, and a
framework for developing the
unique approach for human-
capital management required to
enhance individual,
organizational, and thus
enterprise-wide vibrancy and
performance.

19. ADVANCES IN WORKFORCE PLANNING
AND MODELING
LEVERAGE AN ELASTIC WORKFORCE
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• Elasticity enables dynamic
responsiveness to the market
peaks and valleys
• In order to create an elastic
workforce, organizations must
first identify the core set of critical
skills and employee staff
requirements necessary to
deliver the base business model
• The workforce supplement to the
core is considered the elastic
workforce. This is the staffing
level optimal for the conditional
market environment ahead
• An elastic workforce allows the
core base business the ability to
efficiently and effectively flex the
staffing levels for growth and
contraction as necessary

20. BUSINESS PRIORITIES TO THRIVE IN A ‘LOWER FOR LONGER’
O&G ENVIRONMENT …
… AND THESE ARE THE SAME PRIORITIES HR MANAGEMENT NEEDS
TO GUIDE THEIR CHANGE STRATEGY AND CONTRIBUTION TO THE
ENTERPRISE
“LEAN”
OPERATING
MODEL
Increase scalable
delivery
Improve asset
performance
Reduce risk
volatility
Reduce
operating costs
Contain future
costs
Increase free
cash flow
Reduce balance
sheet liabilities
Redesign the
portfolio
THRIVING IN A REBALANCE ERA | 20

21. THRIVING IN A REBALANCE ERA | 21
THRIVING
IN A
REBALANCE
ERA
Thank you!
John Koob, Partner
Global Oil & Gas Industry Segment Leader
Mercer Energy
500 Dallas Street, Suite 1400, Houston, TX 77002, USA
+1 713 276 2137 | Mobile +1 713 376 7139
john.koob@mercer.com

22. THRIVING IN A REBALANCE ERA | 22
 HOW DID HR LEADERS RESPOND TO THE
DISRUPTION?
 WERE THOSE RESPONSES EFFECTIVE?
 WHAT ARE THE HUMAN CAPITAL CHALLENGES
IN THE FUTURE?
 WHAT STRATEGIES SHOULD HR LEADERS
UTILIZE TO MEET THOSE FUTURE
CHALLENGES?