SEC 10-Q Assessment -- Oil Co. Mobil Oil.greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
Here is another in the series of Oil Co's with 10-Q statements on Y2K compliance.
I've got a lot more but I'm not sure if it's worthwhile to post any of these? You have to really wade through the PR Spin in most to read the details between the lines. Like this one below from Mobil. They're more forthcoming than most of the rest but NOT like ENRON and Baker Hughes Inc. Still in all of these you can see the mood and tone change...and now the posturing to get position to blame someone else if things go bad which means they think it is a real possibility or they wouldn't go to the trouble.
August 11th, 1999 for 2nd Qtr.
Mobil's website page on Y2K was updated on 9-7-99 and last filing was August 11th, 1999 for 2nd Qtr. Mobil says that is was 99% complete in Y2K preparations by June 30th 1999 and expects to be fully completed by September 30th 1999.
Then they move to the next statement:
"The failure or failures for year 2000 reasons of materially important systems or relationships with external agents could have a material adverse effect on Mobil's results of operations, liquidity and/or financial condition. For example, if, for year 2000 reasons, a utility company were to be unable to supply electricity to a Mobil refinery for an extended period, the refinery would have to be shut down for that period, which could result in substantial losses of production, sales and income. Mobil believes that the Project work described above dealing with materially important IT systems and non-IT systems will, when completed, serve to reduce very substantially the risk that such systems will fail for year 2000 reasons. Mobil has no way of ensuring, however, that external agents whose relationships with Mobil are judged to be materially important (e.g., utilities, telecommunications providers and transportation providers) will be timely year 2000 compliant."
Mobil cites what is most likely a big concern for them as being the supply of electricity to a Mobil refinery for an extended period. Note that they indicate that the refinery would have to be shut down. This is an issue that this reporter has been stating for sometime now. Many TB 2000 discussion forum skeptics argued that a loss of power would not be a problem. One oil refinery employee indicated that all refineries supply their own power or back up power. However, this is not true with all refineries. Many cold-weather climate refineries are vulnerable to shutdown from loss of utility power even though they have their own refinery power plants as back up. Why? Because of the extra loads needed for heating systems that keep crude oil lines warm and thereby keep crude oil from congealing or thickening to closure at below 40 degree temperatures. These systems require more electricity than most refinery powerhouses can provide along with the other critical power needs. The last sentence tells us that Mobil has no way of knowing what will happen. As a result of this notion Mobil then proceeds to tell us:
"The failure or failures of systems for year 2000 reasons could also give rise to liability to third parties. Mobil has not yet attempted to assess the potential for such liability, and hence cannot say whether such liability presents a material risk independent of the risk that such failure or failures could have a material adverse effect on Mobil's results of operations, liquidity and/or financial condition."
Here is another Oil Company laying the foundation for claiming that it won't be their fault if things go haywire. It would have to be those bumbling third party vendors who are liable. While they seem supremely confident on the surface, its the rippling effects between the lines that ought to tell you that these folks don't know and are not sure of what will really happen so they are covering their "butts." Do you think I may be over exaggerating here? Read on
There are, however, an almost infinite number of additional risks which are simply not assessable and for which, therefore, contingency plans cannot be developed. These are the risks of failure for year 2000 reasons of one or more systems or relationships with external agents which, individually, Mobil does not judge to be materially important but whose failure could trigger a cascade of other failures for year 2000 reasons, the combination of which could be materially important or could prevent Mobil from implementing contingency plans it has developed. Such a combination of failures could also have a material adverse effect on Mobil's results of operations, liquidity and/or financial condition.
How interesting and revealing not to mention confirming what I just said in the above comment. Here is one company that has begun to really lay it out on the line (albeit in a happy face package to avoid panic).
"Additional risks which are simply not assessable" "contingency plans cannot be developed."
Sobering but truthful. The company deserves to be commended for including this whole paragraph. Now if only they would provide further details of just how much of their embedded systems could not be directly tested. Now note the next significant comment in that paragraph
"whose failure could TRIGGER A CASCADE OF OTHER FAILURES for year 2000 reasons
the combination prevent Mobil from implementing contingency plans it has developed."
Here again we have another candid admission that is certainly true. The question is now:
Why don't the other oil companies admit to these facts?
Where is the news media on this?
Here is another equally big blockbuster paragraph of small admissions that point to the potential severity of the oil industry problems in Y2K.
"Actual results could differ materially from the estimates expressed in such forward-looking statements, due to a number of factors. These factors, which are not necessarily all the key factors that could cause such differences, include the following: Mobil's failure to judge accurately which of Mobil's systems and relationships with external agents are materially important; Mobil's inability to obtain and retain the staff and third-party assistance necessary to complete the not-yet-completed phases of the Project in accordance with Mobil's estimated timetables; the inability of such staff and third parties (1) to locate and correct all non-year 2000 compliant computer code in materially important systems and test such corrected code and (2) to install and test upgrades or new systems containing year 2000-compliant computer code, all in accordance with Mobil's estimated timetables; unforeseen costs of completing Project work; Mobil's inability or failure to identify significant year 2000 issues not now contemplated; and the failure of external agents to achieve timely year 2000 readiness."
Note the honesty here in the statement: "Mobil's failure to judge accurately" The statement is not saying that Mobil has failed to judge accurately but that it might have. This is so true with not only every other oil company but also any other company in any field. At least the Mobil Company has the fortitude to make these statements. If only the others would do so. If only Mobil and others would provide further details of how many systems couldn't be checked and tested and or how many systems have been referred to a fix-on failure policy.
Conclusion: They've still not presented for review the details of their embedded systems procedures and analysis. We'd like to know exactly how they tested their embedded systems. We'd like to know if and how many pipeline and refinery systems were left without rigorous and thorough testing of every chip in every system. Hopefully, Mobil went to such lengths more so than their competitors
-- R.C. (email@example.com), October 17, 1999
I appreciate your efforts here, but I'd focus those efforts elsewhere. I work for a different oil company, but we have no clue, either. Focusing on specific companies doesn't make much difference. We are all clueless.
If I can be so bold as to suggest where to focus, look at imports. I've not heard a word about tankers getting ready. Are they? Is Venezuela a problem? I hear the oil industry is far ahead of the government which by all accounts is toast.
Any info on this?
-- Dog Gone (firstname.lastname@example.org), October 17, 1999.
Thanks again R.C.
-- Mike Lang (email@example.com), October 17, 1999.
Lest we forget--this year--there were two extremely derogatory bits of info. regarding venezuela.
1. U.S. Commerce dept. Rated Venezuela,Nigeria,Saudia Arabia at the Bottom of their remediation list on Oil. (NO HEADLINES)!!??
2. The new gov. That took over (Venezuela) this year was left holding the bag on remediation with no money to spend.
3. AT&T just reported and I also remember seeing it earlier in the year that you might as well forget about alot of intl. telecom.
The oil challenge has been my biggest (bone) of contention. This country cannot live without oil.
And if you want a real ear opener,---just pick up the phone and call down to Venezuela (if you can get thru).
We all live in a bubble--we cannot help but think that the rest of the world is just as sophisticated as the good ole US of A.
Man oh Man what a huge mistake that is!!! Oil at $100.00 abarrel will not be unlikely!!
-- David Butts (firstname.lastname@example.org), October 17, 1999.
Like everyone else, Mobil admits that they lack a comfort-level of detailed knowledge of the status of those they depend on. But this is unavoidable. A few big outfits (like GM) are actively helping their suppliers remediate, but this is not common and also limited. It's just the nature of y2k that everyone must do their best with what's in their jurisdiction, and hope that everyone else does the same.
I don't consider this to be laying the groundwork to point the finger later. It seems more a simple acknowledgement of economic interdependency. We're all nervous about things that can have a big impact on our lives that we can't know or control. Of course these are real possibilities and must be considered. But having *absolutely no clue* how likely these things are doesn't make them *more* likely. It just makes you uncomfortable.
Mobil itself seems to be doing fairly well. And that's the best they can do, they must at some point trust others. That's hard.
-- Flint (email@example.com), October 17, 1999.
One step forward and two steps back. It is so obvious that you LOVE to ARGUE FOR THE SAKE OF ARGUING. Don't you realize what a laughing stock you are? Did you happen to see the c4i post a few threads down? I guess the term "Don't feed the trolls, applies to you also."
-- R.C. (firstname.lastname@example.org), October 17, 1999.
Dog One, I think our overall oil industry y2k assessments are pretty similar but its interesting how frequently we disagree on specifics.
You're currently employed at a big oil company. You know the major oil perspective. The rest of us don't. I left that environment over 10 years ago. RC has busted his ass gathering and reading all these 10-Qs. I'm very appreciative of his work because it gives me an al-be- it limited window to the major oil mindset. RC has distilled 100s of pages of boring legalese into a few paragraphs of premium cuts. You certainly don't speak for me (and probably most of us) when you tell him he's barking up the wrong tree. I think you are doing him and this forum a diservice by belittling his efforts. He's saved me hours of surfing, reading and perusals.
I'd love to have more info. on imports as well. I can tell you and I both believe this is where our greatest vulnerability lies. But as we already know- the info isn't available. These 10-Ks or 10-Qs or SEC- whatevers might be incredulous and sketchy but foreign operations don't even have these limited info disclosure mandates. When I read about the extensive preps, plans, and huge $ expenditures companies like Enron and Mobil have gone through, it DOES give me an indication of what these foreign undercapitalized, unorganized foreign producers are up against. There's a wealth of conclusions that unfold. I'd love to have a wealth of hard data and facts, but it ain't gonna happen. I think we can conclude that many of these foreign producers and refiners, especially the archaic nationalized ones, aren't gonna make it. When the new President of Venezuela comes out and says his predecessor hadn't done anything for y2k preps, we can make some assumptions about Lagoven, Maraven and PDVSA (the 3 major Venz oil companies) based on the domestic data RC has uncovered. Granted its not 'the total and complete picture' but its pieces of the puzzle.
Keep up the good work RC! You and your work are appreciated. This RC dog can hunt!
-- Downstreamer (email@example.com), October 17, 1999.
Hey, I appreciate what you're doing here. I don't believe you gave a second thought to what I wrote before you started reflexively attacking. I think it's *great* that these companies are concerned about their interdependencies, since everyone has them and they are crucial. It's about time (if not too late) to focus very hard on these interdependencies, especially as part of contingency planning. If they *didn't* worry about them, I'd consider them clueless.
But interpreting this natural and inevitable awareness as "posturing to get position to blame someone" is simply silly. If you were to say you need food to live, do you think I'd be justified in thinking you were "posturing to blame" the grocery store, and admitting there was a "real popssibility" that they wouldn't have food? Come on.
-- Flint (firstname.lastname@example.org), October 17, 1999.