C6-1 CASE STUDY 6 CHEVRON’S INFRASTRUCTURE EVOLUTION Chevron Corporation (www.chevron.com) is one of the world’s leading energy companies. Chevron’s headquarters are in San Ramon, California. The company has more than 62,000 employees and produces more than 700,000 barrels of oil per day. It has 19,500 retail sites in 84 countries. In 2012, Chevron was number three on the Fortune 500 list and had more than $244 billion in revenue in 2011 [STAT12]. IT infrastructure is very important to Chevron and to better support all facets of its global operations, the company is always focused on improving its infrastructure [GALL12]. Chevron faces new challenges from increased global demand for its traditional hydrocarbon products and the need to develop IT support for new value chains for liquid natural gas (LNG) and the extraction of gas and oil from shale. Huge investments are being made around the world, particularly in Australia and Angola on massive projects of unprecedented scale. Modeling and analytics are more important than ever to help Chevron exploit deep water drilling and hydrocarbon extraction in areas with challenging geographies. For example, advanced seismic imaging tools are used by Chevron to reveal possible oil or natural gas reservoirs beneath the earth’s surface. Chevron’s proprietary seismic imaging http://www.chevron.com/ C6-2 technology contributed to it achieving a 69% discovery rate in 2011[CHEV12]. Supervisory Control and Data Acquisition (SCADA) Systems Chevron refineries are continually collecting data from sensors spread throughout the facilities to maintain safe operations and to alert operators to potential safety issues before they ever become safety issues. Data from the sensors is also used to optimize the way the refineries work and to identify opportunities of greater efficiency. IT controls 60,000 valves at Chevron’s Pascagoula, Mississippi refinery; the efficiency and safety of its end-to-end operations are dependent on advanced sensors, supervisory control and data acquisition (SCADA) systems, and other digital industrial control systems [GALL12]. SCADA systems are typically centralized systems that monitor and control entire sites and/or complexes of systems that are spread out over large areas such as an entire manufacturing, fabrication, power generation, or refining facility. The key components of SCADA systems include:  Programmable logic units (PLCs) that and remote terminal units (RTUs) connected to sensors that convert sensor signals to digital data and send it to the supervisory system  A supervisory computer system that acquires data about the process and sends control commands to the process  A human-machine interface (HMI) that presents process to the human operators that monitor and control the process.  Process meters and process analysis instruments  Communication infrastructure connecting ...

1. C6-1
CASE STUDY 6
CHEVRON’S INFRASTRUCTURE
EVOLUTION
Chevron Corporation (www.chevron.com) is one of the world’s
leading
energy companies. Chevron’s headquarters are in San Ramon,
California.
The company has more than 62,000 employees and produces
more than
700,000 barrels of oil per day. It has 19,500 retail sites in 84
countries. In
2012, Chevron was number three on the Fortune 500 list and
had more than
$244 billion in revenue in 2011 [STAT12].
IT infrastructure is very important to Chevron and to better
support all
facets of its global operations, the company is always focused
on improving

2. its infrastructure [GALL12]. Chevron faces new challenges
from increased
global demand for its traditional hydrocarbon products and the
need to
develop IT support for new value chains for liquid natural gas
(LNG) and the
extraction of gas and oil from shale. Huge investments are being
made
around the world, particularly in Australia and Angola on
massive projects of
unprecedented scale. Modeling and analytics are more important
than ever
to help Chevron exploit deep water drilling and hydrocarbon
extraction in
areas with challenging geographies. For example, advanced
seismic imaging
tools are used by Chevron to reveal possible oil or natural gas
reservoirs
beneath the earth’s surface. Chevron’s proprietary seismic
imaging
http://www.chevron.com/
C6-2
technology contributed to it achieving a 69% discovery rate in

3. 2011[CHEV12].
Supervisory Control and Data Acquisition (SCADA)
Systems
Chevron refineries are continually collecting data from sensors
spread
throughout the facilities to maintain safe operations and to alert
operators to
potential safety issues before they ever become safety issues.
Data from the
sensors is also used to optimize the way the refineries work and
to identify
opportunities of greater efficiency. IT controls 60,000 valves at
Chevron’s
Pascagoula, Mississippi refinery; the efficiency and safety of its
end-to-end
operations are dependent on advanced sensors, supervisory
control and data
acquisition (SCADA) systems, and other digital industrial
control systems
[GALL12].
SCADA systems are typically centralized systems that monitor
and

4. control entire sites and/or complexes of systems that are spread
out over
large areas such as an entire manufacturing, fabrication, power
generation,
or refining facility. The key components of SCADA systems
include:
ts (PLCs) that and remote terminal
units (RTUs)
connected to sensors that convert sensor signals to digital data
and
send it to the supervisory system
process
and sends control commands to the process
-machine interface (HMI) that presents process to
the human
operators that monitor and control the process.
system and
RTUs and PLCs.
These are illustrated in Figure C6.1.

5. C6-3
Data acquisition occurs at the PLC or RTU level. This includes
meter
readings and equipment status reports that are sent to the
supervisory
system. The collected data is compiled and formatted by the
HMI to enable
the operator to make determine whether adjustments to normal
PLC or RTU
settings are needed. Current data may also be compared to
historical data in
a SCADA database to assess trends or perform analytical
auditing.
C6-4
In addition to Chevron refineries, SCADA are extremely
important in
national infrastructures such as water supplies, pipelines, and
electric grids.
Because attacks or damage to SCADA systems can affect large

6. numbers of
people, ensuring adequate security is important.
Business Infrastructure Transformation
Because of the complexity of its operational processes and the
IT that is
needed to support them, Chevron has traditionally been more
infrastructure
than business focused. SCADA systems and digital industrial
control systems
are critical IT infrastructure at Chevron’s refineries and will
always play an
important role in monitoring and managing facility-based
processes. These
also are among the first IT systems needed to support Chevron’s
new value
chains for LNG and shale oil extraction. However, like any
large corporation,
Chevron relies on a wide variety of business applications to run
its
businesses.
As it is for most global businesses, SAP ERP is a key
transaction

7. processing system at Chevron. Chevron has been using SAP for
more than
two decades and it has played an important role in the
development of SAP’s
vertical solutions for the hydrocarbon industry. There are more
than 50
instances of SAP used by Chevron [SCRI11]. Most of these run
on Oracle
databases. Some other key enterprise applications at Chevron
include Ariba
Buyer, EMC Documentum, Informatica, MicroStrategy,
multiple Oracle
applications [SCRI11].
Going forward, IT executives at Chevron would like to flip the
company’s
traditional IT priorities so that the majority of the IT staff’s
time and
attention is focused on improving business capabilities
[GALL12]. To do this,
Chevron’s IT leaders have increasingly turned their attention to
Web
services, software as a service (SaaS), and cloud computing to
help it run its
business. Chevron considers mobility to be a game changer in

8. how it
C6-5
delivers information and provides solutions and it is convinced
that it can do
both without sacrificing security or reliability.
IT infrastructure at Chevron pervades every facet of its
operations.
However, Chevron’s executives have not lost sight of the fact
that IT is not
the company’s core competency. By moving business solutions
to the cloud,
Chevron executives hope to help the company maintain its focus
on its core
competencies.
C6-6
Chevron has used business-oriented Web services for several
years.
Ariba Buyer, Salesforce.com, and Ketera’s price negotiation

9. system are just
a few of the SaaS solutions that Chevron has woven into its IT
architecture.
Chevron is interested in developing an integrated information
network
that includes all of its major supply chain partners, both
upstream and
downstream. Identify management has emerged as a priority at
Chevron to
ensure secure data transfer among its business partners. A
generic example
of an identify management system is illustrated in Figure C6.2.
When users
at Chevron partners need to access Chevron’s intranet and/or
SaaS data or
solutions, they are first cleared by an identity broker. The
identity broker
authenticates the user and transparently provides a single sign
on (SSO)
token that enables the partner to access Chevron’s intranet (2)
or the
company’s SaaS solution providers (3).
Chevron hopes to better align its operations with those of its
business

10. partners via its migration of business applications to the cloud.
It hopes that
the business infrastructure transformation that is currently
underway will
also lead to better IT and business alignment. As a global
company, the
cloud may be an ideal platform for running the business.
In the years ahead, Chevron’s IT leaders expect mobility,
analytics and
visualization, and social media to become critical aspects of its
business
infrastructure. At the facilities level, advanced sensors and
deeper
embedding of RTUs and PLCs within operations are foreseen
[GALL12].
Technical appreciation of convergence network infrastructure
will continue to
be important, but business literacy/savvy will be most important
to the long-
term success of Chevron’s IT leaders.
Discussion Points
1. Do some Internet research on Chevron’s use of seismic

11. imaging
technology. Briefly explain how it works and how it has helped
Chevron discover new oil and gas reservoirs.
C6-7
2. Do some Internet research on security vulnerabilities
associated with
SCADA and digital industrial control systems. Summarize the
major
security concerns associated with these systems and steps than
can be
taken to enhance their security.
3. Discuss the pros and cons of moving enterprise-wide
applications that
have traditionally been supported on premises to the cloud.
4. Do some Internet research on identify management and single
sign on
systems. Briefly explain how these work and why they are
important in
business intranets and extranets.
5. Why is it increasing most important for a CIO or IT executive

12. who
oversees geographically distributed enterprise networks to be
business
literate?
Sources
[CHEV12] Chevron.com “Seismic Imaging.” Retrieved online:
at
http://www.chevron.com/deliveringenegy/oil/seismicimaging.
[GALL12] Gallant, J. ”Chevron’s CIO Talks Transformation
and Why IT
Leaders Should Smile.” April 12, 2012. Retrieved online at:
http://www.cio.com/article/print/704095.
[SCRI11] Scribd.com. “Chevron Corporation CRUSH Report.”
August 17,
2011. Retrieved online at
http://www.scribd.com/doc/62481977/Chevron-
CRUSH-Report-09A1.
[STAT12] Statistic Brain. “Chevron Company Statistics.”
February 12, 2102.
Retrieved online at: http://www.statisticbrain.com/chevron-
company-
statistics/.

13. http://www.chevron.com/deliveringenegy/oil/seismicimaging
http://www.cio.com/article/print/704095
http://www.scribd.com/doc/62481977/Chevron-CRUSH-Report-
09A1
http://www.scribd.com/doc/62481977/Chevron-CRUSH-Report-
09A1
http://www.statisticbrain.com/chevron-company-statistics/
http://www.statisticbrain.com/chevron-company-statistics/
Analysis of the financial performance of THE ASSIGNED
COMPANY, financial trends, and projections.
– Due at the end of week 2 of the course.
This part of the project should be submitted in two ways:
· To the group project area- in order to receive comments from
peer reviews and complete part 2 of the project
· To the Assignment folder – for grading by your instructor
SUGGESTED WEBSITES
www.marketwatch.com -To find the information for your
company you need to type the stock symbol in
the Searchwindow to get into the company’s page.
www.morningstar.com - To find the information for your
company you need to type the stock symbol in
the Quoteswindow to get into the company’s page.
www.money.cnn.com -To find the information for your
company you need to type the stock symbol in
the Searchwindow to get into the company’s page.
www.finance.yahoo.com - To find the information for your
company you need to type the stock symbol in
the Searchwindow to get into the company’s page.
www.nyse.com – Click on Data, then click on Stocks (under
Quotes), and type the name of the company or the stock symbol
in the window “Keyword or symbol” to get into the company’s

14. page.
www.nasdaq.com - To find the information for your company
you need to type the stock symbol in the Search window to get
into the company’s page.
THE COMPANY’s websites
YOUR SPECIFIC ASSIGNMENT
Using the information from the websites the students have to
develop evaluation of the financial performance for THE
COMPANY (SELECTED BY INSTRUCTOR).
-1—Background and Industry (one short paragraph).
-2—Complete common size analysis of the income statement
and the balance sheet of THE COMPANY for the last three
years.(20% of the Stage 1 grade)
In order to do that you will divide all income statement items by
sales. As a result, all items in the income statement will be
expressed as a percent of sales. To complete common size
analysis of the balance sheet you will divide all items in the
balance sheet by total assets. As a result all balance sheet items
will be expressed as a percent of total assets. Present the results
of your calculations in your project.
Write about 1-2 pages of the analysis of the financial
conditions, its stability, and trends.
-3— Complete percentage change analysis of the income
statement and the balance sheet of THE COMPANY for the last
three years.((20% of the Stage 1 grade)
In this part you will calculate percentage change (growth rates)
for all income statement items and balance sheet
items relatively to the first year.
Write about 1-2 pages of the report of the results that you
received. What important information does this analysis
provide?
-4— Financial ratio analysis. (25% of the Stage 1 grade)
In this part of the project you will complete ratio analysis of
THE COMPANY. Please remember that you are the financial
analyst of THE COMPANY and should prepare the report to the
chairman of THE COMPANY. So the ratio analysis should be

15. completed from the point of view of THE COMPANY’s the
management.
The chairman of THE COMPANY is especially concerned about
the following groups of ratios:
· Liquidity (current ratio, quick ratio, and net working capital-
to-sales ratio)
· Operating performance ratio (Days of Sales in Inventory, Days
of Sales in Receivables, Days Payable Outstanding), CCC,
turnovers
· Profitability ratios (Gross Profit Margin, Operating Profit
Margin, Net Profit Margin)
· Return on Investment ratios: (Basic Earning Power ratio,
ROA, ROE)
You can find financial ratios for the company for the last 3-5
years in the Internet or calculate them.
1. a) Present the ratios as the table(s) in your project. Create
graphs for some ratios on your choice over three years to show
trends.
2. b) Write about 2 pages of analysis of the ratio results that
you found. In your analysis you should answer the following
questions:
· How liquid is the company?
· Is management generating a substantial profit on the
company’s assets?
· If the management of the company would like to improve their
CCC, what should the management of THE COMPANY do?
-5- Evaluate Return on Equity for the company for the last three
years using the DuPont analysis. (10% of the project
grade)(20% of the Stage 1 grade)
1. a) Taking the information from the Income statements and the
Balance sheets, calculate the company’s net profit margin, total
assets turnover, equity multiplier, and return on equity using the
DuPont formula for the company for three years. Show your
calculation!
ROE = Net profit margin x Total assets turnover x Equity

16. multiplier
= Net income/Sales x Sales/Total assets x Total
assets/Common equity
You can use Revenue instead of Sales.
Write about 1 page of analysis of the results that you received.
In your report please answer the question: If the management of
the company would like to improve their return on equity, what
should the management of these companies do?
PRESENTATION OF PAPER AND WRITING (15%) of the
project grade) (see description below)