PACIFIC DRILLING: THE PREFERRED OFFSHORE DRILLER
Haiyang Li, Frédéric Jacquemin, and Toby Li wrote this case solely to provide material for class discussion. The authors do not intend
to illustrate either effective or
...
PACIFIC DRILLING: THE PREFERRED OFFSHORE DRILLER
Haiyang Li, Frédéric Jacquemin, and Toby Li wrote this case solely to provide material for class discussion. The authors do not intend
to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other
identifying information to protect confidentiality.
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Copyright © 2016, Richard Ivey School of Business Foundation Version: 2016-04-08
From June 2014 to January 2015, the market price of oil fell from US$1151 per barrel down to $49 per
barrel.2 As oil prices went down, so did the appetite of energy companies for offshore exploration. Further
compounding the problems was the oversupply of rigs, due to drillers having overbuilt during the boom
times. As of March 2015, there was no near-term recovery in sight for oil prices, which had major
implications for Pacific Drilling, a growing offshore drilling company based in Texas. Founded in 2006,
Pacific Drilling owned and operated a fleet of eight high-specification drillships operating in ultradeepwater drilling environments in depths up to 3.7 kilometres (km) and offered the most advanced drilling
technology available. As of 2015, the company had nearly 1,600 employees and had generated more than
$1 billion in annual revenue (see Exhibits 1, 2, and 3).
With growing competition from rivals — both emerging and more established companies — Pacific
Drilling sought to expand its customer base. However, the close relationships that it had cultivated with its
existing partners (which had helped its early stage growth) raised concerns that the driller had become too
closely linked to them (in terms of culture, processes, and technology) to effectively translate its efficiency
gains to new producer partners.
The company’s chief executive officer (CEO), Christian J. Beckett, and his team received a range of
opinions about what the company should do to weather the storm and emerge stronger. Investors also felt
the pain from the company’s stock price sliding from $11 per share in 2014 to less than $4 per share, as did
the stock price of all offshore drillers during that time (see Exhibit 4). As he considered the available
options, Beckett faced another critical crossroad. The company had survived tough times before — in the
early stages of the company’s development, the team had successfully manoeuvred through the 2008
financial crisis as the credit markets collapsed. But as Beckett admitted, the current challenge was unique
in many ways, and Pacific Drilling was a different company from earlier. However, it remained to be
answered to what extent Beckett and his team could rely on what they had successfully done in the past,
and to what extent they would need to adapt.
1 All currency amounts are in US$ unless otherwise specified.
2 Brad Plumer, “Why Oil Prices Keep Falling — And Throwing the World into Turmoil,” Vox Media Inc., updated January 23,
2015, accessed April 12, 2015, www.vox.com/2014/12/16/7401705/oil-prices-falling
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