Academic journal article Journal of the International Academy for Case Studies

Tom Brown Inc.: Surviving in the Oil and Gas Industry

Academic journal article Journal of the International Academy for Case Studies

Tom Brown Inc.: Surviving in the Oil and Gas Industry

Article excerpt

CASE DESCRIPTION

This case was developed through the use of secondary research material. The case has a difficulty level of five and is appropriate to be analyzed and discussed by advanced undergraduate and graduate students in a strategic management class.

The case allows the instructor the flexibility of concentrating on one strategic issue, or as a means of examining the entire strategic management process. The major focus within the strategic analysis as well as excellent stand alone modules is in the area of legal/political influence, economic, and as a means of discussing owner succession.

The instructor should allow approximately one class period for each element addressed. Using a cooperative learning method, student groups should require about two hours of outside research on each element researched. The case also provides an impetus to explore a critical industry in our world economy, yet one that has received minimal attention in most course coverage.

CASE SYNOPSIS

This case is a library, popular press and internet case which examines Tom Brown Inc. The review of annual reports, trade journals, government documents and proposed and enacted regulations must be accomplished carefully. While most students have a general understanding of the oil and gas industry, few have the current knowledge to compare this industry against more traditional production operations. A review of these resources should lead students in determining the future of the company and the current CEO, Tom Brown.

INTRODUCTION

Tom Brown sat at his desk staring out the window into the west Texas sky as a typical dust storm blew through the area. Brown could not begin to count the number of these storms he had endured over his near fifty years in the oil business in the Permian Basin. But, he really wasn't thinking too much about the weather right then, he was focused more on other storms that he had experienced in this industry, and how the horizon for the industry was as dark and uncertain as the Midland skyline had become.

With the industry experiencing a drastic slow down in prices what would the future hold for Tom Brown and his company. Was fifty years enough to ride the highs and lows of this ever changing industry, or was there one more wave to ride?

COMPANY HISTORY

"Tom Brown, Inc. is an independent energy company engaged in the exploration for, and the development, acquisition, production, and marketing of natural gas, natural gas liquids, and crude oil primarily in the gas-prone basins of the North American Rocky Mountains and Texas."

Tom Brown Inc.'s (TBI) beginnings date back to 1955 when Tom Brown and Droyle Scarber partnered to purchase a trailer mounted drilling rig under the name Brown and Scarber Drilling. After one year of operation, Tom Brown bought out Scarber's interest in the company. In 1959, Brown offered half the company, assets and debt to his rig supervisor, Joe Roper, for $2500. This established a partnership that grew to 12 rigs in the next ten years. In 1969, the partnership purchased an established corporation, the Gold Metal Consolidated Company. Under the corporate umbrella, the name was changed to Tom Brown Drilling Co., Inc. and it became one of the first publicly traded oil companies of the Permian Basin of West Texas.

The 1970's marked an important era in the company's history. They increased diversification and investments in oil and gas properties ultimately dropping the "Drilling" from their name and becoming Tom Brown, Inc. in 1971. A partnership with Adobe Oil & Gas developed significant oil reserves and gave the company a valuable cash stream used to finance additional gas exploration. A major oil find was made in 1975 when TBI discovered the Muddy Ridge Field. This field, part of the Wind River Basin of Wyoming, ultimately grew into the companies primary reserve base.

In 1979, TBI formed Oncor, a wholly owned subsidiary specializing in down-hole drilling tools. …

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