The Rise and Fall of an Oil Company

HANSON, BERNOLD M., Midland, TX

A tremendous amount of oil and gas reserves has been found. These reserves were discovered when geologists were in key positions. Exploration oriented leaders are not in key positions today.

As with all living organisms, oil companies are governed by a life cycle which includes birth, adolescence, maturing, old age, and death. The life cycle of a company is characterized by its CEO/management team.

During the birth of an oil company, a geologist and/or entrepreneur (leader) who has a desire to succeed is in charge. There are few tangible assets and the morality rate is high.

In the adolescence stage, the leader is willing to take high risks and is very receptive to new ideas. The discovery of company-making reserves are most likely to occur during this stage.

During maturing, the key officer is usually an engineer who develops the newly found reserves. He has the desire to quantify exploration ventures in unrealistic, precise terms.

Old age usually has a CPA as manager who prefers to take cash flow and transfer it to other businesses (diversification). The sale of properties starts in this stage.

The last stage is death and the key officer is either a lawyer or a banker. The legal entanglement will start that inevitably plagues the cash-rich, asset-rich oil company. There is no residual expertise conducting exploration activity. We now have the liquidation of remaining assets and the company goes through mergers or sale.

AAPG Search and Discovery Article #91004 © 1991 AAPG Annual Convention Dallas, Texas, April 7-10, 1991 (2009)