Hitt 13e Case Teaching Notes
Case 11: Pacific Drilling: The Preferred Offshore Driller
Case Synopsis
In the offshore oil drilling industry, producers typically focus on the early stages of exploration
of new resources of oil and gas. Some producers also drill and extract these resources
themselves, but many outsource this activity to drillers. Pacific Drilling, founded in 2006, was
one such driller. But unlike competitors, which often utilize all three types of rigs for different
drilling environments—jack-ups for shallow drilling, semi-submersibles for somewhat deep
water, and drillships for ultra-deepwater (UDW) drilling—Pacific Drilling specialized in drillships
for UDW environments.
Landing the first account with Chevron took at least six months of negotiating, but it was
essential in getting other producers to trust the new firm. Pacific developed an excellent,
“seamless” working relationship with Chevron, but some potential customers later saw that as
a drawback, believing that Pacific would not be able to work with other firms. Fortunately,
enough other clients booked Pacific’s services, and the firm was able to weather the economic
crisis of 2008.
Learning Objectives
• Explain the importance of analyzing and understanding the firm’s external environment.
(Chapter 2)
• Define and describe the general environment and the industry environment. (Chapter 2)
• Discuss the relationship between customers and business-level strategies in terms of
who, what, and how. (Chapter 4)
• Describe business models and explain their relationship with business-level strategies.
(Chapter 4)
• Explain the differences among five types of business-level strategies. (Chapter 4)
Strategic Issues and Suggested Discussion Questions & Answers
1. Analyze Pacific Drilling’s current situation through the lens of the seven segments of
the external environment. Which of them, if any, offer opportunities? Which of them,
if any, pose threats?
In terms of opportunities, technology is far and away the most important segment. Many of
Pacific Drilling’s core competencies are derived from their innovative use of new technologies,
and there is good reason to believe there are future opportunities for the firm to utilize even
2. Identify and describe at least two tangible resources, at least two intangible resources,
and at least two capabilities within Pacific Drilling. How have these emerged as core
competencies for the firm? How do these competencies create value for customers?
The case specifies several very distinct tangible resources at Pacific Drilling: One is its flattened
Pacific Drilling also possesses many intangible resources. CEO Chris Beckett, a respected
strategic leader in the industry, has assembled a team of equally trusted, knowledgeable, and
Additionally, several strong capabilities have emerged. The CEO has a clear vision for the firm,
and the organization’s mission and values are plainly communicated. In general, the flow of
Overall, Pacific’s core competencies, particularly its strengths in management and technology
use, provide tremendous value for customers by making UDW drilling more efficient and safer.
3. Which business-level strategy is Pacific Drilling using? How have the five forces
influenced this firm, and what risks does it face? Would you recommend a change in
strategy, and if so, which strategy would you select? Explain your answer.
Unlike Pacific Drilling’s competitors, which often utilize all three types of rigs for different
drilling environments—jack-ups for shallow drilling, semi-submersibles for somewhat deep
Pacific’s entry into the market, and especially its use of the latest technology, caused its better–
established competitors to take note. Many rivals have responded by upgrading their
technology as well, which has somewhat diminished Pacific’s advantage. A far more worrisome
4. Why do you think the initial partners who set up Pacific Drilling chose Christian
Beckett to be the CEO? What kind of organizational culture has he created?
Beckett had excellent credentials coming into the job. He holds an MBA from Rice University,
and he has an industry-insider’s perspective due to his tenure as head of corporate planning at
Transocean and as U.S. land seismic manager at Schlumberger, both leading firms in the
A strong leader, Beckett looked for ways to establish a specific culture within the new
organization. He led the development, for example, of a mnemonic device around the word
“PACIFIC” to help employees grasp the firm’s core values (Exhibit 13). With an eye toward using
Additional Resources
Reuters’s company profile gives in-depth background on Pacific Drilling’s current financials,
leadership, valuation, news, and more:
In November 2018, Rigzone posted this follow-up on Pacific Drilling’s emergence from Chapter
11 bankruptcy:
ITP’s 2016 video contained no narration but offered excellent views of one of Pacific’s rigs, the
Pacific Khamsin: