Pacific Drilling: The Preferred Offshore Driller [Case Analysis] Essay (Essay Sample)

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Pacific Drilling: The Preferred Offshore Driller [Case Analysis]
Introduction
Pacific Drilling was established in 2006. It operates in a deepwater drilling environment, offering the most advanced drilling technology in the industry (Li et al. 1). This case study assesses the offshore drilling industry’s attractiveness, discusses Pacific Drilling’s strategy and market positioning, and identifies challenges and possible strategic approaches.
Offshore Drilling Industry
The intensifying competitive rivalry challenges the long-term viability of the industry. There are both emerging and established drilling companies competing for the small market, occupying mainly the Golden Triangle of Oil (Li et al. 2). Offshore drilling industry had both diversified and niche drillers. Companies like the Seadrill, Atwood, Transocean, Noble, Diamond Offshore, and Enso have a highly diversified product portfolio and Ocean Rig was a niche driller with established capital capabilities threatening the operations of new entrants like Pacific Drilling. These companies “competed to lease their rigs to producers” (Li et al. 2). As a result, companies developed unique capabilities such as efficiency and service quality to compete favorably.
The cost of entry into the industry is high. The initial investment, including capital requirements and personnel, is high, limiting entry by new drillers. Apart from the conventional wisdom of the industry limiting the chances of new entrants, customers were unwilling to engage new drillers in their wells. Besides, lenders considered it very risky to lend to new entrants. Cumulatively, lenders estimated that new entrants required “several-hundred-million dollars” in asset value (Li et al. 4). These factors limit any prospect of entry and success of new entrants in the industry. The high cost of entry explains why Pacific Drilling started operation as a subsidiary of Tanker Pacific, and subsequently moving into a joint venture arrangement with Transocean (Li et al. 3).