Brinkerhoff

I. Facts of case:

a. Brikerhoff International, Inc. is currently in an economic boom following 8 years of economic depression

b. President Tom Brikerhoff wants to expand company efforts & revenues, and also relieve tension around Safety Supervisor, Kurt Mannheim

i. Kurt Mannheim concerned about safety of Rig #1-E, however, he had also recently accused Rig #1-EЎ¦s rig manager, Rick Kopulos of allowing alcohol into their base

1. concern for rig safety might have risen from personal tensions rather than actual safety issues

2. Brikerhoff considering promotion of Mannheim

ii. Actually concerned w/safety of Rig #20 under Tom Rossick

c. Drilling IndustryЎXhigh risk & high uncertainties

i. Rig activity could go from 60% utilization to 20% in 2 weeks b/c of fluctuating demand

ii. Rig operates 24 hours a day w/2 12hour crew shifts

iii. Working „і isolated life for 2 of 3 weeks most of the year; only shared w/other workers; far from other cities & towns

iv. Harsh environmental conditions

v. Alcohol & drugs were not permitted

1. Mannheim violated company rules by allowing, although small & controlled amounts, of alcohol onto the base camp

d. Company history

i. Brikerhoff continued to buy additional rigs after the Canadian gov. introduced the National Energy Program, which gave a large portion of CanadaЎ¦s oil & gas to another company called Petro-Canada; also charged remaining companies 25% royalties on output, which led to the decline in drilling activities

1. caused additional debt to company when a year later, oil prices fell to less than $10/barrel; if had purchased less, perhaps would have been in less debt

2. BII took drastic steps to cut overhead from $2 million plus to less than $500,000

3. cost reduction not enough, which led to buyout & stock swap between Tom & his father & brother, giving him sole operation

e. Turning point

i. Business began to boom again in 1992 when AlbertaЎ¦s gov. granted a royalty holiday til June Ў¦93 & other environmental forces gave further incentive to gas exploration & drilling

ii. However, serious labor shortage & high turnover rates caused problems

iii. BII had problem in 1993ЎXnot large enough to cover total customer demands w/its small inventory of rigs

1. However, regardless of small size, BII could charge higher per diem rates for some rigs b/c of company reputation for good work, excellent safety record & low maintenance costs

a. Proves that safety directly affects the rates of oil, which is why current safety concerns are not a minuscule

issue.

b. Good rig record = fewer delays & shorter completion times

i. Horizontal drilling assisted in the efficiency of a wellЎ¦s production

ii. If drilling could be cut by 10 days, could save a customer $200,000-$250,000 on a job which costs between $20-25,000/day

f. Uncertainties of the Business Recovery

i. Government & customers had imposed though environmental & safety standards

ii. Brikerhoff made failed attempts to arrange joint venture agreements w/other drilling companies (other companies not willing to explore new organizational combinations)

iii. Brikerhoff went against his hesitation & put Rig #22 back into operation

1. more rigs into operation could lead to low quality, low performance, unsafe practices, & high drilling costs w/unskilled workers, which could hurt more than help the company

2. Introduced a Quality Assurance Mission Statement

a. Safety of each employee is the first priority of the company. Required employee involvement w/quality assurance program will lead to improved attitudes to produce better work practices, reduce accidents, reduce days on the job to improve cost efficiency for customers. Will lead to reduced operation costs & a more cooperative environment. Higher efficiency will lead to more projects & the company morale will increase.