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Pioneer Petroleum

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Pioneer Petroleum Corporation

Ryan Rhodes

Dr. Bacon

February 18, 2009

Table of Contents

Introduction

Background……………………………………………………………….. Pg. 3

Major Problems……………………………………………………………. Pg. 5

Analysis

Alternative Courses of Action………………………………………………Pg. 6

Analysis of Alternatives……………………………………………………. Pg. 6

Conclusion

Suggested Course of Action………………………………………………... Pg. 8

Introduction

Background

Pioneer Petroleum was formed in 1924 with the merger of several formerly independent firms which operated in the oil refining, pipeline transportation, and industrial chemical fields. Through the next sixty years, the company integrated vertically into exploration and production of crude oil and marketing refined petroleum products and horizontally into plastics, agricultural chemicals, and real-estate development. It was restructured in 1985 as a hydrocarbons-based company, concentrating on oil, gas, coal and petrochemicals. Pioneer at the time was one of the lowest cost refiners on the West Coast and had an extensive West Coast marketing network. In 1990, total revenue exceeded $15.6 billion and net income was over $1.5 billion. Pioneer was subject to extremely volatile prices in oil. Because of this, the management of Pioneer emphasized the importance of operational and financial flexibility to respond to any price swings. Pioneer spent about $3.1 billion on capital expenditures in 1990, and the forecast for 1991 was approximately $4.5 billion. These expenditures were mainly focused on equipment to increase efficiency such as a sulfur recovery facility, and the improvement of a coker. Investments were also directed towards environmental projects, and Pioneer anticipated spending an additional $3 billion in the next five years to meet the new standards of the 1990 Clean Air Act. These new regulations actually provided an opportunity

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