McManus gave students a clear illustration of the “hedgehog” strategy described by Jim Collins in Good to Great when he described his company’s focus on exploration for oil and natural gas “liquids” in onshore locations in the southwest United States. According to Collins, companies that move from merely “good” to “great” usually follow the model of the hedgehog in the fable “the hedgehog and the fox” by doing a limited number of things very well rather than by trying a great many things and not doing many of them well.
The company’s current strategic focus was the result of management’s confronting some “brutal facts” about the company’s external environment, most recently the drop in the prices for natural gas that made its exploration and development far less profitable than exploration and development of oil and natural gas “liquids” (such as propane). The current focus is an historic departure from the company’s strategic roots in Alabama Gas Company, which dates from the early days of Birmingham in the 19th century. The first foray by the company into exploration and development came in the 1980s when it began to explore for coalbed methane gas in Alabama. Significantly, the company announced last month that it will sell those Alabama natural gas drilling properties.
A group of students who had studied the strategy of Energen in depth made a presentation to Mr. McManus and made several recommendations, one of which was that the company consider expansion into international markets such as China. McManus responded by noting that the company believes that the external political risks are too high for a company of its size to expand outside of the United States, which he described as the best place in the world to be in the oil and gas business.
Energen today has a market capitalization of over $5.5 billion, an increase of over 65% in just one year. It has proved oil, gas and natural gas liquids reserves of over 330 million barrels of oil equivalent, primarily in the Permian Basin in west Texas and the San Juan Basin in New Mexico and Colorado. Mr. McManus said that these reserves should allow for production from its wells for many years into the future. The company is headquartered in Birmingham.
Energen has given many students at UAB the opportunity to be the first in their families to attend college through the Energen First Scholars Program. The program is aimed primarily at graduates of the Birmingham city school system who are first-generation college students, as well as graduates of central Alabama high schools who are first-generation college students.
“Strategic leadership through the eyes of the C-Suite” is taught by School of Business professor Stephen Yoder, and features visits from the senior-most managers of public or other large complex organizations who discuss their organizations’ strategies and how they are developed and implemented.
[Pictured left to right: Jory Eaton, Kellee Pearson, Mr. McManus, Khusbu Thala, Juben Tamrakar, Gerard Ramsey]