Gulf Oil Case Summary

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Gulf Oil Case Summary In the late 1970’s Gulf Oil Corporation noticed a negative outlook on the future of their company. Oil reserves were reaching all time lows, and the future didn’t look bright for Gulf. In response to the poor company performance, James Lee became chairman of Gulf Corp. and entered the company with a different outlook. Lee’s strategy was to focus on oil, and move away from Gulf’s history of acquiring coal mines, uranium mines, and other such resources. The second part of Lee’s strategy was heavily focuses on exploration and expenditures to discover new oil reserves. Under Lee’s leadership, the number one priority of Gulf Oil Corp. was to replace domestic reserves of hydrocarbons through discoveries and acquisitions. Eventually, falling oil prices led to increased debt due to a large focus on exploration that wasn’t necessarily resulting in increased profits for the company. In 1984, the CEO of Mesa Petroleum Company, Boone Pickens, began trying to gain a majority stake in Gulf Corp. Gulf was against this because they saw it as Pickens attempting to gain control of the company, only to benefit from the current revenues and reserves without preserving the company outlook. Boone Pickens was not concerned with the future of Gulf, but rather the major reserves of oil that they already possessed. The board of directors of Gulf Corp. wanted to keep their long-term goal of exploration and expenditures to gain new reserves and continue to help the company grow. As far as the board was concerned, it was imperative that Pickens did not gain majority control. In order to prevent Pickens from taking over, Gulf Oil Corp. management first attempted to reincorporate from Pennsylvania to Delaware. This move ensured that Pickens would need a majority shareholder vote to elect alternative directors. The reincorporation was only a minor speed bump
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