Western Atlas Inc. History

Address:

P.O. Box 1407
Houston, Texas 77251
U.S.A.

Telephone: (713) 963-2224
Fax: (713) 952-9837

Public Company
Incorporated: 1933 as Western Geophysical Company
Employees: 18,000
Sales: $2.1 billion
Stock Exchanges: New York
SICs: 1389 Oil and Gas Field Services, Not Elsewhere Classified; 1382 Oil and Gas Exploration Services

Company History:

Providing oil field and factory automation services around the globe, Western Atlas Inc. is the world's largest provider of seismic data to the oil industry and is the leading designer of assembly lines for U.S. vehicle manufacturers. The company was spun off from Litton Industries late in 1993. Sales during 1994, its first year of operation as an independent, topped $2 billion. About 75 percent of those receipts were garnered from foreign operations.

The precursor to Western Atlas was founded during the Great Depression by Henry Salvatori, who established the Western Geophysical Company in 1933 in a small Los Angeles facility. Salvatori hoped to profit in the burgeoning western U.S. oil industry using a recording truck that he and his two employees built. The truck used seismic surveying technology to find underground oil reserves. In short, seismic surveying was accomplished by penetrating the earth's surface (or ocean floor) with precisely timed sound waves. Sound waves reflected back to the earth's surface were detected by sensitive receivers and translated into readable media. Geophysicists and geologists used the data to help them identify promising structural features into which they could drill for oil and gas.

As oil companies scrambled to uncover new reserves during the 1930s, Western's business boomed. Within 18 months, the company was fielding ten seismic crews in California, Colorado, Kansas, Texas, and Louisiana. Less than five years after starting operations, Western Geophysical expanded overseas, initiating a legacy of international growth that the company would sustain throughout the twentieth century. Western sent a crew to Italy in 1937 and began searching for oil in Canada soon thereafter. Demand for Western's high-tech seismic services became so great in those two regions that management decided to start a Canadian subsidiary in 1952, Western Geophysical Company of Canada, Ltd., and an Italian subsidiary in 1957, Western Riserche Geofisiche.

At the same time that Western was growing its foreign and U.S. land-based seismic operations, its was also pioneering the search for oil below the ocean floor. Western began its marine geophysical activity in 1938 when a crew tethered one of its high-tech instrument trucks to a barge and began surveying bays along the Texas coast. Although the effort was a success, progress of its marine operations was hampered by a dispute about boundaries between state and federal waters. The boundary issue was finally resolved in 1952, and Western immediately set up marine operations in California. By 1955, Western was maintaining ten marine crews and had assumed the lead in the burgeoning marine geophysics industry.

Western's rampant growth during the 1930s, 1940s, and 1950s was partially attributable to a generally strong demand for seismic services by the oil and gas industries. Importantly, though, Western was able to surpass most of its peers during the period through technological leadership. Western was one of the few companies in its industry--not only in the early 1900s, but also into the 1990s--that used only seismic equipment that it had designed and built. Its advanced equipment research and development operations helped Western's crews throughout the world cultivate a reputation for being among the most effective in the industry.

Western's technological leadership was evidenced by its early innovations related to marine geophysics, and it became even more obvious in the 1950s, when Western invented the first practicable system for processing analog data on a large scale. At the time, crews would detonate explosives and then record the resultant seismic data on analog tape. Several different channels (analogous to frequencies) were processed individually to determine if their characteristics suggested the existence of recoverable oil and gas. Western developed a device that could simultaneously process 24 seismic channels. Meanwhile, its competitors were still handling each channel individually.

Western Geophysical continued to lead industry innovation in the 1960s, when it became one of the first companies to convert to digital recording and processing. Western also developed its breakthrough AQUAPULSE and MAXIPULSE systems, for which it was granted several patents. Those systems eventually eliminated the time-consuming and troublesome use of large explosives to generate seismic data, relying instead on safer generation techniques and much more sophisticated data processing methods. Similarly, in the 1970s, Western introduced the first reliable high-pressure air gun, which was used to generate seismic data. Later in the decade, the company was granted a patent for its KILOSEIS systems, which could receive and record seismic information more efficiently than any other device in the industry.

In 1960, the company was acquired by Litton Industries, a leading manufacturer of high-tech defense equipment. Litton had purchased Western Geophysical in an attempt to diversify and diminish its dependence on government contracts. Western benefitted from Litton's deep pockets and technological resources and was able to remain relatively autonomous from an operating standpoint. Shortly after the merger, Booth B. Strange took the reins at Western and moved the company from Los Angeles to Houston. During the late 1960s and 1970s, Western achieved dramatic growth and established itself as the leading global provider of seismic services.

Western's strategic success during the 1970s resulted from the efforts of several managers. John R. Russell, for example, joined Litton's Western Geophysical division in 1969, and by 1993 had worked his way up to vice-president of finance in the division. In 1990, he earned the president and chief executive slot. Russell succeeded M. Howard Dingman, Jr., who had been with the company for 42 years. Russell was joined at the helm by vice-president Thomas B. Hix, Jr., who had also started at Western Geophysical in 1969. The man who would have, perhaps, the greatest influence on Western Atlas during the 1980s and 1990s was Alton J. Brann. Brann, who joined Litton Industries in 1974 when he was 31 years old, would eventually oversee Western's transition to an independent company again and would become the company's chief executive.

Intelligent and hard working, Brann had overcome several challenges before rising to the position of CEO at Wester. Raised primarily by his grandparents in the Boston tenement district of East Cambridge, Brann began working at a young age, taking a part-time job at the Boston Museum of Science while in the seventh grade. He was paid $10 per weekend to supervise a group of young people who volunteered at the museum; "ten dollars a weekend was $40 a month--our rent was only $30," Brann recalled in the July 11, 1994 Los Angeles Business Journal. Soon after Brann started high school, his grandfather died from a prolonged illness, and, as his grandmother was unable to find a job, Brann began supplementing his weekend income by giving $100 science lectures at such organizations as the Kiwanis Club, and he also served as a counselor at a posh New Hampshire boys camp. Besides providing much-needed income, such work experiences helped him become more articulate and cultured.

Brann left the museum in 1963 at the age of 22, taking a job with Dynamics Research Corp. as a data technician. Working under project managers with doctoral degrees, Brann developed a desire for more formal education. In 1966, he enrolled in University of Massachusetts' new Boston campus, while continuing his work at Dynamics. Brann graduated with a B.S. in mathematics in 1969, and shortly thereafter was appointed department head at Dynamics. In 1973, he was offered a better position in Los Angeles with Litton, which hired him to supervise 170 workers in its Guidance and Control Systems division. "My first day on the job, we had a meeting at 6:30 in the morning," Brann recalled in the Los Angeles Business Journal article. "I was instantly in the middle of work. People were yelling at me, 'I'm behind schedule and what are you going to do about it? You're in charge now.' It was a very rough and tumble environment ... that suited me just fine."

Brann's talent and hard work were rewarded at Litton, and, as Brann progressed through the ranks of the defense contracting side of the business, Litton's Western Geophysical division continued to prosper. In addition, Litton became active in another industry during this time, factory automation, having begun designing and building factory assembly lines and related equipment for companies throughout the world. Litton's extension into the factory automation arena signified ongoing efforts to diversify during the 1980s and to maximize the effectiveness of Litton's technological resources. The diversification strategy was generally successful. As defense contracts escalated beginning in the mid-1980s, Western was able to offset the effects of a concurrent slump in the oil industry.

Indeed, during the early and mid-1980s the oil exploration industry fell on relatively hard times. Total worldwide expenditures on geophysical exploration tumbled to about $2.9 billion in 1985 and then plummeted 37 percent during the following two years to about $1.8 billion. As a result, the total number of exploration crews operating globally shrunk to just 329 land-based and only 59 marine crews by 1987. Although about 40 percent of those crews were operating in the United States, the companies that endured the shakeout with the least difficulty were those with extensive overseas operations. Western Geophysical fell into that category.

In addition to geographic diversification, Western Geophysical buoyed its financial performance during the early and mid-1980s by sustaining its technological edge over competitors. The company refined a high-tech, low-pressure air gun--the Litton Low-Pressure gun--that was capable of achieving deeper measurements than high-pressure guns. Western also introduced a "sleeve gun" in the late 1980s. The sleeve gun became a popular energy source for marine exploration and was eventually installed aboard most of Western's seismic vessels. With Litton's help, Western was also able to construct or revamp its computer processing centers, where seismic information was processed, to make them the most advanced in the world. By the early 1990s, Western was operating ten computer centers on several continents. Furthermore, Western made large strides in the area of three-dimensional seismography, which generated views of geophysical structures in three dimensions as opposed to a flat plane.

In 1987, Litton entered into a joint venture with Dresser Industries to form Western Atlas International, Inc. The resultant Western Atlas International offered clients a full service package, including: reservoir description services, whereby the characteristics of oil reserves were tested and specifically detailed; seismic services; core and fluid analyses; and wireline logging, which entailed dropping sensors down oil wells to measure rock porosity, chemical content of fluids in the well, and other factors. Western Geophysical became the largest division of Litton's new Western Atlas International, Inc. As exploration markets recovered slightly, Western Atlas's annual revenues surged toward the $1 billion mark in the late 1980s.

Litton's oil and gas services and its factory automation division posted steady gains during the early 1990s. In fact, each of the divisions were drawing sales of about $1 billion annually, accounting for roughly 40 percent of Litton's entire revenue base. Unfortunately, however, Litton's core defense contracting business was in a serious slump as a result of massive federal cutbacks in defense spending. By 1992, Brann, who had been named president and CEO of Litton, decided that Litton's best course would be to sell its seismic and automation divisions and invest the cash into its struggling, though still healthy, defense-related operations.

In preparation for the split, Litton bought back Dresser Industries' share of the Western Atlas joint venture and then combined all of the factory automation and seismic operations into a division named Western Atlas Inc. On December 31, 1993, Western Atlas was officially freed from Litton's control and began 1994 as an independent. Brann assumed the chief executive position at the newly formed company. Having prepared for the move--studying literature about the oil and gas industry and visiting factories from Detroit to Russia to push the company's automation systems--Brann was looking forward to the challenge of building Western into a successful independent corporation.

In 1994, Western Atlas had about $1.2 billion in sales from its seismic operations and about $900 million in revenues from its automation operations. Its seismic division was the largest in the world, with operations scattered throughout the globe. Moreover, the company was still considered the technological and profit leader, with operating margins at least 25 percent higher than the industry average. Likewise, Western was designing and building automated assembly lines in China, Russia, India, and Mexico, among other places. About 75 percent of the company's sales, in fact, were coming from countries other than the United States and Canada. Under Brann's direction, the company was focused on a strategy of long-term growth through acquisition going into the mid-1990s.

Principal Subsidiaries: Western Geophysical.

Western Atlas Inc. History

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