Ironwood Resources

A case study on developing effective price structures & managing price execution for an independent oil and gas producer for use in graduate and executive education.

This case study¹ focuses on pricing strategy within the volatile upstream oil and gas sector, where Ironwood Resources produces crude oil, natural gas, and natural gas liquids in the Permian Basin. After analyzing this case, students will develop skills in developing effective price structures for upstream oil and gas settings, conducting pocket price and margin analysis, customer account management, and price execution, while considering price dispersion and stakeholder resistance. They will also study how firms in competitive, commodity-driven markets can implement data-driven pricing reforms, balance customer relationships with profitability, and leverage transaction-level pricing decisions. The teaching note, posted separately, provides a comprehensive solution to the pricing analyses and additional context on industry dynamics and implementation challenges.

Introduction

James Wilson stared at the spreadsheet on his computer, the numbers blurring together as fatigue set in. Three weeks into his new job as Ironwood Resources’ first-ever Pricing Director, James was still discovering and untangling layers of complexity. He was quickly learning that the oil and gas industry operated by its own rules, with pricing structures that seemed to have evolved through a combination of market forces, legacy customer relationships, and intuitive judgment rather than effective pricing strategy principles.

Analytical by nature and having earned a stellar reputation for building price departments from the ground up, James was recruited by Ironwood specifically for his outsider perspective and pricing acumen. At forty-two, he had the quiet confidence of a seasoned pricing expert who had proven himself repeatedly and turned around under-performing business units with rigorous, data-driven pricing strategies. His previous employer, a major specialty chemicals company, had seen margin improvements of 4.5 percentage points after implementing his value-based pricing framework.

Now, sitting in his sparse office at Ironwood Resources’ Midland headquarters, with the faint sound of drilling rigs in the background, James knew he faced a different kind of challenge. The margin pressure that had prompted Ironwood’s CEO Maria Sanchez to create his position and recruit him aggressively wasn’t just about setting prices. It was about the company’s identity and future in an evolving industry.

“The deeper I dig, the more things become complex,” James thought, running a hand through his prematurely graying hair. He would need to build a compelling case for change to persuade the analytical minds in Ironwood’s executive suite, the relationship- and remuneration-focused sales team, and the technically driven operations department. With a notepad in hand, he began sketching out his approach to understand Ironwood’s actual profitability picture.

The Industry Landscape

James spent his first week immersing himself in the complex ecosystem of the oil and gas industry. Unlike the more stable chemicals sector, this world operated in boom-and-bust cycles driven by geopolitical influences and increasing environmental scrutiny. Since 2020, the industry had faced unprecedented volatility, with WTI crude prices swinging from the negative territory during the pandemic to over $100 per barrel during supply chain disruptions and conflicts, before settling into the current $70-85 range. He knew that the next upturn or downturn could happen at any time.

The Permian Basin, where Ironwood primarily operated, remained North America’s most prolific hydrocarbon region, accounting for approximately 40% of U.S. oil production. Consolidation had intensified competitive pressure on Ironwood, with majors like ExxonMobil acquiring prime acreage and mid-sized independents like Pioneer Natural Resources adopting disciplined, margin-focused strategies. Ironwood’s secondary operations in the Eagle Ford Shale and emerging assets in the Powder River Basin provided some geographic diversification, but the Permian remained its crown jewel.

The market dynamics were complex in this industry. OPEC+ continued to exert significant influence through production quotas, although compliance varied. Following previous boom-and-bust cycles, the U.S. shale producers had adopted capital discipline, focusing on free cash flow rather than production growth at all costs. The global oil demand had recovered from the pandemic lows but still faced long-term uncertainty due to energy transition efforts. Natural gas prices showed regional disparities, with U.S. Henry Hub prices relatively subdued compared to international LNG benchmarks.

The regulatory environment added yet another layer of complexity. With tightening methane emissions regulations, operators faced financial penalties for excessive flaring and venting. ESG considerations increasingly influenced capital allocation from institutional investors, an area where Ironwood had made some proactive investments. Finally, carbon pricing mechanisms affected operating costs in some jurisdictions, and water management became a critical operational and environmental concern.

Technology was also rapidly transforming the industry. Advanced analytics and AI were revolutionizing reservoir management and production optimization. Digitalization efforts that sought to reduce operating costs and improve efficiency across the value chain were being adopted enthusiastically by the majors. The electrification of oilfield equipment reduced on-site emissions but required significant capital investment. And finally, carbon capture, utilization, and storage projects were gaining traction as strategies to reduce emissions.

Within this complex industry landscape, Ironwood Resources had carved out a distinctive position for itself with three main business segments: (a) crude oil production, primarily light, sweet crude (65% of revenue); (b) natural gas production, primarily dry gas with some rich gas areas requiring processing (25% of revenue); and (c) natural gas liquids (NGL), including ethane, propane, butane, and natural gasoline (10% of revenue).

The company served a diverse customer base that included regional refineries (primarily mid-sized independent operators), major integrated oil companies (purchasing both for their own refineries and trading operations), petrochemical manufacturers (focused on specific NGL components), and marketing and midstream companies (who further aggregate and distribute to end-users).