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	TBP SPEECH ENTREPRENEURSHIP FROM AN OIL AND GAS PERSPECTIVE KEYNOTE ADDRESS FOR UNIVERSITY OF TEXAS GRADUATE SCHOOL OF BUSINESS CONFERENCE "SMALL BUSINESS AND THE ENTREPRENEURIAL SPIRIT" UT GRADUATE SCHOOL OF BUSINESS BUILDING (ACROSS THE STREET FROM THE LIBRARY-IN THE VICINITY OF 22ND AT SPEEDWAY) (35 MINUTES) MARCH 26, 1982

FRIDAY, 6:00 P.M.-7:00 P.M.

I. I AM EXTREMELY PLEASED TO HAVE THE OPPORTUNITY OF BEING WITH YOU TODAY AND TO PARTICIPATE IN THIS CONFERENCE ON "SMALL BUSINESS AND THE ENTREPRENEURIAL SPIRIT."

A. I WISH TO RECOGNIZE THE RGK FOUNDATION, THE INSTITUTE FOR CONSTRUCTIVE CAPITALISM OF THE GRADUATE SCHOOL OF BUSINESS, THE COLLEGE OF BUSINESS ADMINISTRATION STUDENT COUNCIL AND THE GRADUATE BUSINESS COUNCIL...FOR MAKING THIS CONFERENCE POSSIBLE.

B. I ALSO WANT TO ESPECIALLY RECOGNIZE THE STUDENTS IN ATTENDANCE WHO HAVE EARNED THEIR WAY TO THIS CONFERENCE THROUGH A RIGOROUS SELECTION PROCESS.

II. AS A KEYNOTE SPEAKER, MY ASSIGNMENT IS TO ADDRESS ISSUES WHICH ARE OF PRIMARY INTEREST TO THIS CONFERENCE.

A. IN MY OPINION, THE OVERRIDING ISSUE FACING SMALL BUSINESS...AND ALL BUSINESS...IS THE GROWING ENCROACHMENT OF GOVERNMENT IN THE FREE ENTERPRISE SYSTEM...RESULTING IN THE EROSION OF THE ENTREPRENEURIAL SPIRIT IN OUR COUNTRY.

B. I AM HOPEFUL HOWEVER THAT THIS DANGEROUS TREND IS REVERSING, OR AT LEAST NOT ADVANCING DUE TO THE LEADERSHIP OF PRESIDENT REAGAN AT THE NATIONAL LEVEL AND GOVERNOR CLEMENTS AT THE STATE LEVEL. [HANDWRITTEN ADDITION: FIRST TIME CALLED AND ENTRPRENUER]

C. PRESIDENT REAGAN UNDERSTANDS VERY WELL THE IMPORTANCE OF PRESERVING THE FREE MARKET SYSTEM.

1. HE UNDERSTANDS THAT INCREASING GOVERNMENT REGULATION DECREASES ECONOMIC FREEDOM AND PERSONAL FREEDOM AS WELL.

2. ECONOMIC LIBERTY AND PERSONAL LIBERTY ARE INSEPARABLE.

3. PRESIDENT REAGAN FURTHER DEMONSTRATED THIS UNDERSTANDING WHEN HE RECENTLY VETOED THE BILL THAT WOULD HAVE GIVEN HIM THE POWER TO ALLOCATE CRUDE OIL SUPPLIES AND IMPOSE PRICE CONTROLS IN THE EVENT OF SEVERE SHORTAGES.

4. APPARENTLY SOME MEMBERS OF CONGRESS DID NOT LEARN FROM THE "OIL SHORTAGE EPISODES" DURING THE 1970'S...NO BUREAUCRACY CAN ALLOCATE RESOURCES AS EFFECTIVELY AS THE FREE MARKET.

D. TURNING TO THE STATE OF TEXAS...WE ARE INDEED FORTUNATE TO HAVE A GOVERNOR SERVING US WHO IS A PRODUCT OF THE FREE ENTERPRISE SYSTEM AND WHO EXEMPLIFIES THE ENTREPRENEURIAL SPIRIT.

1. BILL CLEMENTS, A BUSINESSMAN WHO HAS INTRODUCED EFFECTIVE MANAGEMENT PRACTICES TO STATE GOVERNMENT. {STRICKEN TEXT: IS CONCERNED WITH THE PLIGHT OF SMALL BUSINESS IN TEXAS}

2. ALTHOUGH WE HAVE THE STRONGEST ECONOMY OF ANY STATE IN THE NATION, GOVERNOR CLEMENTS WANTS TO PRESERVE THIS POSITION FOR THE FUTURE.

3. HE HAS APPOINTED A 25-MEMBER TASK FORCE ON SMALL BUSINESS WHICH WILL STUDY THE PROBLEMS OF SMALL BUSINESSES IN TEXAS AND REPORT THEIR RECOMMENDATIONS TO THE GOVERNOR BY MID-JUNE.

4. THE TASK FORCE WILL CONCENTRATE ON FOUR ISSUES:
A. GOVERNMENT REGULATIONS
B. EDUCATION
C. INTERNATIONAL TRADE
D. CAPITAL FORMATION AND RETENTION

5. THE COMMITTEE'S RECOMMENDATIONS WILL FORM A BASIS FOR LEGISLATION TO BE SUBMITTED BY THE GOVERNOR TO THE NEXT SESSION OF THE TEXAS LEGISLATURE. [HANDWRITTEN ADDITION: HOW REFRESHING IT IS TO HAVE A SUCCESSFUL BUSINESSMAN LEADING OUR STATE AS OPPOSED TO A CAREER POLITICIAN]

III. I WOULD NOW LIKE TO DIRECT MY REMARKS MORE SPECIFICALLY TO THE THE FREE ENTERPRISE SYSTEM AS IT APPLIES TO THE OIL AND GAS INDUSTRY.

A. AMERICA'S ECONOMIC GROWTH WAS ATTAINED PRIMARILY BECAUSE OF ADHERENCE TO THE FREE-ENTERPRISE SYSTEM, THE BASIC STRENGTH OF THAT SYSTEM IS THE ENTREPRENEURIAL SPIRIT—A WILLINGNESS TO ACHIEVE GREATNESS.

1. INDIVIDUALS AND COMPANIES IN AMERICA HAVE BEEN WILLING TO INVEST THEIR TIME AND MONEY IN A FREE MARKET FOR THE OPPORTUNITY TO EARN A PROFIT, UNENCUMBERED BY GOVERNMENT INTERFERENCE.

2. INDEED, THIS WAS A BASIC PRECEPT IN OUR NATION FROM ITS EARLY FOUNDING UNTIL MODERN TIMES.

B. HOWEVER, BEGINNING WITH THE "NEW DEAL," AMERICA LOST SOME OF ITS WILLINGNESS TO TAKE RISKS AS GOVERNMENT ASSUMED THE ROLE OF "PROVIDER."

1. THE RESULT HAS BEEN A DECLINE IN PRODUCTIVITY.
A. IN THE FINAL ANALYSIS, PRODUCTIVITY IS THE MOST CRUCIAL ASPECT OF A SUCCESSFUL ECONOMY.

2. ONE KEY TO PRODUCTIVITY IS CAPITAL INVESTMENT.
A. IN RECENT YEARS, HOWEVER, INVESTMENT HAS BEEN STIFLED BY INCREASING GOVERNMENT REGULATION...AND THE GOVERNMENTS OWN REQUIREMENT FOR CAPITAL.
B. GOVERNMENT REGULATION IS ESTIMATED TO COST INDUSTRY OVER $100 BILLION ANNUALLY.{STRICKEN TEXT: FOR SUCH THINGS AS SAVING THE SNAIL DARTER}
C. GOVERNMENT INTERVENTION IN THE FREE MARKET HAS BEEN PARTICULARLY DEVASTATING IN THE FIELD OF ENERGY. (1) WE LOST OUR SELF-SUFFICIENCY BECAUSE OF GOVERNMENT REGULATION AND PRICE CONTROLS WHICH HINDERED THE SEARCH FOR NEW OIL AND GAS RESERVES. (2) THE GOVERNMENT SINGLED OUT THE OIL AND GAS INDUSTRY AS A SOURCE OF INCOME WHEN IT IMPOSED THE SO-CALLED "WINDFALL PROFITS TAX," WHAT INDUSTRY WILL BE NEXT? WILL THERE BE A "WINDFALL PROFITS TAX" ON THE SALE OF A HOME? (3) WE HAVE ALL HEARD A LOT ABOUT THE POSSIBLE DEREGULATION OF GAS—SOMETHING WHICH WE BELIEVE IS VITAL, HOWEVER, IF THIS DEREGULATION DOES, IN FACT, TAKE PLACE, 53% OF ANY INCOME DERIVED WOULD GO TO THE GOVERNMENT...EVEN WITHOUT A "WINDFALL PROFITS TAX." (4) LET ME ASK—HOW MANY BARRELS OF OIL OR CUBIC FEET OF GAS HAS THE GOVERNMENT FOUND LATELY?

C. FORTUNATELY, THE ENTREPRENEURS IN THE NATION'S PETROLEUM INDUSTRY, THOUGH PERHAPS FEWER IN NUMBERS, DID NOT LOSE THEIR FAITH IN THE FREE-ENTERPRISE SYSTEM.

1. THIS FACTOR, COUPLED WITH DECONTROL OF CRUDE OIL PRICING BY PRESIDENT REAGAN, RESULTED IN INCREASED CRUDE OIL SUPPLIES AND DECREASED WORLD PRICES.

2. {STRICKEN TEXT: NATIONALLY, PRESIDENT REAGAN IS EMPHASIZING FREE ENTERPRISE, IN TEXAS, GOVERNOR CLEMENTS HAS BROUGHT A FREE-ENTERPRISE/GOOD BUSINESS APPROACH TO STATE GOVERNMENT RESULTING IN THE MOST EFFECTIVE STATEHOUSE IN AMERICA}

IV. THE CONCEPT OF ENTREPRENEURSHIP CAN ALSO BE APPLIED SUCCESSFULLY WITHIN THE FRAMEWORK OF PRIVATE AND PUBLICLY HELD BUSINESS OF ALL SIZES.

A. MESA PETROLEUM CO, HAS ACHIEVED UNUSUAL GROWTH DURING ITS 18 YEARS EXISTENCE, THE PARAMOUNT REASON FOR THE COMPANY'S SUCCESS IS ITS UNDERLYING MANAGEMENT PHILOSOPHY WHICH EMBRACES THE VERY ESSENCE OF THE FREE-ENTERPRISE CONCEPT. [HANDWRITTEN ADDITION: TARGET CO. THAT HAS REPLACED THEIR ANNUAL PROD FOR 18 STRAIGHT YEARS (EXPLAIN)]

1. I WOULD LIKE TO SHARE SOME OF THE DETAILS OF THIS PHILOSOPHY WITH YOU.

B. WE BELIEVE THAT MANAGEMENT'S PRIMARY RESPONSIBILITY IS TO ENHANCE THE INVESTMENT OF OUR SHAREHOLDERS, THIS REQUIRES THAT BOTH MANAGEMENT AND EMPLOYEES BE TOTALLY DEDICATED TO MAKING THE SHAREHOLDER NO. 1. IN SMALL, PRIVATE BUSINESS. THIS SAME CONCEPT CAN BE APPLIED TO ITS CUSTOMERS.

1. TOO OFTEN, THE FORGOTTEN STOCKHOLDER IN A COMPANY PUTS UP HIS MONEY AND TAKES HIS CHANCES.

2. IT'S THE STOCKHOLDER WHO IS WILLING TO MAKE INVESTMENTS AND TAKE RISKS WHO IS THE BACKBONE OF OUR FREE ENTERPRISE SYSTEM.

3. OUR COMPANY RECOGNIZES THIS

4. HOWEVER, MANY IN CONGRESS LOOK AT BUSINESS WITH AN EVIL EYE, THEY HAVE CREATED A GOVERNMENT SYNDROME ON CORPORATIONS, THIS IS UNFORTUNATE BECAUSE GOVERNMENT IS OVERLOOKING THE FACT THAT THE "OWNERS" OF THESE {STRICKEN TEXT: PAID} CORPORATIONS" ARE MILLIONS OF CITIZENS IN OUR SOCIETY WHO BELIEVE IN THE FREE-ENTERPRISE SYSTEM.

5. MESA'S ORIENTATION TO ITS SHAREHOLDERS STARTS WITH ITS PEOPLE—THEY ARE TREMENDOUSLY DEDICATED, WHICH COMES FROM BEING PROPERLY MOTIVATED WITH BASIC ENTREPRENEURIAL CONCEPTS.
A. THIS CAN BE DONE MOST EFFECTIVELY BY GIVING ALL EMPLOYEES A "CUT OF THE PIE"—EVERYONE LIKES TO MAKE MONEY—IT IS A VERY STRONG MOTIVATIONAL TOOL. IN FACT, I AM SURE IT IS THE STRONGEST AND BY CREATING A TEAM CONCEPT WITH EVERYONE WORKING TOWARD A COMMON GOAL. (1) OVER 95% OF MESA'S EMPLOYEES ARE ALSO STOCKHOLDERS. THIS IS ACHIEVED THROUGH A STOCK PURCHASE PLAN. (A) MESA MATCHES DOLLAR FOR DOLLAR THE EMPLOYEES CONTRIBUTION WHICH CAN EQUAL 6% OF HIS SALARY. (2) ALSO, EACH EMPLOYEE PARTICIPATES IN A NONCONTRIBUTORY PROFIT-SHARING PLAN WHICH HAS BEEN INVESTED HEAVILY IN MESA COMMON STOCK AND IS CURRENTLY INVESTED PRIMARILY IN MESA ROYALTY TRUST. (A) SINCE ITS INCEPTION THROUGH DECEMBER 31, 1981, THE PLAN HAS AVERAGED 23% ANNUAL GAIN ON INVESTMENT. (B) FROM 1964 THROUGH 1981, MESA CONTRIBUTED $10 MILLION TO THE PLAN, AND EMPLOYEES MADE $6 MILLION. (C) IN 1980, 26% OF OUR EMPLOYEES MADE MORE FROM THEIR PROFIT-SHARING TRUST THAN THEY DID ON SALARY. (3) OUR KEY PERSONNEL ARE ALSO HOLDERS OF STOCK OPTIONS, YOU WILL FIND THT MESA'S MANAGEMENT LOOKS AT SITUATIONS VERY MUCH LIKE STOCKHOLDERS AND NOT LIKE PROFESSIONAL MANAGERS PERPETUATING THEIR JOBS. (4) THE JOBS CREATED BY MESA HAVE BEEN AT NO COST TO THE GOVERNMENT, BUT WHAT HAS BEEN THE COST TO SOCIETY OF ALL THE NONPRODUCTIVE JOBS CREATED BY THE PERPETUATING BEAURACRACY FOUND IN GOVERNMENT?

6. AN IMPORTANT FACTOR IN MOTIVATION IS LEADERSHIP.
A. I THINK I HAVE BEEN SUCCESSFUL IN INSTILLING ENTREPRENEURIAL INSTINCTS OP NURTURING THEM IN MOST OF OUR PEOPLE, (1) THEY ARE WILLING TO TAKE RISKS, THEY ASSESS RISKS WELL AND CAN MAKE DECISIONS QUICKLY, I BELIEVE THIS HAS A GREAT DEAL TO DO WITH SUCCESS.
B. IT IS IMPORTANT TO SHOW YOUR PEOPLE THAT THEY ARE NO. 1. YOU LEAD THEM TO THAT POINT AND LEAVE NO DOUBT IN THEIR MINDS. (1) YOU MUST INSTILL A TOTAL SENSE OF PROFESSIONALISM. {STRICKEN TEXT: IF YOU LOOK LIKE A DUCKER, YOU WILL PLAY LIKE ONE} [HANDWRITTEN ADDITION: DON'T WORRY ABOUT THE CREDIT JUST GET THE JOB DONE] (2) IT MAY SOUND CORNY, BUT IF YOU BELIEVE, THEN YOUR EMPLOYEES BELIEVE. (3) GOOD COMMUNICATIONS ARE VITAL IF EMPLOYEE MOTIVATION IS TO BE CHANNELED TOWARD A COMMON GOAL.

C. THE RESULT IS A HIGHLY MOTIVATED, COHESIVE TEAM WORKING TOWARD THE SAME GOALS.

1. CONSEQUENTLY, MESA ENJOYS EXTREMELY HIGH PRODUCTIVITY FROM ITS EMPLOYEES.
A. MESA IS HISTORICALLY A LEADING COMPANY AMONG THE FORTUNE 1000 IN THE RATIO OF ASSETS TO EMPLOYEES. WE CURRENTLY HAVE ASSETS OF APPROXIMATELY $2 BILLION AND [ONLY] 900 EMPLOYEES.
B. WE HAVE A SMALL GROUP, WORKING HARD. THERE ARE NO WARM BODIES—EVERYONE IS A CONTRIBUTOR—AND WE KEEP [EMPLOYING] THIS THEME. [HANDWRITTEN ADDITION: 40 YEARS TOO LONG, UNHAPPY. AT EVERY MEETING OF THE EMPLOYEES, USUALLY TWICE A YEAR, GET HAPPY, MOVE ON IF YOU ARE NOT HAPPY AT MESA.] (1) OUR PEOPLE ARE GIVEN RESPONSIBILITY AND THE AUTHORITY TO GET THE JOB DONE, FEWER PEOPLE WITH MORE AUTHORITY INCREASES PRODUCTIVITY AND ENABLES THE COMPANY TO REACT MORE QUICKLY TO OPPORTUNITIES THAN THE COMPETITION. (A) FEWER AND MORE PRODUCTIVE EMPLOYEES MEAN WE ARE ABLE TO PAY MORE.

D. AGAIN, BASIC TO ALL OF MESA'S MANAGEMENT PHILOSOPHY IS THE FREE ENTERPRISE ORIENTED CONCEPT OF PUTTING THE SHAREHOLDERS INTEREST FIRST.

1. TOO OFTEN, COMPANY MANAGEMENTS ARE MORE CONCERNED WITH THEIR OWN PRESERVATION THAN ENHANCING THEIR SHAREHOLDERS'S INVESTMENTS. THEY ARE GENERALLY NOT GOOD RISK TAKERS, AND THEIR COMPANIES SUFFER FROM A LACK OF PRODUCTIVITY.

2. COMPANIES WITH THAT ATTITUDE DO NOT COMMAND A REASONABLE P/E RATIO SUCH AS MESA HAS ENJOYED, BECAUSE THEIR SHAREHOLDERS LACK CONFIDENCE IN THEIR ABILITY TO "MAKE THINGS HAPPEN."

E. PERHAPS THIS "SHAREHOLDERS-FIRST" POLICY IS BEST ILLUSTRATED BY THE RESULTS THEMSELVES.

1. MESA WAS A LEADER IN ESTABLISHING THE ROYALTY TRUST CONCEPT AS A MEANS OF ENSURING THAT SHAREHOLDERS RECEIVE THE FULL VALUE OF THEIR ASSETS.
A. THE ROYALTY TRUST GRANTS EACH SHAREHOLDER A DIRECT OWNERSHIP INTEREST IN PRODUCING PROPERTIES, PROVIDING A DIRECT INCOME STREAM WHICH FORCES THE STOCK MARKET TO RECOGNIZE THE VALUE OF THE UNDERLYING ASSETS.

2. THIS "SHAREHOLDER-FIRST" POLICY IS ALSO REFLECTED BY THE RESULTS OF A HYPOTHETICAL SHAREHOLDERS INVESTMENT IN THE COMPANY'S COMMON STOCK.
A. A $10.000 INVESTMENT IN 1964 WOULD HAVE GROWN TO $284,000 AS OF DECEMBER 31, AN APPROXIMATE 2,742% INCREASE OR 21% COMPOUND ANNUAL RATE OF GROWTH.

V. MANAGEMENTS OF MANY LARGE CORPORATIONS ARE NOW SAYING THAT THEY WANT TO INSTITUTE AN ENTREPRENEUR-TYPE MANAGEMENT.

A. MORE AND MORE, THEY ARE REALIZING THAT MANY SMALLER COMPANIES ARE BETTER MANAGED AND MORE EFFICIENT.

VI. IN CONCLUSION. THE FREE-ENTERPRISE SYSTEM IS WHAT OUR COUNTRY IS ABOUT.

A. AS LONG AS THE PRIVATE SECTOR IS ALLOWED TO TAKE CHANCES IN AN ENVIRONMENT FREE FROM GOVERNMENT INTERFERENCE, WE ALL WIN.

1. STOCKHOLDERS EARN A RETURN ON THEIR INVESTMENTS.

2. INDUSTRY GROWS—CREATING JOB OPPORTUNITIES FOR OUR CITIZENS.

3. A HEALTHY ECONOMY PRODUCES TAX INCOME TO FINANCE SERVICES OFFERED OUR CITIZENS BY THE GOVERNMENT.

B. THE FINANCIAL SUCCESSES GENERATED BY THE FREE-ENTERPRISE SYSTEM ALSO ENCOURAGE VOLONTEERISM AND SOCIAL RESPONSIBILITY SO VITAL TO OUR COUNTRY'S WELL BEING.

1. THOSE WHO HAVE BEEN SUCCESSFUL IN BUSINESS HAVE A RESPONSIBILITY TO PROVIDE PERSONAL AND ECONOMIC LEADERSHIP TO HELP OUR SOCIETY MEET ITS HUMANITARIAN, EDUCATIONAL AND CULTURAL OBLIGATIONS.

2. IT IS PARTICULARLY IMPORTANT FOR GRADUATES OF UNIVERSITIES, SUCH AS THE UNIVERSITY OF TEXAS, TO PARTICIPATE IN THE FINANCING OF THE SCHOOLS OPERATIONS.

3. THIS SUPPORT WILL HELP PERPETUATE A FREE-ENTERPRISE SYSTEM THAT HAS BEEN SO GOOD TO OUR COUNTRY AND THE PEOPLE OF THE WORLD.

C. IN CLOSING, I WOULD LIKE TO ISSUE A CHALLENGE TO THE PARTICIPANTS OF THIS CONFERENCE—INVOLVE YOURSELF IN THIS MEETING, CONTINUE TO BE A STUDENT OF THE FREE ENTERPRISE SYSTEM THROUGHOUT YOUR LIFETIME AND MOST IMPORTANT—PARTICIPATE IN AND PROTECT THE {STRICKEN TEXT: FREE ENTERPRISE} SYSTEM. {STRICKEN TEXT: IN THE UNITED STATES.}

D. I WILL BE PLEASED TO ANSWER YOUR QUESTIONS.