By Rheaa Rao and Tatyana Shumsky
The energy sector is thirsty for finance executives with
deal-making skills as rising oil prices spur merger activity and
companies seek to fill vacancies created during the market
bust.
So far this year, 23 deals have been announced, proposed or
completed by U.S.-based oil and gas companies in the S&P 1500,
according to Dealogic. The total value -- $47.4 billion -- is
already 34% higher than the $35.3 billion worth of deals announced,
proposed or completed during all of last year.
The flurry of activity suggests that oil and gas companies are
poised to grow after years of retrenchment.
Companies such as National Oilwell Varco Inc., Gulf Island
Fabrication Inc., and Marathon Oil Corp. have recruited new finance
chiefs with experience in mergers and acquisitions.
"As the activity increases, it would increase the skill level
required for a new CFO," said Preston Caldwell, an equity analyst
at Morningstar.
More than 40% of oil and gas companies in the S&P 1500 index
announced a CFO departure between 2012-2017, according to The Wall
Street Journal analysis of S&P Global Market Intelligence data.
Of those, almost 30% have changed CFOs more than once. The moves
coincided with a historic collapse in crude-oil prices and a series
of bankruptcies that decimated the sector.
During that same period, 35% of the nation's largest 1,000
companies changed CFOs at least once, according to Korn/Ferry
International.
Crude-oil prices tumbled from more than $100 a barrel in June
2014 to a 12-year low of $26.21 in February 2016, erasing more than
three-quarters of their value. Stock prices followed suit, as the
SPDR S&P Oil and Gas Exploration Exchange Traded Fund fell 71%
during the period. More than 200 U.S.-based oil-and-gas companies
filed for bankruptcy in 2015 and 2016, according to law firm Haynes
and Boone LLP.
National Oilwell Varco didn't halt deal making during the
downturn, and acquisitions continue to be a crucial aspect of its
growth strategy, said Loren Singleton, the company's vice president
of investor and industry relations.
Jose Bayardo, the company's CFO, is a former investment banker
who joined National Oilwell in August 2015. He succeeded former
finance chief Jeremy Thigpen, whose priority during the downturn
was cost-cutting, Mr. Singleton said.
The Houston-based company purchased a business unit from Trican
Well Service Ltd., a Canadian oilfield services company last June
for $53.5 million Canadian dollars ($40 million). National Oilwell
signed a joint venture with Saudi Aramco in May and will own a 70%
stake in the new venture.
"He [Mr. Bayardo] has been an important part of that strategy
and execution on that strategy," said Mr. Singleton.
Marathon Oil hired Dane Whitehead as its finance chief in March,
shortly before the company announced two large deals. The
Houston-based oil-and-natural gas exploration and production
company reached an agreement to sell its Canadian subsidiary for
$2.5 billion in March. It also acquired land in the oil-rich
Permian Basin for $700 million.
Mr. Whitehead previously worked at EP Energy Corp., a company
that, according to Dealogic, completed 10 deals during his tenure.
That dealmaking experience makes him a good fit for Marathon, which
seems to be ramping up its M&A activity, said Muhammed Ghulam,
an analyst at Raymond James.
Marathon declined to comment.
Tough market conditions forced many companies to write down the
value of their oil and gas properties, turning up the pressure on
executives, said Deborah Byers, partner and U.S. energy leader at
Ernst & Young LLP.
"We've seen a lot of churn in management teams in general, just
because there's a lot of stress in the industry," she said.
Three finance chiefs resigned from Gulf Island Fabrication Inc.
since 2012. The Houston-based builder of offshore oil and gas
platforms named David Schorlemer CFO in January. He succeeded
Jeffrey Favret who stepped down late last year after taking the
reins from Roy Breerwood III, in 2013. Mr. Breerwood succeeded
Robin Seibert who left the company in 2012.
The pressure to cut costs and lay off staff in the oil and gas
sector took a toll on finance chiefs in the industry, said William
Chiles, a company director for Gulf Island.
Mr. Chiles said that Mr. Schorlemer has different strengths than
the previous finance chief, who had an accounting background. "Our
current CFO has better financial engineering skills, more M&A
and capital market skills that we need today," he said.
Despite the bloodletting among finance chiefs during the oil
downturn, those who stuck it out in the industry are likely to be
in demand for years, said Rob Thummel, portfolio manager at
Tortoise Capital Advisors. Many of these executives navigated the
cratering oil prices while negotiating lower borrowing rates and
soothing concerned shareholders, he said.
"That experience, as painful as it was for their pocketbook and
their stock options, was valuable for their career development,"
Mr. Thummel said. "Someone getting through the tough times is what
you want in a CFO."
Write to Rheaa Rao at rheaa.rao@wsj.com and Tatyana Shumsky at
tatyana.shumsky@wsj.com
(END) Dow Jones Newswires
June 13, 2017 08:14 ET (12:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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