Insight into Independents: Interview with Two Leaders
Editor’s Note: While usually we interview two seasoned professionals, this time we did something a bit different. We hope you enjoy the views both of an industry veteran and of a YP who is also a veteran, but of a different kind.
Please describe your career path, from university graduation to independent oil and gas company. Is there anything in particular that attracted you to the company you work for now?
JF: I studied geology at the University of Wales (Aberystwyth University), in a course designed to prepare graduates for the oil business. Unfortunately, when I graduated in 1979, there were very few jobs in the oil business (and “mud logger” sounded unappealing!). I went into the mining business as a mineral exploration geologist in southern Africa with De Beers Anglo American group. But after 6 years of living in the bush I wanted to drive a desk, not a Landrover, so we came back to Britain.
I worked several jobs with large oil companies. My last posting was in Syria. There I was approached by Maersk Oil and I thought it was a very interesting offer because it was an opportunity to get involved in business development with a company that has a fantastic brand, history, reputation, and foundation to grow from. I think Maersk’s production, its employees’ technical skills and pioneering mindset, plus the access to capital through the group and the international footprint through group activities such as Maersk Line are amazing differentiators from a business developer’s point of view. I saw very early on even before I came here that it would be easy to sell our story as an attractive partner around the world. So that, plus the fact that business development and commercial activities in general are gaining in prominence at Maersk Oil, attracted me.
CW: Following my graduation and commissioning from West Point I spent 6 years as an officer in the US Army. Following my second tour in Iraq, I was recruited by an independent oil and natural gas company as a production engineer. I spent 3 years in its Gulf of Mexico and Gulf Coast business units. This summer, I joined Anadarko’s Carthage/Haynesville business unit. Anadarko is a great company that challenges employees with responsibility, offers great learning opportunities, and really sticks to a set of core values—that means the most to me.
Recently, we’ve seen the spin-off of refining from Marathon and the impending separation at ConocoPhillips. Do these transactions signify a growing appreciation of the globally active “independent” business model?
JF: This is a good question. It’s tricky to read this one. I mean, you could be cynical and say companies are moving toward the independent model to address short-term problems, but it does seem there has been a fundamental shift in the way oil companies organize themselves. Some 20 to 30 years ago there was a general feeling that integrated companies were better investments because they had a more predictable business, being better able to ride the oil price cycle, and so were more stable with lower financing cost. At the same time, in those lower price environments, the “pure play” upstream companies were less attractive because the exposure to the upside was not expected, but now we have seen a general shift in oil prices upward and the exposure to the upside is more important to certain investors. Anecdotally, a banker friend of mine told me downstream has only really enjoyed 3 good years of business in the last 35 years!
The downstream sector is essentially a utility business with stable returns and steady, long-term, lower risk. People who invest in upstream are OK with higher risk because they want to be exposed to larger upsides that come along when explorers get it right and have great success and strike at the right time in the oil price cycle. The answer to the question is perhaps subjective.
CW: Each company is different and is valued differently among the investment community, so this question is probably better addressed by analysts. For us, we do two things really well: We develop unconventional resources including shale, tight gas, fractured reservoirs, and coalbed methane, and we are a leader in deepwater exploration.
How significant are North American shales, global unconventionals, and deep water to your global portfolio?
JF: I could argue that the fields in Denmark and Qatar are pretty unconventional and Maersk Oil has a high exposure to these very challenging and unique plays. Deep water is becoming an increasingly important part of the portfolio; something like 60% of our capital in the next 5 years will be invested in deepwater projects such as those that we have in the Gulf of Mexico, Brazil, and Angola. In both Brazil and Angola we have some high-potential appraisal wells being drilled this year. So deep water is very much a part of Maersk Oil’s makeup these days.
A decision was made before I arrived here that we would not get into shale gas. Whether we should be in liquids-rich plays is another question. I am still not convinced we have the organizational reach to be effective and competitive in a new market like that. Maersk Oil is very good with unconventional drilling, horizontals, and complex completions, but to say that we can go into a new country effectively—North American onshore—and be competitive as an operator is a question mark for me. However, we will continue to watch developments in the industry and regularly review this decision.
CW: As signified by the company’s recent moves, Anadarko certainly recognizes the potential of each of these. Despite the nontraditional gas/oil commodity price relationship, they offer real value and also help move the US toward greater energy security. As a veteran of Operation Iraqi Freedom, I know the human cost of reliance upon energy from foreign nations that may not be friendly.
How have your company’s operations and strategy been influenced by the global recession (and nascent recovery)?
JF: My view is that we have to take a very long-term view on our investments. Oil projects by nature are very long term—we are talking about 10-, 20-, 30-year cycles—so I think it’s very risky not to invest during economic downturns. You just suffer later on. Thankfully, we enjoy the backing of the A.P. Moller-Maersk Group, which takes a long-term view of all its business units and has a strong balance sheet. The group has said that Maersk Oil will remain an investment priority.
CW: We’ve built a deep and balanced portfolio of assets that provides tremendous flexibility. As we began to see a widening gap in the values of oil and natural gas, we have been able to allocate capital investment toward areas of our portfolio that offer better liquids yields that generate higher margins. From a tactical viewpoint, I’d say that we keep an eye on one area we can control and that’s managing our cost structure. We are always seeking to drive efficiencies while maximizing economic return per well. This focus on working smarter has also continuously improved our safety performance. We’re growing fast, so we must stay ahead of operations and allocate capital effectively.
What are the advantages for a young professional starting a career with an independent?
JF: I can tell you why young professionals should join Maersk Oil: We are a company that has the ambition and means to grow significantly over the coming years with a portfolio of good projects. We have a track record of giving new starters real responsibility early on in their careers, and if they take advantage of that, they are assured an exciting global career path.
CW: I think you’ll be a lot closer to the proverbial “drill bit.” You’ll enjoy more freedom and at the same time be challenged quickly with responsibility.
How does the culture in an independent differ from that in a major? Do you think there is more interaction between management and/or supervisors and the younger professionals?
JF: I believe there is more interaction among managers, supervisors, and young professionals than in a giant company. If we speak generally, the culture is less bureaucratic, faster paced, and a bit more flexible.
Every company needs global processes, structures, and practices to a degree, but we believe ours are fit-for-purpose, allowing Maersk Oil to be flexible and agile with fast decision-making. Each company has a culture of its own. We are building on our traditional pioneering mindset and adding a greater degree of transparency to our culture to become a natural collaborator of choice for partners and employees.
CW: Having never worked for a major I can’t compare. Coming from the military, I can say that in general there is much less red tape to negotiate at the two companies I’ve worked for than within the US Army. As far as the culture is concerned, I think that is a function of the company’s leadership, not the type of company. I’ve seen both good and bad leadership since leaving West Point 10 years ago and in each place I’ve worked the work culture has oftentimes been a reflection of its leadership style. I think we can all agree that interaction between upper management and young professionals can benefit both parties, be they vice presidents or vice admirals. As an Army captain, I gained as much from the time spent with my corporals as I did with my fellow officers.
Are independents making a significant research and technology effort?
JF: I have worked for three independents and ConocoPhillips (a major) and they all had some involvement in research—each done differently. We all tend to be “niche focused” on what areas of business are important to us rather than just speculating on what might become important, but our project portfolio is naturally much smaller than a major’s. At Maersk Oil we have a new technology center in Qatar and a lot of work is going on in completions and well conformance. We focus our research on relevant challenges for our business. I think it’s the same across the independents.
CW: Technology is a significant part of our business. It’s what enables us to explore in deep water, and it’s responsible for the enormous natural gas and oil resources now being recovered from shale formations in the US. I think what the E&P world is discovering is that research and development dollars are well spent on the completions side. Compared to conventional onshore tight gas or amplitude plays in the Gulf of Mexico, these newly discovered shale gas or shale oil reservoirs have shown us the value of effective completions technologies. Money spent on R&D with respect to completions can help recover more resources and keep costs low.
Another area in which our technology division is expending effort is on water conservation and chemistry. Horizontal completions in shales require greater volumes of water than conventional development; hence, water must be sourced and used responsibly. We are constantly seeking new ways to conserve resources and reuse as much produced water as possible. A better understanding of water chemistry is necessary to identify which water sources—whether produced, brackish, or freshwater—will economically satisfy water demands.
Do the independents prefer to invest in research programs in universities and research institutes rather than having in-house research facilities?
JF: Maersk Oil does a bit of both. A dedicated team in Copenhagen looks at new technologies such as the breakthrough “TriGen” technology—an oxy-fuel system that can exploit low-quality gas resources to produce power, water, and “reservoir-ready” CO2 for enhanced oil recovery purposes. We have a brand-new research and technology center in Qatar that has already applied for patents as it studies improvements for our well technology and oil recovery. We also have joint industry projects in collaboration with universities, such as our 5-year chalk study with the University of Copenhagen or our BioRec project with Novozymes, which is looking at microbiology and biotechnology for applicable solutions to some of the problems facing oil recovery efforts.
CW: Perhaps. Both methods will certainly yield benefits. In-house resources give independents with the personnel available the ability to control their own destiny regarding research. Smaller independents without the resources for an in-house group would benefit from an academic collaboration.
Do you find there is quicker dissemination/adoption of technologies at an independent (relative to a major) due to its smaller size?
JF: I would like to think so, but it’s a balance between bureaucracy vs. resources. Super majors have enormous resources with a tremendous number of people, but they may be bogged down by their own internal systems and procedures. We have less of that, but we have fewer resources to meet technology challenges. There is a balance I think we tend to get right.
CW: In my view, as much speed as a company gains from its smaller size, it might also miss out on the ability to discover and in turn test new technology at an early stage, thus missing out on first or early-adopter advantage. This can be avoided by keeping a close eye on new technologies by attending industry conferences and reviewing publications.
The majors are currently engaged (in North America) in a campaign to educate the public about the benefits of shale exploration. How do you see the independents contributing to changing the public’s perception about the oil and gas industry?
JF: This is an issue I feel very strongly about. I think it’s so sad that the public tends to have one view of the industry—typically negative. We have got to do better as an industry in educating the public and I would like to start with children. Getting them to understand the reality of the world they live in and the role oil and gas play in their life is essential. They should also understand what the trends are because things are changing.
I think it has to be a concerted industry effort. It is not easy, and there have been efforts in the past, but they have not worked very well. Somehow we need to change that because if we don’t, our university students will not pursue the subjects they need to join an industry like ours.
CW: We’re all working together on sharing our story with stakeholders. As independents, we don’t invest that much in direct advertising; however, we are very engaged with our local communities and with trade organizations such as the American Natural Gas Alliance, the Independent Petroleum Association of America, and the American Petroleum Institute. However, the best way we can impact this perception is through leadership by example. For instance, here in Carthage we have begun converting our field fleet vehicles from gasoline engines to compressed-natural-gas (CNG)-powered engines and have also installed a CNG refueling station.
Jon Ferrier is head of business development and strategy for Maersk Oil. He holds a BS degree in geology from Aberystwyth University, as well as an MS degree in mineral exploration from the Royal School of Mines, Imperial College London. Ferrier started his career as an exploration geologist in mining at Anglo American in South Africa. Later, he moved to London to work with Conoco as a development geologist. He held multiple technical and managerial positions with ConocoPhillips before moving to Paladin Resources as director of business development. He also worked as country manager for Syria with Petro-Canada for 3 years.
Chris Widell, from Columbus, Ohio, currently serves as the water team lead for Anadarko’s Carthage/Haynesville business unit. He graduated from the United States Military Academy at West Point in 2002 with a BS degree in civil engineering. From 2002 to 2008 Widell served in the 1st Cavalry Division, Fort Hood, Texas, and deployed to Iraq twice—first to Baghdad in 2004 and then to the Diyala Province during the Surge of 2007. Awards and decorations include the Bronze Star Medal with oak leaf cluster, the Ranger Tab, the Combat Action Badge, the Parachutist Badge, and the Air Assault Badge. In 2008 he exited the Army as a captain and joined Newfield Exploration working in the Gulf of Mexico and Gulf Coast asset teams as a production engineer. In 2011 Widell joined Anadarko Petroleum.