Independent CEOs see challenges with high prices

Steven Poruban
Senior Editor

HOUSTON, Oct. 26 -- Chief executive officers of four US independent exploration and production companies noted during a panel discussion here that the high commodity prices currently boosting their profits also create challenges.

"In the [price] environment that we're in today, it's important to execute," Newfield Exploration Co. Pres. and Chief Executive Officer David Trice said at the annual meeting of the Independent Petroleum Association of America.

Mergers and acquisitions among independents over the last few years have contributed more to companies' growth than the drilling has, the executives agreed.

With acquisitions, Chesapeake Energy Corp. is "more willing to overpay than most," joked the company's Chairman and Chief Executive Officer Aubrey K. McClendon. He added that recent acquisition margins for the oil and gas E&P industry are the best ever. However, he noted, "Where you make the most money in this business is at the point of discovery."

Technical talent
Attracting talented workers while maintaining a company's business culture also remains a concern among the executive panelists.

James J. Volker, Whiting Petroleum Corp. chairman, president, and chief executive officer, said his company retains talent through a production participation plan (PPP). Under the plan, nonexecutive employees participate in as much as 2-5% of net operating income—depending on oil and gas prices—from any well drilled or acquired during a given year.

If cashed out today, Volker said, the PPP account would be worth about $80 million. Whiting currently employs about 260 workers.

Newfield's Trice said E&P companies are paying for performance. "We're all on the dollar for people," he said, adding that Newfield actively recruits at US colleges.

John B. Walker, president and chief executive officer of Enervest Management Partners Ltd., queried Chesapeake's McClendon about the company's recently offering jobs to all the geological and geophysical graduates from the University of Oklahoma.

"There were six," McClendon stated. "We go all out."

Contact Steven Poruban at Stevenp@pennwell.com.

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