Lew,
Thanks for the compliment and for your suggestions for considerations that should be evaluated as part of due diligence on Ultra.
I agree with you that an investment in any company is more than anything an investment in its management. Top notch management can often bring a company through the most difficult situations in an industry that holds little promise and still make a success of the enterprise. On the other hand, even management with average competence can be victimized by adverse economic environment, competition, etc. etc.
Can you suggest some ways that I could ascertain the degree of respect that Watford commands among investors, partners and peers in the industry?
I was not very impressed with some aspects of his record. He took a small company and led it into a number of expensive endeavors, including buying huge concessions offshore in the Bight of Africa which may well prove to be very valuable. One could speculate that he either is willing to take great risk (even the risk of bankrupting the co.) for the sake of possible great future reward and lucked out, OR he knew how to hire such top-notch geologists that he could do better than the very-well-heeled majors in ascertaining, ahead of exploration, the value of those offshore prospects. I don't know which it was.
Watford was at the helm of Nuevo Pete when it took on huge debt that caused very large losses when the price of oil dropped. Had the drop in oil prices continued much longer, it is my impression that Nuevo might have gone under.
I think Watford was separated from Nuevo before UP hired him. One never knows the true circumstances of such a separation, so it is very difficult to even guess why they separated. Did the directors believe Watford had been unwise to saddle the co. with so much debt and to not foresee the drop in oil prices? That is a possibility, but the reason(s) could have been entirely different and it's even possible that the separation was not initiated by the board of directors. The true reasons behind such events are seldom, if ever, stated publicly. I don't know of any way of knowing, short of establishing a very personal relationship with one of the directors and getting him to divulge what happened (which, of course is an absolutely ridiculous idea). I would have felt better if Watford had still been employed by Nuevo when UP hired him.
If you can suggest ways of ascertaining how his peers honestly regard him, we would be grateful.
The number of lawsuits against a company is not a very good yardstick of how well the company is managed. They can represent extraneous factors such as simple cupidity.
Thanks again.
Regards,
Hickory |
