IN THE NEWS / 'Discard Losing Strategies and Adopt FOCUS,' Art Smith Advises Oilmen at Herold Pacesetters Conference
OLD GREENWICH, Conn., Sept. 24 /PRNewswire/ -- Most oil and gas companies have the talent and ability to survive the industry's current economic squeeze, but many must jettison existing strategies to do so, Torch Energy Advisors Inc. Chairman & CEO Art Smith told the John S. Herold Pacesetters Energy Conference here today.
''This is a time when beanie babies are perceived by many to have more investment growth potential than oil and gas stocks,'' Smith, the former head of Herold said in the conference keynote address. ''It's time for us to recognize that capital has been reallocated to other industry sectors at the expense of energy, and the only way to turn that flow around is to focus on creating value through stable, consistent performance.'' Smith challenged the audience to ''develop your own unique style -- learn creativity, not xerography.''
Smith said producers should ''deep-six any of the Top Ten Losing Upstream Strategies'' that may still be lingering in their business plans. He identified the ''Top Ten'' as including:
The ''Resume'' Board -- A ''giants of industry'' board of directors that actually lacks the drive needed for a successful E&P operation.
Long Ball -- Companies that only swing for home runs, not singles, don't often survive.
Gambler's Ruin -- Devoting a disproportionate share of a company's capital to high-risk exploration.
Cult Technology -- Cult-like following in the euphoria over leading-edge technologies when the reality is that there are very few proprietary technologies.
''Please the Street'' -- Catering to Wall Street analysts under the impression they know how to run, not just analyze, companies; truth is, they're often dead wrong.
Contrarian Strategy, Poorly Executed -- Doing the opposite of the prevailing strategy at the wrong price points or wrong time.
Blind Ambition/Greener Pastures -- Persisting with dreams of enormous discoveries that are grossly mismatched with the company's size and balance sheet.
Siren's Song -- Abandoning a good strategy in the hope of growing faster or for the sake of change itself, often the result of a CEO's boredom or desire for new excitement.
''Genie Stuck-in-the-Bottle'' -- Failure to communicate the strategy to those who are key to its success, the employees; people can't implement what they don't know.
Alice-in-Wonderland -- Lack of a defined destination and corporate odometer to measure progress, destined to aimless meandering at stakeholder expense.
Once losing strategies are shed, Smith prescribed a multi-step approach that has been followed, in whole or in part, by such successful oil companies as Tosco, Newfield, Anderson, Cross Timbers, Vintage and Nuevo, summarized by the acronym FOCUS:
Focus wins -- Put all your eggs in one basket, and watch that basket.
Ongoing, relentless measurement and modeling -- What gets measured gets managed, most importantly milestones toward value creation goals.
Combine intellectual capital and innovation -- Create an environment that nurtures and challenges the human resources that create real, distinctive value and growth.
Understand where we are on the macroenvironment cycle -- Know the external factors affecting your business, but don't ever think you can forecast oil and gas prices.
Stick with it, once you develop a good strategy -- Resist greener pastures and boredom.
Smith also expressed ''grave doubts'' about a new 1998-99 wave of ''downsizing, consolidation of operations and headcount reduction, quoting Prof. Michael Unseem of the Wharton School as observing that downsizing can't ''masquerade as a corporate strategy.'' It is far more productive and timely, according to Smith, for companies to recognize and utilize the value that exists in their people.
Torch Energy Advisors Incorporated, an employee-owned company headquartered in Houston, Texas, provides upstream outsourcing and energy asset management services to the energy industry. Torch's wholly owned subsidiary, Novistar, is the largest dedicated provider of administrative and information technology services, including transaction processing and information management. Torch Operating Company manages 9,000 oil and gas wells with operations extending from
California to Alabama and is responsible for annual production of 35 million equivalent barrels of oil. Through Torch Energy Marketing, the company offers hydrocarbon marketing and risk management services. In addition, Torch provides capital to independent producers for acquisition and development opportunities through a $100 million facility managed by Torch Energy Finance Company. |
