MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING MONDAY, FEBRUARY 9, 1998 (4)
MoreOn J.P. Bryan from the Globe and Mail
A self-described outsider, Mr. Bryan said he met recently with Gulf's board of directors and they came to a mutual decision that the company's future would be better guided by Mr. Auchinleck because of its need to focus on internal growth.
"The board really wants somebody to lead it from here on who has more of an operational and internal focus, who can harvest the things that I brought to the company. I don't disagree with that," Mr. Bryan said in an interview in Calgary.
"I've always said that I think there are certain people who have talents for certain occasions."
He also complained that too much attention has been paid to his personality.
Mr. Bryan, whose pay packet totalled $1.76-million in 1996, had exercisable stock options valued at $12.8-million at the end of 1996, according to Gulf's latest management information circular.
Industry analysts say Mr. Bryan would have preferred to stay on for another year, but with commodity prices in the doldrums, the flamboyant Texan's talents as a deal maker didn't fit with the pressing need to nurture Gulf's existing assets.
While opinions differ on whether Mr. Bryan was a breath of fresh air or a loud-mouthed American, he received general praise yesterday for rescuing Gulf from the brink of bankruptcy and turning it into a global energy player.
Gulf still faces tough times ahead, in part because of a $2.7-billion debt load.
Within six months or so, Gulf plans to sell $400-million in non-core assets, including a corporate jet and a ranch in Nevada, to help pay down the debt, Mr. Auchinleck said yesterday.
Formerly part of the Reichmann family's energy empire, Gulf racked up losses totalling $645-million from 1990 to 1995, but posted a $37-million profit in 1996 and earned $204-million in the first nine months of last year.
Although Mr. Bryan is proud of the turnaround, he said he realizes that some Calgarians will be happy to see him fly away for good to the United States, where he spent most of his career as an investment banker.
He slashed 40 per cent of Gulf's staff after taking over the top job in January, 1995, and offended Calgary's business community by deciding in the autumn of 1996 to move Gulf's executive offices to Denver.
Although Mr. Bryan spearheaded the move, there are no plans to relocate the executive offices in Calgary now that he has resigned.
After a series of acquisitions, Gulf's payroll has steadily crept back to almost 1,200 jobs, where the staffing level stood before Mr. Bryan arrived on the scene.
He said he hopes his criticisms about the close-knit nature of Canada's oil patch and observations about Quebec separatists won't overshadow his legacy at Gulf.
"I enjoyed being here in Calgary, in spite of what some people may be led to believe. I have a lot of affection for Canadians and this community," Mr. Bryan said.
"Frankly, I was always in the role of the outsider. It's sad that I was taken somehow as arrogant or whatever and that's not the way I meant it."
Mr. Bryan, 58, said he disagrees with those who portrayed him as an unsophisticated American after he suggested in June, 1996, that Quebec separatists should either start their own country with a bit of land or "if a small, isolated group of you want to go back to France, we'll get you a boat."
Yesterday, he acknowledged that "in retrospect, I probably could have phrased it differently, for sure, in a more elegant way. "But I just think this secession idea is horrible. If these Quebec guys go, why shouldn't others. It seems to me that the next separation entity would be Alberta. It could be a freestanding unit. Alberta has got great natural resources and people with a lot of vigor and entrepreneurial spirit. It seems like Alberta would be a logical candidate, but I'm totally opposed to separation."
Mr. Bryan said he's looking forward to getting some rest after a gruelling three years at Gulf. His plans include spending more time at the family ranch in West Texas and at houses in Colorado Springs and his hometown of Houston.
"Maybe after six months or a year, maybe I'll find another challenge that I'm up for. But right now, I'm looking forward to doing as little as possible."
Mr. Bryan said Mr. Auchinleck "is an engineer and an outstanding talent. He's better suited to go into the bowels of the company and get the value out of it. I think my talents have been used to their very best on behalf of Gulf."
Under Mr. Bryan, Gulf went on a shopping spree and its stock market value soared to more than $2.5-billion from $600-million.
Last year's acquisitions included the $1.11-billion hostile takeover of British-based Clyde Petroleum PLC and the $688-million friendly purchase of Calgary-based Stampeder Exploration Ltd.
"J.P. made an impact both inside the oil industry and also outside," said Ian Doig, publisher of Calgary-based energy newsletter Doig's Digest.
Neil Leeson, a Calgary-based industry analyst who follows the U.S. oil and gas sector, said the departure of Mr. Bryan leaves Gulf vulnerable to being taken over, possibly by a large U.S. producer.
Gulf has already been viewed as a possible takeover target in recent weeks, and "you're going to see Gulf on the block before the year is out," Mr. Leeson predicted.
However, Gulf shares fell 60 cents to $7.60 yesterday on the Toronto Stock Exchange as investors got rattled about Gulf's future without Mr. Bryan.
Industry analysts say Gulf needs to cut its $2.7-billion debt load and also examine what to do with the heavy oil assets acquired in the Stampeder deal, which is hurting Gulf because heavy oil prices have dropped even further than light crude prices.
Oil and natural gas prices have been slumping for more than four months, forcing many producers to reassess their priorities, industry analysts say.
And while some investors have bailed out in the short term, it makes sense in the longer term to haveMr. Auchinleck strengthen existing assets rather than go on the acquisition trail, analysts say.
Gulf's international assets, including its North Sea holdings and joint ventures in Indonesia, were part of the portfolio overseen by Mr. Auchinleck, who is also CEO of a publicly traded subsidiary, Gulf Indonesia Resources Ltd.
Mr. Auchinleck, 46, has worked at Gulf for more than 22 years. He graduated in 1976 from the University of British Columbia with a bachelor of applied science degree in chemical engineering and quickly landed a job at Gulf.
His experience includes stints in Western Canadian field offices and drilling projects in the Beaufort Sea.
Gulf chairman Earl Joudrie described Mr. Auchinleck as the ideal new CEO because he has served as Gulf's chief operating officer since last July and head of international operations since 1995.
Mr. Bryan said he's pleased that he hired oil patch veteran Edythe (Dee) Parkinson-Marcoux last October to head Gulf's new heavy oil division.
However, he said previous plans to launch an initial public offering this summer of the heavy oil division will be delayed until heavy oil prices recover.
"Longer term, I think the future of the oil business in Canada is still in heavy oil," Mr. Bryan said.
Gulf under J.P. Bryan
Jan. 30, 1995 - J.P. Bryan takes over struggling Gulf Canada Resources as president and CEO after making $296-million investment on behalf of Houston-based group called Torch Energy Advisors. Proceeds to cut staff by 40 per cent, sells assets, restructures debt.
May 1995 - Gulf pays $138-million for Mannville Oil & Gas and $53 million for other assets.
Oct. 1995 - Torch Energy pays $325-million for Alberta government's 11.74-per-cent stake in Syncrude Canada Gulf, which already owned 9.03 per cent of Syncrude, manages the new Syncrude interest.
Oct. 1995 - Gulf fails in bid for Czar Resources; Ranger Oil buys Czar for $108-million.
Oct. 1996 - Mr. Bryan spearheads move of Gulf executive offices from Calgary to Denver.
Feb. 1997 - Gulf acquires British-based Clyde Petroleum PLC for $1.11-billion after bitter, two-month takeover battle.
July 1997 - Gulf announces friendly takeover of heavy oil producer Stampeder Exploration of Calgary for $688-million.
Sept. 1997 - About 27.6 per cent of subsidiary, Gulf Indonesia Resources, is spun off to investors for $470-million (U.S.).
Oct. 1997 - Edythe (Dee) Parkinson-Marcoux named president of Gulf's newly created heavy oil division; Gulf later reveals $1.1-billion (Canadian) plan to develop Surmont heavy oil property in northern Alberta.
Feb. 9, 1998 - Mr. Bryan announces that he has resigned as president, CEO and director of Gulf; remains a director of Torch, which now holds about 10 per cent of Gulf, compared with 25 per cent in early 1995.
Still More On J.P. Bryan
Globe & Mail
J.P. Bryan: Hero and/or villain?
And so the biggest gunslinger of them all is riding off into the sunset. Gulf Canada CEO J.P. Bryan surprised everyone in the oil patch with his announcement yesterday that he is giving up the helm of the company he turned from a moribund wreck into a multibillion-dollar powerhouse. The only things left now are questions: First of all, did he jump or was he pushed? And second, is Gulf better or worse off with him gone?
On the first question, opinion is leaning toward the pushed theory. Until now there has been no hint from anyone at Gulf of any departure plans, which tend to be widely telegraphed by CEOs looking to ease their way out of a company. Analysts say Gulf met with them just a week ago to brief them on its plans, and there was no inkling that this announcement was coming.
"I couldn't have been more surprised," Martin Molyneaux of FirstEnergy Capital said yesterday. At the analysts' meeting, Mr. Bryan laid out his strategy for the next couple of years and "said he had just exercised some [stock] options," the analyst said, which most took as a sign he would be sticking around.
For many, the assumption is that Mr. Bryan and the Gulf Canada board locked horns on something. "My guess is that there was a board meeting and there was a difference of opinion," Mr. Molyneaux said. "Reading between the lines, I would guess it had something to do with debt levels, and was probably linked to the Stampeder Explorations acquisition" last year.
There also have been rumours that Mr. Bryan clashed with Gulf's board and some former partners when he tried to float a deal to merge Gulf with another company he founded, Nuevo Energy of Houston. The former president of Nuevo has said Mr. Bryan fired him because he resisted this plan, although Mr. Bryan has scoffed at this allegation on several occasions.
The debt issue is more concrete. For some time now, critics have said that Gulf's debt is too high. As several have pointed out, that kind of financial leverage works well when commodity prices and stocks are going up, but it multiplies the damage when markets go south. At between four and five times cash flow, Gulf's debt is still far higher than that of similar companies, and falling oil prices likely have created a cash squeeze.
As for Stampeder Explorations, Gulf paid $688-million for the heavy oil producer last summer, and heavy oil has since fallen out of favour, with prices falling even faster than those for conventional crude. Mind you, Gulf is not alone -- PanCanadian is also suffering as a result of its purchase last year of CS Resources, a heavy oil producer for which it outbid Gulf.
As for the question of whether Mr. Bryan's presence has been good or bad for Gulf, there is no easy answer. On one hand, many observers -- and even some critics -- say he produced tremendous value at Gulf, through innovative deals and a clear grasp of financial leverage, and that shareholders benefited as a result. Gulf's market value has more than quadrupled since he took over in early 1995, and that's hard to argue with.
On the other hand, some say J.P. was also a loose cannon, both in terms of Gulf's corporate strategy and in his personal dealings with other players in the oil patch. He not only loaded the company up with debt -- $2.7-billion or so -- but he also seemed to take great delight in stressing that he wasn't part of the cozy old-boys' network. He even moved his head office to Denver, a further snub.
And yet, "he has brought a lot of value to the company by doing things in different ways," Mr. Molyneaux said. "And he has gotten others in the industry thinking more creatively too, about things like Syncrude, for example." The deal in which Gulf rolled its Syncrude stake into a royalty trust was applauded as a master stroke, and quickly imitated by PanCanadian.
If nothing else, this mixed reaction to J.P.'s departure is fitting, since James Perry Bryan is a man of many contradictions. He is a law school graduate turned investment banker, known for his skill at executing hostile takeovers, but he is also an art history student with a love of native and Old West culture, and he's no slouch when it comes to decorating, either. His office is a better Western exhibit than many museums possess.
In person, he is a soft-spoken man with an intellectual air, and yet he raised the ire of Quebeckers everywhere by stating that anyone who didn't want to be part of Canada should get in a boat and go somewhere else.
He has also created millions of dollars of wealth for himself, both through Gulf and the other companies he created -- Torch Energy, Nuevo Energy and Bellwether Explorations (all of which he resigned from last year to focus on Gulf, he said). And yet, in a speech last fall, he focused on the spiritual side of life, the importance of family and friends.
Is J.P. going to retire to his ranch and admire the view? That seems unlikely to those who know him. "I have a suspicion we haven't heard the last of J.P.," Mr. Molyneaux said. Let's hope that's true -- the oil patch will be a less colourful place without him.
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