NOI Natl Oilwell

By Rheaa Rao and Tatyana Shumsky 

The energy sector is thirsty for finance executives with deal-making skills as rising oil prices spur merger activity and companies seek to fill vacancies created during the market bust.

So far this year, 23 deals have been announced, proposed or completed by U.S.-based oil and gas companies in the S&P 1500, according to Dealogic. The total value -- $47.4 billion -- is already 34% higher than the $35.3 billion worth of deals announced, proposed or completed during all of last year.

The flurry of activity suggests that oil and gas companies are poised to grow after years of retrenchment.

Companies such as National Oilwell Varco Inc., Gulf Island Fabrication Inc., and Marathon Oil Corp. have recruited new finance chiefs with experience in mergers and acquisitions.

"As the activity increases, it would increase the skill level required for a new CFO," said Preston Caldwell, an equity analyst at Morningstar.

More than 40% of oil and gas companies in the S&P 1500 index announced a CFO departure between 2012-2017, according to The Wall Street Journal analysis of S&P Global Market Intelligence data. Of those, almost 30% have changed CFOs more than once. The moves coincided with a historic collapse in crude-oil prices and a series of bankruptcies that decimated the sector.

During that same period, 35% of the nation's largest 1,000 companies changed CFOs at least once, according to Korn/Ferry International.

Crude-oil prices tumbled from more than $100 a barrel in June 2014 to a 12-year low of $26.21 in February 2016, erasing more than three-quarters of their value. Stock prices followed suit, as the SPDR S&P Oil and Gas Exploration Exchange Traded Fund fell 71% during the period. More than 200 U.S.-based oil-and-gas companies filed for bankruptcy in 2015 and 2016, according to law firm Haynes and Boone LLP.

National Oilwell Varco didn't halt deal making during the downturn, and acquisitions continue to be a crucial aspect of its growth strategy, said Loren Singleton, the company's vice president of investor and industry relations.

Jose Bayardo, the company's CFO, is a former investment banker who joined National Oilwell in August 2015. He succeeded former finance chief Jeremy Thigpen, whose priority during the downturn was cost-cutting, Mr. Singleton said.

The Houston-based company purchased a business unit from Trican Well Service Ltd., a Canadian oilfield services company last June for $53.5 million Canadian dollars ($40 million). National Oilwell signed a joint venture with Saudi Aramco in May and will own a 70% stake in the new venture.

"He [Mr. Bayardo] has been an important part of that strategy and execution on that strategy," said Mr. Singleton.

Marathon Oil hired Dane Whitehead as its finance chief in March, shortly before the company announced two large deals. The Houston-based oil-and-natural gas exploration and production company reached an agreement to sell its Canadian subsidiary for $2.5 billion in March. It also acquired land in the oil-rich Permian Basin for $700 million.

Mr. Whitehead previously worked at EP Energy Corp., a company that, according to Dealogic, completed 10 deals during his tenure. That dealmaking experience makes him a good fit for Marathon, which seems to be ramping up its M&A activity, said Muhammed Ghulam, an analyst at Raymond James.

Marathon declined to comment.

Tough market conditions forced many companies to write down the value of their oil and gas properties, turning up the pressure on executives, said Deborah Byers, partner and U.S. energy leader at Ernst & Young LLP.

"We've seen a lot of churn in management teams in general, just because there's a lot of stress in the industry," she said.

Three finance chiefs resigned from Gulf Island Fabrication Inc. since 2012. The Houston-based builder of offshore oil and gas platforms named David Schorlemer CFO in January. He succeeded Jeffrey Favret who stepped down late last year after taking the reins from Roy Breerwood III, in 2013. Mr. Breerwood succeeded Robin Seibert who left the company in 2012.

The pressure to cut costs and lay off staff in the oil and gas sector took a toll on finance chiefs in the industry, said William Chiles, a company director for Gulf Island.

Mr. Chiles said that Mr. Schorlemer has different strengths than the previous finance chief, who had an accounting background. "Our current CFO has better financial engineering skills, more M&A and capital market skills that we need today," he said.

Despite the bloodletting among finance chiefs during the oil downturn, those who stuck it out in the industry are likely to be in demand for years, said Rob Thummel, portfolio manager at Tortoise Capital Advisors. Many of these executives navigated the cratering oil prices while negotiating lower borrowing rates and soothing concerned shareholders, he said.

"That experience, as painful as it was for their pocketbook and their stock options, was valuable for their career development," Mr. Thummel said. "Someone getting through the tough times is what you want in a CFO."

Write to Rheaa Rao at rheaa.rao@wsj.com and Tatyana Shumsky at tatyana.shumsky@wsj.com

(END) Dow Jones Newswires

June 13, 2017 08:14 ET (12:14 GMT)

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