Tuesday 19 September 2017

Veteran oil boss Heavey plans new adventures after Tullow

After more than three decades of wandering Africa, the firm's founder is not finished with the countries he's turned into major oil producers. He tells Gavin McLoughlin why the Irish and Africans get on so well and why when you have business problems in one of the world's most high-pressure industries the only thing to do is sit down and have a cup of tea while you think things over

Outgoing Tullow boss Aidan Heavey. Picture: Mark Condren
Outgoing Tullow boss Aidan Heavey. Picture: Mark Condren
Gavin McLoughlin

Gavin McLoughlin

Tullow's outgoing boss Aidan Heavey has seen a lot of his paper wealth wiped out over the last few years. Five years ago a share in Tullow Oil was worth more than £15 (€17) Today it's worth just over £3 (€3.42).

But the Roscommon man thinks the company is on the up again. As the oil price has risen, so too have Tullow's shares -a year ago they were as low as £1.18. Its shares are "highly geared" to the oil price, analysts at Morgan Stanley say.

It has also implemented a restructuring programme including asset sales and big cuts in capital expenditure, hoping to use income from its massive TEN project off the coast of Ghana, which has recently started producing oil, to pay down its large debt pile. In 2015, Tullow had to amend a banking covenant to fend off the risk of a breach.

Having built the business from nothing, Heavey deserves enormous credit. It's perhaps unfortunate that his departure comes after such a precipitous share price decline - he had plans to retire much earlier but decided to stay on when the business ran into difficulty.

Speaking to the Sunday Independent Heavey said it was an "odd" feeling to announce his departure as boss. "I suppose I've spent half my life as CEO of Tullow, so it is strange. But that's life and you have to move on," he said.

"The last three years in the oil industry were horrendous. They were probably the worst I've ever seen with the oil price collapse and it was such a dramatic change to the oil and gas industry.

"I'd plans years ago to retire, but the whole industry had changed so it was important to make sure that we got the company in great shape - and we did that over the last two-and-a-half years. So once the programmes we'd set in place were finished ... it was a great platform for Paul to move in and move forward."

Paul is Paul McDade - Tullow's chief operating officer for over a decade - who is replacing Heavey in the top job. The announcement comes not long after the company announced chief financial officer Ian Springett, who has been in his role for almost a decade, was taking an extended leave of absence for medical treatment. It's a lot of change in a short space of time for a company whose top table has been very stable for a very long time.

McDade told Bloomberg during the week that investors shouldn't expect any "dramatic changes" when he ascends to the throne in April. "The hard work we've done over the last couple of years has put the company in such a good position, given the external environment," McDade added.

But he faces plenty of challenges. The company has cut its guidance for oil production from TEN this year. It's also had trouble at another oil-producing project there (Jubilee) and is in the middle of remediation works. A refinance of debt will take place, and there could be further asset sales.

"The change of management has added a degree of instability and probably comes later than investors would have liked - 2017 has many hurdles," says Darren McKinley, senior equity analyst at Merrion Capital.

Those hurdles aren't really Heavey's problem now. He's staying on as ceo until Tullow's AGM in April. After that he'll become chairman - not ideal from a corporate governance perspective, Heavey admits, but necessary, in his opinion, to ensure a smooth handover in Africa.

"We're very much a relationship business so we have a lot of relationships all over Africa with various presidents and business people and so it's quite difficult to say 'this is the new ceo and he's going to take it over'.

"The handover is quite a long process in Africa. People have to get to know somebody and they have to get used to them as the ceo and the go-to person, and that does take time. I know it goes against corporate governance but when you have a relationship business, and a business where it's all about contacts, especially in Africa, it does take time."

He feels the company is in good shape. "We sorted out all the issues in the business. We've streamlined it, so Paul's in a growth period. His challenge is to deliver that growth. The whole thing about me staying on as chairman for the two years is to help him with the relationships and smooth that over.

"But he's very much his own man. He'll do his own thing, and that's why he was picked."

Heavey began his working life as an accountant at Robert J Kidney, before moving to Aer Lingus. Then he was headhunted by a company called Tullow Engineering, which had an oil distribution arm.

"Back in the 80s, oil was really top of the pops, it was like the dotcom business in 2000. The Celtic Sea had a lot of companies starting off: Atlantic Resources, Conroy Resources, Eglinton Oil & Gas. Everybody at that time was looking at the industry. So it wasn't unusual for people to look at it, but what was unusual [about Tullow] was that in discussions with some banking friends we were talking about Africa.

"There were a lot of oil and gas fields left behind by major companies in Africa, and they were too small for them to develop and so that's really where Tullow came out of. It was just the era that I was in, and it was fascinating."

At 63, Heavey feels he's too young to depart the scene altogether. He wants to get involved in other projects in Africa - the place he says he knows best. Don't expect to see him appearing on the board of another Irish plc.

"The only company I'll be a director of is Tullow. But I will do other businesses, I'm too young not to. I'll take a bit of time but Africa is where I know best. I will never do anything that will compete with Tullow, because I still have major involvement.

"I'm going to do some charity stuff, and I will do some business infrastructure investment projects in Africa. Over the years I've helped some of the countries to bring in investment, I've helped bring in finance in countries, so I think I'll probably get more involved in that.

"I've been wandering around Africa for over 30 years, I've been in every country on the continent. The Irish are very well known and the Irish missionary services have been very well known but I also think the Irish approach to life is very similar to Africans. We get on very well. We communicate well. We're quite touchy-feely, so they relate to us.

"There's a very good link between Ireland and the continent and I've always said in the past that Ireland hasn't used those relationships as much as it should."

In two years' time (at most) Heavey will leave Tullow's board altogether. He feels proud of the contribution that it has made to the African continent. The best moment, he says, was when the Jubilee project turned Ghana into an oil-producer for the first time. "When you think of where Tullow started, a tiny little company in Ireland, and suddenly we had brought this giant field in Ghana, and Ghana had become an oil producer for the first time - and a major oil producer.

"The celebrations in that country - it was just mind-boggling. When you looked at that and all the people that were employed in Africa by Tullow, all the scholarships and all the training programmes that we had put through.

"You could fly on a helicopter from the east coast of Africa all the way to the west and stop off in Tullow sites in Kenya, Uganda, DRC, and Gabon - at one stage we had 15,000 people working for us in Northern Kenya."

As he looks forward to life after Tullow, he has few regrets.

"We've made loads of mistakes. That's life. Life is about making mistakes and how you react to them. I don't think there's any really big mistake. We made bad decisions over the last 30 years but you just shake yourself off and you get on with it. I don't really think about it. Life is about making mistakes and learning from them."

His advice for his successor McDade?

"My view on life is, if you have issues, you have problems, just sit down, have a cup of tea, think about it, and put a team in place. That's what Tullow's always done. We've never looked on challenges other than 'this is something to be solved and the best way to solve it is to sit down, have a cup of tea'."

"Never make a decision without thinking about it; never make a decision when you're hotheaded."

That goes for retirement decisions as well.

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