Tullow Oil - Aidan Heavey
www.tullowoil.com
Foundation
Dublin 1986
Employees /Suppliers
- Employees: 200 plus 220 full-time contractors
- Suppliers: €300 million spent worldwide, per annum, principally with Oil and Gas Service Companies
- Wage Bill: Worldwide €15 million
Customer / Suppliers
Over 90 Oil and Gas Exploration, Development and Production Licences in 16 Countries. Producing over 57,000 barrels of oil per day from 25 different fields. Strategic relationships with over 20 Governments and National Oil Companies. Market Capitalisation of €1.7 billion.
U nique product features
A creative and flexible approach to solving technical and commercial problems in an industry where these are lacking.
Benefit to Customers
Tullow works with Governments and Field partners to ensure reserves of Oil and gas are managed and developed in an optimal manner. The use of latest technology and a rigorous commercial focus ensures previously marginal fields can be made economic and the lives of mature fields can be extended.
Scale of achievement
- Largest Irish Independent Oil and Gas Company
- Market Capitalisation of €1.7 billion
- Largest Independent Oil and Gas Company listed on the London Stock Exchange by turnover.
- Largest spread of interests of any oil company in Africa. Owner/Operator of strategic UK gas Fields and infrastructure. Landmark Acquisitions of $1 Billion in 2004. Production Growth of over 2000% and shareholder return of over 200% since 2000.
Innovation / Creativity – what aspects of your operation do you regard as being particularly creative or innovative?
We were unique amongst the E&P start-up companies in the 1980s in that we did not set up an oil company to drill a prospect and hope to have a big discovery. We set up Tullow to offer a service to Host Countries to develop their natural resources as efficiently and effectively as possible. Our reward was a share of that wealth created.
The early struggle was to develop a balanced portfolio of projects and clients that you could service effectively. We had to develop the skills to negotiate with the governments, in competition with major global companies, structuring the deals in a very creative, transparent and commercial manner to help finance the programmes. Then having won the deal, set up the management and technical team to carry out the work.
Our policy from day one was to be the best, and to achieve that, you need the best people with a positive ‘can do’ attitude. Whilst we started off in competition to major oil companies, Tullow is now complementary to them, and we operate fields and facilities for the Super Majors. With our focus, creativity and determination we are very hard to compete against. We combined an ability to identify, develop and operate oil and gas interests successfully with good deal making capabilities. My background is accountancy and business management, not oil.
The management disciplines and deal making skills which this brought to the company enabled top quality oil and gas people to do their job with confidence and flair, kept our shareholders and banks comfortable and contributed significantly to the staying power and success of Tullow.
Initial Expansion – How did your initial phase of market expansion occur?
The oil business required enormous amounts of funding and as such, start-up companies tend to be project orientated and backed by large funding. Tullow was started from scratch with no major funding. Building the foundations of the business in the early years was tough. We had to invent new ways of funding our business whilst making sure we continued to build our reputation as a very capable International Independent.
We loved the fact that the odds were stacked against us surviving, but we survived and grew and developed a good reputation with the governments, the industry and finally with the banking and investment communities. At different times, each of these has been critical to our growth. A key part of our early strategy was to focus on low risk proven acreage of marginal interest to larger companies and to fund exploration and development work from the cash flow derived from small fields. We did not overextend ourselves. At the same time we also participated in new exploration plays that had the potential to deliver major discoveries at minimal cost.
Our Irish credentials played an important part in giving us access to development opportunities in new areas in both Africa and Asia. We developed a good name with the banks and we felt in 1998-9 that the time was ideal to expand into the North Sea where the wave of “mega-mergers” was creating opportunities for smaller companies to pick up assets being disposed of by the majors.
As this was an area that had been dominated by the big companies for many years, our international experience and different materiality perspective, we felt, would bring a new and fresh approach. We received a big break in 2000 when we managed to acquire a major package of assets from BP for st£200M.
This was a huge deal for us; our market value at that time was st£180M. The deal transformed our business and our status within the industry.
We quickly built up a team to manage and develop these assets and in a very short time, transformed the UK assets from end of life gas fields into a thriving business which is still growing. The next big change came in 2004 when we acquired over $1 billion worth of assets.
The key asset was a company called Energy Africa plc.
This was a South African based public company set up in the early 1990s by African Investors to be the key pan African independent oil company, working in areas and assets overlooked by major companies. In 2002, a takeover attempt by the Malaysian National Oil Company failed because 35% of the African investors did not want their dream to vanish so they blocked the takeover bid. All attempts to break the deadlock failed until we saw the opportunity.
Tullow had been producing in Africa since 1987 and thus we knew the assets, management and shareholders of Energy Africa and, more importantly, shared their view of how best to grow the business. We convinced the 35% shareholders to join Tullow and together we could build an even better business. They agreed and together we convinced the Malaysians that their best option was to sell their stake to us for cash. The total acquisition was $570million.
We were now the largest quality independent in Europe by revenue and production. Having completed the Energy Africa deal in May 2004, we then successfully integrated the business ahead of schedule, and went on to win the bid for an additional package of UK assets worth £200M in December 2004.
It was an interesting point in our development, and demonstrated just how far Tullow has come in the last few years. We were purchasing assets from Exxon Mobil and Shell for £200M and during all the negotiations, nobody asked us whether we had the money or not. If we had been doing the deal only 12 months before it would have been a major transaction requiring shareholder approval.
Our status within the industry has completely changed and we are now a counterparty of choice for major companies because they know we can complete transactions quickly and efficiently. We are now a dominant player in the UK Southern North Sea and have the largest footprint of any independent in Africa. Our business has jumped from st£2 million a year in 1998 to 1999 to st£1 million a day today.
Obstacles Overcome – What are the toughest issues you deal with as you continue to grow your business?
The oil and gas industry is constantly changing therefore financial, commercial and technical flexibility is critical. Oil prices are outside of our control as a result the business must be flexible enough to adjust development programmes and grab opportunities when economics change as a result of price movements.
We have four areas from which we add value:
- Exploitation of current reserve base
- Exploration – a range of exploration wells ranging from low risk to very high risk/high reward projects that could transform the size of the Company
- Selective acquisitions within core areas
- Active portfolio management. We adjust the emphasis of each of these areas depending on the oil price environment. This requires steady reliable information with manageable business units.
Organisational Culture – How would you define the culture within your organisation?
Tullow is an entrepreneurial and highly commercial company. We encourage a creative and flexible approach. We work hard at being a good employer, partner and operator. We bring simultaneous technical, financial and operational focus to opportunities, enabling swift decision making and execution. Everybody in the organisation has access to the CEO and senior management.
Impact on Lifestyle – How do you recharge your batteries (hobbies, sports, family?)
Work is only part of life and balance is crucial. I enjoy a well done deal no matter what the scale and enjoy the daily challenge in business. In my spare time I like nothing better than a competitive game of golf, especially when I win. Beyond that my family provide plenty of love and laughter!
Role Models – Have you a role model who has influenced your approach to business?
I admire anyone who combines positive thinking, perseverance and skill to succeed against the odds. I also believe it is critical to have a strong team spirit and good personal relationships particularly when people are working under pressure.
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