Anadarko, EOG Share Disparate Strategies
For Anadarko, growing in leaps and bounds before it joined forces with
United Pacific Resources, a merger just made sense. For EOG Resources,
which at one time had been part of mega-marketer Enron, smaller is better,
and a merger would not make sense. There is no denying, however, that the
disparate strategies have worked for both.
Both of the Houston-based companies have impressive track records, but
different ideas of how to grow, as company executives explained last week
at the Society of Petroleum Engineers meeting in Dallas. Anadarko's Rex
Allman III, vice president of domestic operations, shared his views, and
while not disagreeing with the reasons, EOG CEO Mark Papa pointed out how
steady growth has actually led to more opportunities for his production
Anadarko, which completed its merger with UPR in July (see NGI, April 10), found that there were just too many
successful projects to complete. So it looked around for a partner that
could do some of the work. But not just do the work. It also wanted a company
that had a good track record, and could do the work well.
To explain how Anadarko's merger with Union Pacific Resources was accomplished
is like trying to tell someone how to drive a car. Every situation is different,
and while Anadarko had a smooth ride with few bumps, another company probably
couldn't duplicate it, said Allman.
"UPR was a successful driller, with a high debt load, and a solid
asset base," said Allman. It was everything that Anadarko needed.
By merging with it - officially completed July 14 - Allman said that Anadarko's
balance sheet improved, and along with it came a "tremendous increase
What helped with the success of the merger was the fact that both companies
had mastered the technologies of the workplace. And both of them liked
to work fast. Allman said that the merger experience had taught Anadarko
that a company needs to know what it's buying. "You've also got to
treat your people fairly," he said. "And you've got to merge
He said the three "Gs" were important for any company going
through a merger: Grow up, Get Over it and Go on.
Anadarko has found that a "lot more roads are open to it than ever
before," Allman said. "We're looking out the windshield now."
The road is plenty wide enough for EOG at this point, and there are
no plans to merge now or into the immediate future, said CEO Papa. At one
time, it was part of Enron, but now is "completely divorced"
from its parent. "Bigger is not necessarily better," he said.
Instead of growth, EOG, which concentrates its production in the North
American natural gas market, has focused on its per-share stock performance.
"We also don't want to change a successful culture."
The strategy, which runs contrary to what a lot of energy companies
are doing today, appears to be the correct one for EOG, which has seen
a 125% increase in its stock performance this year compared with an average
68% increase in the overall peer group performance.
Still, he does worry about where the people will come from. Papa said
that the average age of EOG's petroleum staff is 47. "We've lost a
generation of professional talent, and I do wonder how the industry as
a whole will go forward with fewer people coming in. It's a question that
hangs over all of us."
Carolyn Davis, Houston