Elaine Maslin, 2nd April 2012
Ten years ago, the UK’s largest independent exploration and production group – Enterprise Oil – was swallowed up by Shell.
However, its culture and spirit, built from its St Magnus House base in Aberdeen, has not been entirely lost.
Former directors and managers are now spread across the globe from sub-Saharan Africa to Singapore, running conventional and unconventional oil and gas and mining operations.
Some have been eyed as future heads of BP, others sit on the boards of the likes of Tony Hayward’s new venture Genel Energy and, until recently, Rolls Royce.
And then there is a whole fleet of small and often niche independents run by former Enterprise people.
So what made the firm, an early Thatcherite experiment in privatisation, succeed?
An esprit de corps, says Sir Graham Hearne, the firm’s first chief executive. Peter Kingston, one of Sir Graham’s original team, adds “a bit of chemistry” to that.
“All of us felt there were better ways of doing things,” said Kingston, who was the firm’s first technical director.
“It was a cultural thing, a bit of chemistry. We created a management structure all of us signed in to. The key was exploration success and some great acquisitions.”
Enterprise started with Sir Graham, a lawyer by training, being picked as the firm’s first chief executive in 1983 by former Shell man William (Bill) Bell.
Bill had been picked to be chairman of the new company, created from the oil assets stripped from British Gas (Hutton, Beryl, North-west Hutton, Fulmar and Montrose) by then Prime Minister Margaret Thatcher on one of her first forays into privatisation.
Success was not always guaranteed and the company was on the back foot from the start – possibly giving it a resolve to succeed – said Birmingham-born Sir Graham. “We floated the company (in 1984) and it was a resounding flop,” he said. “There was some dislocation in the oil market which drove down the oil price – between the date of underwriting and the date the public could apply for shares. It then became a bit of a political football because RTZ Oil & Gas had wanted to buy these assets from the government.”
Legislation was enacted to stop RTZ buying the new firm and a “golden share” was allotted, effectively giving Enterprise a veto against a takeover.
But RTZ still managed to pick up a 29.9% share and Sir Graham and the company spent the next 10 years trying to dissolve it.
“It wasn’t an easy thing to build a company with a 29.9% shareholder who was not keen to see you grow,” he said. “But there was resolve to see it grow and succeed.”
Most of the people he recruited were from the majors – BP, Shell, ExxonMobil – but they were the ones willing to take the risk, those with a “fire in their belly” and wanting a challenge, he said.
“We were a smallish team with a big canvass – a lot to go at – and the esprit de corps was quite outstanding.
“I had a wonderful combination of talented petroleum engineers, explorers and financial people. We had a brilliant technical director, Peter Kingston, and a brilliant financial director, John Walmsley, who was replaced by another brilliant man, Andrew Shilston.”
For Kingston, part of the success was about doing things differently, from the co-operative spirit in senior management (an early decision was made that all the senior staff should interview the senior staff in each other’s teams and acquisition or exploration decisions were made collectively), to being less reluctant to part with assets than others at the time.
From the start, Sir Graham argued for keeping a lot of money in the business – £80million – despite Treasury wanting the new company to rely on loans.
“It made a big difference and meant we could push ahead very quickly and do new things,” said Kingston.
Another example was when they decided to auction off a small discovery in Lincolnshire. The winning bidder was Tullow, who offered shares instead of cash.
“We ended up with 10% in Tullow,” said Mr Kingston. “That 10% became quite a lot of money. It is an example of how we were prepared to do things in a slightly different way.”
One of the key early staff was Miles Bowen, again from Shell and described as a brilliant exploration director by Sir Graham, now retired. Bowen was key to discovering the “name making” Nelson field for Enterprise.
The company had eyed the asset and slowly built up its equity before making its discovery.
“Nelson became a name-making event because we had put our reputation on the line and built our interest in it because we had a belief in the interpretation of it,” said Kingston.
Peter Kallos, who went on to be executive vice president International at Petro-Canada and is now chief executive of Buried Hill Energy, said the success was through being both commercially orientated and organically successful.
“We had the famous twin engines of growth strategy – lots of people over the years have done it but it was quite successful and went from nowhere to the FTSE 100 in a relatively short period of time.
“In doing so it attracted a lot of early career professionals many of whom had come from bigger oil companies and found the environment invigorating.”
Having finally shaken off the last vestiges of RTZ, via Lasmo and then Elf, and following a failed bid for Lasmo, the firm, by that time Europe’s largest exploration and production business, finally came into Shell’s sights.
“We sold out – we didn’t have a choice but had we not sold it, you look at the valuation of the likes of Tullow today, with 50-60,000bpd production, Enterprise had 250-300,000 and in excess of 1billion barrels of oil reserves,” said Kallos.
“It got sold for £6billion. What would be the difference between the pre-$20 a barrel days then and the current $80-100 barrel days?
“There was no-one happy about the outcome of Enterprise being forced to sell,” he added.
For Kingston the highlight was the early 1990s. He took voluntary redundancy following a collapse in the oil price, having already decided the company was perhaps getting too large – with too many projects and not enough funding – and the excitement had gone out of it for him.
Had Enterprise not been taken over, a new era of independents and careers for those who left might not have been sparked.
In fact, many of the independents set up have already gone on to be taken over, including Stratic Energy, Granby Oil and Gas, Revus Energy, Peak Group, Avaanna Resources and Energy North Sea, with further new firms founded.
Relatively new players on the block founded by ex-Enterprise people include Hurricane Exploration, Agora Oil & Gas and Hansa Hydrocarbons.
Some firms have also attracted large numbers of ex-Enterprise people – no doubt attracted by a like-mindedness as at Enterprise.
Dublin-based Petroceltic specifically stands out with a number of senior ex-Enterprise staff, including its chief executive Brian O’Cathain, on its relatively small books.
Could another Enterprise be built in the UK? “I think the same could be done again,” said Sir Graham. “I think the circumstances are different. But if the essence of the job is building a business with individuals with a bit of fire in their belly, I think you could.”
Where are they now? Enterprise staff move on . . .
o Sir Graham Hearne is now on the board of Rowan Companies, is chairman of insurance group Catlin, non-executive chairman of Braemar Seascope Group and deputy chairman of Gallaher Group.
His prior career had included stints at Courtaulds and N M Rothschild as well as running oil firms Tricentrol and Carless, Capel and Leonard.
o Founding chairman Bill Bell is retired and living in Kent.
o Rt Rev Justin Welby left Enterprise to join the clergy and is now Bishop of Durham.
o Sam Laidlaw was chief executive when Enterprise was bought by Shell in 2002 after less than a year in the role.
He went on to be vice president Chevron Texaco and is now chief executive of Centrica.
o Former Shell petroleum engineer Pierre Jungels was chief executive prior to Mr Laidlaw. He is now non-executive chairman at Rockhopper Exploration after being executive chairman at OHM alongside a number of other non-exec roles.
o Peter Kallos, who started out as a production engineer, held a number of roles at Enterprise, including head of the UK business. He went on to work for Shell and was executive vice president at Petro-Canada’s international and offshore business before becoming chief executive at explorer Buried Hill Energy, alongside former Enterprise colleague Hugh Leonard, who had been vice president acquisitions at PetroKazakhstan.
o Andrew Shilston was finance director at Enterprise and then on to be chief finance officer at Rolls Royce and held a non-executive role at Cairn before joining BP as a non-executive director. His right hand man Eugene Whyms went on to be chief finance officer at Encore before retiring.
o John McGoldrick, a chemical engineer by training, ran Enterprise’s Irish and then American operations and went on to run Houston-based Caza Oil & Gas. He is now in charge of Australian coal bed methane firm Dart Energy’s International business.
o Peter Kingston was due to step down as chief executive of Tower Resources last month. After leaving Enterprise, where he was joint managing director, he was deputy chairman and senior independent director of Soco International and a founder director of Plexus Energy.
o Former Enterprise petrophysicist for Norway Robert Trice founded and is now chief executive of Hurricane Exploration, which is exploring basement reservoirs off Shetland.
o Brian O’Cathain is now chief executive of Petroceltic after a period as chief executive of Afren. Before that the former Enterprise man was managing director of Tullow Oil’s international business and chief executive of Afren. At Petroceltic he is joined by ex-Enterprise Mike Whyatt, previously executive chairman at Plectrum Petroleum before it was bought by Cairn Energy, and Andrew Bostock, another senior Enterprise employee. Also at Petroceltic from Enterprise is David Scott, as head operations and engineering, following a stint as chief operating officer at Regal Petroleum, whose current executive chairman Keith Henry was a non-exec director at Enterprise. Before that Mr Scott spent time at Hardy Oil & Gas and Burlington Resources.
o John Walmsley, finance director at Enterprise, went on to be chief executive at Hardy Oil and Gas and is now executive chairman of Consillience Energy Advisory Group, which he co-founded with Liz Bossley, former head of marketing at Enterprise.
o Former exploration director Andrew Armour with Tim Sullivan co-founded Revus Energy, joined by Enterprise colleague Callum Smyth. Revus was later sold to Wintershall. Both have since joined Agora Oil & Gas, where Mr Armour is chairman.
o Hugh Mackay led Enterprise’s south east Asia before founding mineral exploration firm Avaanna Resources, bought by a subsidiary of Cairn Energy, and helping develop Peak Group and joining AGR Petroleum Services. He is now chief executive at unconventionals firm Europa Oil & Gas.
o Accountant Kevin Watts was corporate development director at Enterprise before becoming chief executive at Stratic Energy, bought by EnQuest, where he was joined by another former Enterprise UK manager Mark Bilsland. Mr Watts is now non-executive chairman at Trap Oil.
o Technical director Ian Craig replaced Peter Kingston before leaving in 2002 to work at Sakhalin Energy. He is now Shell director sub-Saharan Africa.
o Andrew Paterson was a consultant drilling superintendent and left Enterprise to start up Peak Group, sold to Ability Group of Norway in 2007. At Peak, he was joined by former Enterprise drilling manager Bob Lyons.
o Enterprise corporate communicators Peter Reilly and Patrick D’Ancona went on to found their own PR firms.
o Geophysicist Richard Moreton and another former Enterprise man Martin Whitehead founded Granby Enterprises, which was bought by Silverstone Energy, which then merged with Bridge Energy. Moreton is now joint managing director at Bell Exploration with Mr Whitehead. Both are also directors at Goldings Consulting.
o Former Enterprise men Ian Massie, Steve Thorn and Peter Schweizer set up Energy North Sea, which was sold to Marubeni Corp. Mr Massie went on to work with Armor Designs and Mr Thorn and Mr Schweizer are now directors at unconventionals firm Gripen Gas in Sweden.
o Mark Hope, among the first employees at Enterprise, played a central role in the development of the Nelson field and became UK director and then global technical director. He joined Shell Expro before becoming chairman of Woodend Arts Association in Banchory.
o Enterprise trio John Martin, Patrick Kennedy and Simon Lunn have set up Hansa Hydrocarbons.