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Lau keeping Husky on tight leash Reporters, analysts barred from annual meeting; told company had nothing of ‘significance’ to announce; CEO heads back to Hong Kong to oversee spinoff of Asian O&G operations Gary Park For Petroleum News
John Lau is leaving Husky Energy in much the same way that he has run Canada’s third largest oil and refining company — with his hand firmly on the controls.
In one of the oddest decisions anyone could remember, Lau’s final appearance before the company’s annual meeting, after 17 years as chief executive officer, was placed off limits to most reporters and analysts.
Only the Calgary Herald, Nickle’s Daily Oil Bulletin and a few chosen analysts were granted entry.
A Husky spokesman said the “guest” list was restricted “because we weren’t having a news conference and we didn’t have anything of significance to announce.”
The company also wanted to direct attention to its upcoming first-quarter results, he said.
That left reporters and analysts to suggest that Lau was settling some scores with those who had speculated — often aided and abetted by Lau himself — on the chances of a Chinese state-run company taking over Husky; the chances of a joint-venture with a major refining company; and the chances of Husky’s Asian assets being spun off into a separate company.
Lau, a Hong Kong-born accountant and turnaround expert, was picked to lead Husky by Li-Ka-shing, one of the world’s wealthiest men who individually and through his flagship company Hutchison Whampoa owns 72 percent of the Canadian company.
The Husky rescue He set about rescuing what was widely known in Calgary as the Husky “dog,” with a debt to cash flow ratio of 15 times, turning it into one of the industry’s top performers by embarking on a painful restructuring and making a series of skillfully timed acquisitions to solidify the recovery.
In a rare public show of frustration six years ago — when he first announced his departure from Husky in 2005 — Lau said he had received little backing from Husky management in his efforts to pull the company out of its financial hole, saying he was viewed as a “stranger and an intruder.”
Although inclined to stick to tightly scripted presentations, Lau occasionally delivered some of the industry’s most memorable quotes.
He once predicted Husky was destined to become “one turbo-charged puppy”; said he would not resign until the Husky-operated White Rose oil field offshore Newfoundland was completed, giving him the chance to “make sure my baby’s growing up”; and, in answer to those who said Husky demanded too high a takeover price, said: “Of course we’re expensive, because the return is good. You don’t expect to get a Cartier watch by paying a Seiko price, right?”
Growth strategy The Lau-directed growth strategy saw Husky buy the Saskatchewan government’s 50 percent stake in an upgrader, giving it the ability to process heavy oil from its northern Alberta operations, and buy Canadian East Coast offshore assets from Talisman Energy and Gulf Canada as a launching pad to expand its presence in the region.
That was followed by a flurry of deal making, including the C$800 million acquisition of Marathon Oil’s holdings in Western Canada; a lively, though short-lived exploration program in the Central Mackenzie Valley, highlighted by the region’s first discovery in 85 years; a 2007 deal with BP to create an integrated North American oil sands business consisting of upstream and downstream operations; and advancing the planned 200,000 barrels per day Sunrise oil sands project to the point of corporate sanctioning later this year.
Impressive legacy Lau’s legacy is impressive: Husky has raised its heavy oil output from 12,000 bpd in 1993 to 100,000 bpd and its booked Canadian heavy oil reserves to 120 million barrels; it has 10 billion barrels of in-place heavy oil resource and is seeking a partner to develop its major stakes in carbonate formations, likely the next generation of oil sands development; and it is testing various non-thermal enhanced recovery techniques.
Lau’s decisive and some said heavy-handed management style included a decision by Husky to abandon membership in the Canadian Association of Petroleum Producers, reinforcing his reputation as an industry lone wolf.
In 2002, Husky stunned the oil patch by disclosing it had held “discussions” with PetroChina and “other parties” regarding possible transactions, but added “there is no assurance that any transactions will occur.”
Two years ago he turned the tables on analysts who saw only one outcome for Husky — a hostile takeover.
He said Husky was actively looking to acquire an international rival and would spend as much as C$15 billion on a growth program to 2020.
Now the possibility of either selling out to or teaming up with elements of China’s powerful state-run energy companies is likely to dominate Lau’s future.
In returning to Hong Kong he will “assume responsibility for leading the development of the company’s businesses in the Asia-Pacific region, including existing businesses in Indonesia and the South China Sea.”
In partnership with China National Offshore Oil Corp., Husky last year reported a second “significant” deepwater gas find in the South China Sea, pointing to “huge potential” in an area where CNOOC and its partners plan to invest US$29.3 billion over the next decade developing the reserves.
Coinciding with Lau’s relocation, Husky has reiterated its plans to complete a spinoff of its Asian oil and gas operations by the end of 2010.
In overseeing the birth of yet another project, Lau will leave another imprint on Husky and nobody is betting his influence will end there.
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