NEW CENOVUS CHIEF EXECUTIVE VOWS TO RIGHT THE SHIP
Cenovus Energy publicly introduced its new CEO last week.
Well, introduced only so much as can be done when there are clear limits on what the new guy is prepared to say. Specific strategy questions were off the table, although Alex Pourbaix was forthcoming in answering the questions lobbed his way.
The former TransCanada Corp executive acknowledged he’s on a steep learning curve. “Drinking from the proverbial fire hose” is how he described his first week.
His enthusiasm was unmistakable, however.
Pourbaix is excited about the potential of Cenovus’s assets, including the Deep Basin properties acquired from ConocoPhillips.
The company also has a package of Deep Basin assets on the market. The idea behind the divestiture is that other companies will see more value in the assets than Cenovus, which still wants to give itself more breathing room on the balance sheet.
Pourbaix said his goal is to get the company’s debt to EBITDA (earnings before interest, taxes, depreciation and amortization) to two times or below.
“There are many ways to get your debt to EBITDA down — grow production, reduce costs or sell assets,” he said.
Pourbaix is likely to look at each of those levers.
One question heard following Pourbaix’s appointment was whether he and Cenovus chairman Pat Daniel have discussed reshaping the company’s board of directors, which was seen as not supporting former CEO Brian Ferguson amid the negative sentiment that followed the company’s $17.7-billion acquisition of ConocoPhillips’s Canadian assets.
Pourbaix sidestepped that one, offering a succinct “no comment,” but did say he spent significant time with the company’s directors during its search process to replace Ferguson, who retired in October.
Pourbaix did indicate he won’t be slow to make changes at Cenovus, with the aim of making the company more competitive from a cost standpoint.
“I’m taking a hard look at all areas, with a focus on cost control and efficiency. It’s really important this company be cost competitive,” he said.
He’s also faced with the imminent departure of Judy Fairburn, the company’s executive vicepresident of safety and chief digital officer, who’s leaving at the end of the month; a decision she made a few months ago.
There aren’t many chief digital officers in the energy sector. Cenovus was the first to create that post among Canadian oil and gas producers.
The area of big data — digitization — has many benefits for the upstream sector and it’s important to have a window on those technologies, Pourbaix said.
Some will suggest it needs to be part of any E&P company’s operating strategy as a key input into the goal of decreasing costs and increasing competitiveness.
The other piece to this, is simply that the adoption of technology and data analytics as part of the operating strategy going forward — for any oil and gas player — is critical to making a transition from the old industrial complex to one embracing the future.
This shift is critical for the sector if it wants to attract the next generation of graduates.
The message to millennials and new grads, said Pourbaix, is that the energy sector offers technically challenging and rewarding careers.
“We haven’t done enough in explaining how interesting the industry is ... that you can make a difference. And it’s not just about reducing the carbon footprint. It’s about how things have already changed in terms of increasing the number of wells per pad, decreasing the overall environmental footprint, the use of diluent … and the energy intensity of this business,” he said.
Pourbaix said he’s been hired “to drive accountability, creating shareholder value.”
Or, looked at in another way — to create Cenovus 2.0.
“I want to see a company that is really focused on disciplined capital allocation, a focus on accountability, driving inefficiencies and a focus on maximizing shareholder value,” he said.
There is one variable Pourbaix can’t really control when it comes to maximizing shareholder value, and that’s market access and infrastructure, though he played an important role in that context at TransCanada.
Both remain very important for Canada’s energy companies, not just Cenovus, to increase shareholder value.
“It is in the industry’s interests to get these pipelines built. It’s become a headwind for the province and the industry,” he said, acknowledging Cenovus’s rail loading terminal at Bruderheim gives the company a welcome degree of optionality.
One could argue Pourbaix has begun his upstream journey in the oilpatch at a time of exciting change — whether it’s the application of technology or this week’s news that TransCanada is one step closer to building the Keystone XL pipeline, on which Cenovus has made shipping commitments.
Still, there is no getting away from the fact Cenovus is still in “show me” mode — and a change in CEO will not resolve that.
It’s a start. But it is the results Pourbaix can generate that will get the company out of the penalty box with investors and playing offence, not defence.