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[Oslo] Statoil's long-serving chief executive Helge Lund unexpectedly quit on Wednesday to take on the top role at smaller rival BG, where he has been promised a big pay rise if he can turn round the flagging British gas and oil producer.
Lund, who in 10 years transformed Norway's once domestic-focused state oil firm into a US$77 billion international major, now faces a new set of problems at BG, Britain's third-largest energy firm, which has been struggling following a string of production downgrades that cost the previous CEO his job. "(Lund) has built a world-class exploration and production portfolio at Statoil, and the company is now widely admired for its technical expertise, financial performance and strong, values-based culture," BG's chairman Andrew Gould said.
BG shares are down 20 per cent since the start of the year as its important Egyptian gas business has performed disastrously due to lower production for exports and its huge investments in Brazil have yet to prove their value. "In terms of global industry leaders, it is hard to imagine a more suitable candidate," Investec said in a note.
Analysts have suggested that the company might be better focused if it were to spin off either its successful liquefied natural gas (LNG) business or its deepwater Brazilian interests, which promise more than 6 billion barrels of oil equivalents in recoverable reserves. "For leaders, there comes a time when it's right to move on, both for themselves and for the company they run," Lund said, adding that it was BG which approached him six to eight weeks ago. "I've wanted one more leadership challenge," said Lund, a native of Oslo who turns 52 on Thursday. "I think I'm too young to retire. This (BG) is a challenge I find exciting, and that's the main motivation." Ironically, one of BG's biggest future projects may be an LNG plant in Tanzania, to be jointly built with Statoil, after the firms found more than 30 billion cubic feet of gas in several nearby offshore licence areas. "BG's key priorities are the delivery of the large new projects, managing decline in its mature regions, the monetisation of some assets and a reinvigoration of its exploration pipeline. Helge Lund has proved successful at this, while at the helm of Statoil," analysts at Goldman Sachs said in a note.
Lund, who will start at BG on March 2, becomes the first CEO of Statoil to leave the still state-controlled firm voluntarily. The Norwegian government is now looking for CEOs at three of its biggest firms, with vacancies also at Telenor and Yara . "Lund had been driving the Statoil cash cycle to a more balanced level," brokerage Jefferies said in a note. "In the near term we believe there is now a risk that these efforts lose some momentum." But Chairman Svein Rennemo dismissed those fears saying there is no change in direction. "We are searching for a new CEO, not a new strategy,"Rennemo said. "The strategy is well-anchored in the board." Statoil has already appointed Eldar Saetre, currently head of its marketing, processing and renewables division, as its acting chief executive while the firm searches for a permanent replacement for Lund. Saetre has ruled himself out as a candidate, Rennemo said.
A potential hurdle in attracting top candidates will be the relatively low pay, a norm for Nordic countries and especially important for a state-owned firm. The new CEO does not have to be Norwegian but must be able to navigate Norwegian society, including the country's politics, Rennemo said.
Lund earned a sbase salary of US$1.15 million last year and a total package of US$2.1 million. BG said his guaranteed pay at the British firm will be 2 million pounds (US$3.18 million) a year but that figure could rise to as much as 14 million pounds if he hits all his performance targets.
BG shares were up 1.3 per cent at 1,038.50 pence by 1024 GMT, despite a big fall in oil prices overnight while Statoil shares were down over 3 per cent at 152.3 crowns, the biggest faller in the Stoxx Europe 600 oil and gas sector index .
Lund also leaves at a difficult time as the firm cuts capital spending plans, lays off workers and cuts costs after oil prices slumped to a four-year low and cost inflation squeezed margins. REUTERS