As Anadarko Petroleum Corp. (APC) Chairman Jim Hackett steps down and heads off to Harvard Divinity School, Chief Executive Officer Al Walker’s biggest challenge is convincing investors nothing will change at the $45 billion global oil explorer.
Hackett, 59, who more than tripled Anadarko’s market value during almost a decade of leadership, was succeeded last year as CEO by Walker, who already was serving as president. Walker combined those roles with chairman after the company’s annual meeting yesterday, marking the first time he’ll be charting future projects without Hackett.
“The strategy of this company is not changing,” Walker said in an interview yesterday in The Woodlands, Texas, where Anadarko is based. “The culture’s not changing. And our business model’s not changing.”
Walker takes on the dual role of CEO and chairman as other U.S. energy producers, including Chesapeake Energy Corp. (CHK), Occidental Petroleum Corp. (OXY) and Hess Corp. (HES), are separating the jobs after shareholders protested poor stock performance. Investors don’t have that complaint at Anadarko, which has seen a 33 percent rise through yesterday during Walker’s CEO tenure.
“When Hackett came to this company, he did not have the opportunity set that he is leaving for Al Walker,” said Fadel Gheit, an analyst at Oppenheimer & Co. “So Al Walker is inheriting a much better company.”
Gheit, who has an outperform rating on Anadarko, said his advice to Walker would be “don’t screw it up.”
Hackett remade Anadarko through deep-water exploration projects in Africa and the Gulf of Mexico and more than $21 billion in acquisitions. Analysts are looking for Walker, 56, to extract more value from the oil and natural gas assets Hackett assembled, while helping the company move beyond an environmental lawsuit and its association with BP Plc (BP/)’s 2010 Macondo oil spill in the Gulf of Mexico.
Anadarko boasts the largest market capitalization, other than ConocoPhillips (COP), among U.S. oil and gas producers that don’t have refineries or a chemical unit. In addition to expanding in the deep-water offshore, it has seen surging U.S. output with projects in the Wattenberg field of Colorado, Eagle Ford Shale in Texas and Pennsylvania’s Marcellus Shale.
The company is targeting compound annual production growth of at least 5 percent to 7 percent through 2020, according to a presentation in March. Some of its major projects are now online, including off the coast of Ghana and in Algeria. Off the coast of Mozambique, Anadarko and its partners estimate they’ve discovered as much as 65 trillion cubic feet of recoverable gas.
The thing “investors tend to worry about with new CEOs is that they want to make a mark and make a splashy acquisition or be more aggressive or show that the company is theirs in some way,” said James Sullivan, an analyst with Alembic Global Advisors in New York. So far, Walker has done a good job of focusing on unlocking the value of the company’s asset base, he said.
The company remains a favorite of analysts who track its stock, with 29 ratings equivalent to a buy and five equal to a hold, according to data compiled by Bloomberg. The average 12-month price target for Anadarko from analysts tracked by Bloomberg is $108.31, 22 percent more than the $88.77 closing price yesterday.
In March 2012, the company told analysts it would seek to make sure the value of the assets in its diversified model was understood. Anadarko said then it might also look at further asset sales and restructuring efforts.
Yesterday, Walker said “the current framework and construction of the company is one that gives us a lot of flexibility.” Walker said he has “no interest” in a possible split of the company’s domestic and international assets. The company continues to look to sell some assets, including its Brazilian holdings and possibly 10 percent of its stake in a deep-water project off the coast of Mozambique.
Walker came to Anadarko in 2005. His titles have included chief financial officer and chief operating officer. He previously worked at UBS AG as an investment banker.
Walker’s succession has provided a sense of continuity, said Sullivan, who has an overweight, or buy, rating on the company’s shares and doesn’t own any. Splitting the chairman and CEO roles can happen when shareholders want more oversight of a chief executive, he said, while fusing the roles provides a clearer line of leadership.
Hackett, who retires next month, arrived at Anadarko in December 2003 after the company had been missing production targets. In 2006, he bulked up the company’s onshore and offshore holdings with the acquisitions of Kerr-McGee Corp. and Western Gas Resources Inc. In the Gulf of Mexico, Anadarko, which had a 25 percent stake in the Macondo well, eventually paid BP $4 billion as part of a settlement.
Anadarko still is waiting to resolve potential environmental liability in a case involving Tronox Inc. and the cleanup of more than 2,700 sites. The chemical company was spun off from Kerr-McGee, which Anadarko later acquired. The U.S. government and other plaintiffs are seeking $25 billion. In a May regulatory filing, Anadarko said it doesn’t see a loss as probable. Potential costs from the lawsuit may be as much as $1.4 billion, Walker said yesterday.
In March, Anadarko said Hackett would attend Harvard Divinity School after his retirement to become better prepared to write, speak and teach about faith and leadership.
“You have, I think, an outstanding CEO who will now become your chairman of the board,” Hackett told attendees at yesterday’s annual meeting, adding that Anadarko has a “fantastic” portfolio of assets and employees. “God bless all of you.”