July 14, 2017 / 6:27 PM / 2 years ago

In search for new CEO, Cenovus seeks fresh blood for old path

CALGARY/TORONTO (Reuters) - Cenovus Energy Inc’s (CVE.TO) search for a new chief is focusing on external candidates with strong technical skills to help stabilize a company whose shares have nearly halved after an unpopular acquisition.

President and CEO Brian Ferguson of Cenovus Energy goes over his speaking note before addressing shareholders during the company's annual general meeting in Calgary, Alberta, April 29, 2015. REUTERS/Todd Korol

The Canadian crude producer is working with executive recruitment firm Korn/Ferry International (KFY.N) to find a replacement for outgoing Chief Executive Brian Ferguson, who was an accountant by profession, sources familiar with the matter told Reuters. Cenovus made a transformational acquisition in March, paying about C$16.8 billion ($13.2 billion) for ConocoPhillips’ (COP.N) Canadian oil and gas assets, which doubled the company’s production capacity. But the debt-fueled deal angered shareholders, and last month Ferguson, who had championed the transaction, decided to leave the company.

Among the potential candidates Cenovus is likely to consider for the top job include Devon Canada (DVN.N) President Rob Dutton, MEG Energy Corp (MEG.TO) CEO Bill McCaffrey, ARC Financial Corp Director Chris Seasons and former Shell Canada (RDSa.L) President Lorraine Mitchelmore, the sources added.

Most of these executives have extensive experience operating in the oil sands but Cenovus is also expected to tap top talent from U.S. energy sector.

Cenovus spokesman Brett Harris declined to comment on the search process beyond saying the company’s global search would look at both internal and external candidates.

Dutton, McCaffrey and Mitchelmore did not immediately respond to requests for comment. Seasons declined to comment.

Korn/Ferry did not offer an immediate comment.

Energy industry analysts and company executives in Canada’s oil capital Calgary said Cenovus’ search for a new CEO may be hampered by a lack of available top quality candidates with experience in the niche oil sands sector.

They added the company is more likely to plump for a candidate with a good track record at turning around struggling businesses, given the hammering Cenovus’ share price and strategy have taken since the ConocoPhillips deal.


Cenovus could find it challenging if the company is looking for more than a caretaker, said Laura Lau, senior portfolio manager at Brompton Group, which holds Cenovus shares.

“There aren’t that many people with vision ... I would prefer somebody with oil sands experience. I would also prefer an engineer,” she said. “I find engineers to be the best leaders because they’re very process-oriented.”

Ferguson’s successor will take over a company that is on an uphill mission to win back shareholder confidence after the ConocoPhillips deal, which critics say marred Cenovus’ pristine balance sheet and brought the crude producer into the unknown field of natural gas.

“They probably are looking for a change of culture; the board will be looking for capital discipline,” said Matthew Miller, an analyst with CFRA. “For a CEO search, they’re going to look externally, so that could take a bit longer.”

Not naming a successor along with Ferguson’s retirement announcement last month - leaving a leadership vacuum directly after the company’s bold and risky acquisition - has not sat well with investors.

“It’s like buying a car and then having the keys taken away,” said Ryan Bushell, portfolio manager at Leon Frazer & Associates, which holds Cenovus shares. “I’m confident they will find someone good, but until they find that person, there’s a lot of uncertainty.”

Apart from steadying the ship, the new CEO will face the daunting task of delivering about C$5 billion in asset sales, required to cut down company’s debt. The CEO will also need to boost employee confidence.

“The sooner we can demonstrate some good value asset sales, get that balance sheet back in order, all of us will feel better,” Cenovus Chief Financial Officer Ivor Ruste said. “That’s the nature of the discussions I’ve been having with individual investors.”

($1 = 1.2723 Canadian dollars)

Additional reporting by Liz Hampton in Houston, Solarina Ho in Toronto and Nia Williams in Calgary, Alberta; editing by Denny Thomas and Marguerita Choy

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