Wulff to replace Botten at Oil Search as 25-year stint ends

Oil Search has anointed the man in charge of its Alaskan expansion, Keiran Wulff, to be its next CEO.

Incoming Oil Search CEO Keiran Wulff.

Oil Search chairman Rick Lee says long-term managing director Peter Botten will “be available to the company” well after he steps down as its boss, playing down fears his loss could disrupt the company’s growth plans.

Oil Search shares fell 13c or 1.8 per cent to $7.19 on Tuesday, trading as low as $7.135 in the aftermath of the company’s announcement that Mr Botten would step down from the role in February. He will end a 25-year stint at the top of the pioneering gas exporter, and be replaced by the man in charge of its Alaskan expansion, Keiran Wulff.

Mr Lee told analysts on Tuesday morning that, although Mr Botten will retire from the Oil Search board in February and cease employment in August, he would remain involved with Oil Search through its Papua New Guinea health and education foundation, and remain available to the company through a non-compete clause expiring in 2021.

His comments came after the downbeat market reaction to the news, and after analysts had expressed concerns at the potential impact of Mr Botten’s decision on Oil Search’s plans to expand in PNG and Alaska.

Credit Suisse analyst Saul Kavonic said Mr Botten’s tenure at Oil Search had been “spectacularly successful”, but his retirement carried risks for the company.

“Botten’s cornerstone role at Oil Search cannot by simply replaced. His departure presents risks to the company’s internal functioning alongside political and market engagement at a delicate point in Oil Search’s growth trajectory,” Mr Kavonic said.

But Mr Lee told analysts the transition had been carefully designed to minimise any possible impact, playing down suggestions Oil Search may need to retain Mr Botten’s leadership if milestones in its expansion plans are not met by the time he is due to depart.

“In designing the transition period Peter will be available to the company well beyond the point he steps down from the board, so our hope and expectation is that he will be part of delivery of the expansion projects,” he said.

“But what happens beyond that period, and a one year non-compete period after — so that’s through to August 2021 — is a little bit beyond our planning horizon at this stage. But our objective at this point is to these projects through front-end engineering and design and to final investment decision, and we’ll deal with as and when it unfolds over the next little while.”

Outgoing Oil Search CEO Peter Botten.

Dr Wulff is also a long-term Oil Search executive, who returned to the company in 2015 after seven years away from the Papua New Guinea-focused company.

He will retain his Alaskan responsibilities until mid-December, to advance its Pikka development to the front-end engineering and design stage, before handing over to Bruce Dingeman, the chief operating officer of the Alaska business.

Dr Botten hopes to advance expansion projects including a near-doubling of the output from its PNG LNG business by 2025, and the integration of the Papua LNG project, before easing out of the role.

The arrangement will see Mr Botten earning another $3.6m from the company after he steps down.

He will be given six months of his $2.37m annual fixed pay and accumulated annual and long-service leave on the termination date, plus a full year’s salary in compensation for a non-compete clause lasting until February 2021.

But the company has taken the opportunity to cut executive pay for his successor. Dr Wulff will earn fixed pay of $1.7m, long-term incentives worth twice that and short-term pay equal to his base pay but with half paid in shares and deferred for two years.

In 2018 he had base pay of $1.02m and took home $1.86m including bonuses.

Mr Botten earned $6.5m, including long and short-term incentives.

Mr Lee said that as the company embarked on the next stage of its expansion in PNG and Alaska, Mr Botten had decided it was time to change leaders.

“We look forward to a seamless transition of responsibilities from Peter to Keiran and to working closely with Keiran on Oil Search’s next chapter,” Mr Lee said in a statement to the market.

Mr Botten said he was confident that Dr Wulff had the “necessary attributes to lead the company successfully on the next phase of its expansion”.

“I believe Oil Search is a leader in the resources sector in promoting the importance of partnerships with governments, communities and other stakeholders to drive socially responsible developments, leveraging our respective strengths and building capacity in government and communities for positive social change,” Mr Botten said.

He oversaw the company’s growth from a market value of $910m in 1996 to $7.54bn, grew revenue from $66m to $1.5bn and profit from $19m to $341m. The shares have risen from 88c to $7.32 ahead of Tuesday’s announcement.

Dr Wulff said delivering the Alaskan and PNG projects would be his absolute focus and that the company had financial room to finance both. If it succeeds the company should be in a substantially stronger position by 2025, when the debt on the foundation project, PNG LNG, pays out.

“The company is really going to have a mountain of cash coming towards it at the time, Dr Wulff said.

A geologist by training, Dr Wulff was instrumental in Oil Search’s expansion from its PNG roots into Alaskan oil, taking advantage of low oil prices to acquire a stake in the Pikka project from one of its PNG partners, Repsol.

Dr Wulff said despite their distance the PNG and Alaskan projects shared similar geology and that the Alaskan project allowed Oil Search to draw on its experience in drilling and production in remote and difficult terrain.

Dr Wulff said he liked to under-promise and overdeliver.

After joining Oil Search in 1993 he rose to chief operating officer as it took over from

ChevronTexaco as operator of PNG oil and gas assets. When he returned to Oil Search in 2015, he was tasked with cutting costs and improving efficiencies to counter a steep decline in oil prices, before becoming moving to head strategy and commercial.

Succession planning was flagged by Mr Lee at the annual meeting in Port Moresby in May and the announcement today will draw the curtain on one of the longest CEO careers for a top 200 company.

Mr Botten joined the company in 1992 and was appointed chief executive in 1995. Dr Wulff, who joined in 1993 but left in 2008, said making staff comfortable with the change from such a long-serving and “visionary” leader would be part of the challenge of the job.

Dr Wulff left to spend more time with his family and pursue other career interests, including international board seats and stints as managing director of renewables company Aligned Energy and the ASX listed Buru Energy.

Mr Lee said Dr Wulff’s appointment as successor was “the culmination of a comprehensive and rigorous executive development and global search process”, that considered several highly qualified internal and external candidates.

“The board is extremely appreciative of Peter’s long and dedicated service to Oil Search over the past 26 years. Under his leadership, Oil Search has grown from a small exploration and production company to a regionally significant oil, gas and LNG producer and exporter.

“Peter is recognised as one of the world’s most successful corporate executives, as well as a leader in environmental, social governance and corporate social responsibility.”