Oil Search taps Wulff as CEO Botten to retire

Keiran Wulff will replace long-standing Oil Search chief executive Peter Botten at the company. Nic Walker

By Angela Macdonald-Smith - Financial Review

Incoming Oil Search CEO Keiran Wulff has big shoes to fill and challenges in both Alaska and the Pacific when longstanding boss Peter Botten steps down next year.

Dr Wulff will take over from Mr Botten on February 25, but will have to navigate uncertainties casting a shadow over the oil and gas producer's biggest growth project in Papua New Guinea.

The firm's chief in Alaska and an experienced hand in PNG, he will be able to call on his predecessor's experience and expertise at least until August next year when Mr Botten retires.

But with a $US14 billion LNG expansion in PNG delayed after the change in government earlier this year and lingering investor uncertainty over the Pikka oil project on Alaska's North Slope, the carefully structured leadership transition is still seen as posing risk.

"Botten is a legend of the region's LNG industry and cannot be easily replaced after a spectacular 25-year innings," said Credit Suisse energy analyst Saul Kavonic, pointing to his key leadership role in company strategy and internal organisation as well as political and market engagement.

"We have doubts whether Oil Search is functionally prepared for this departure."

Shares in Oil Search dipped 1.8 per cent to $7.19 after chairman Rick Lee announced Dr Wulff, who first joined Oil Search in 1993, had been appointed chief executive officer designate ahead of the first CEO change for a quarter of a century.

Mr Lee, who flagged in May that succession planning was well advanced, said Mr Botten had decided, with full support from the board, that now was the right time to transition the leadership.

He said that after an extensive internal and external search process, the board had agreed unanimously that Dr Wulff was the person "with the necessary experience, leadership skills and vision to take Oil Search into the future".

RBC Capital Markets analyst Ben Wilson said an insider appointment was a "natural fit" given the growth strategy was well set for PNG and Alaska and given that navigating the political and regulatory environment in both PNG and Alaska was "of critical importance".

"Botten’s depth of relationships in PNG won’t easily be replaced, however Dr Wulff has more relevant experience than most on this front," he said.

Still, Simon Mawhinney at investor Allan Gray, which has reservations about the Alaska entry, said capital allocation decisions were probably more important.

"There are so many uncertain outcomes that present for this company in the coming one to five years that it's really hard to know how they unfold and it's also hard to know how important the CEO is in that, given how large a portion of those assets sit inside a joint venture of which they are not the operator," Mr Mawhinney said.

He suggested that Mr Botten's close relations with the previous PNG government under Peter O'Neill may mean a change of CEO is positive.

The date of Mr Botten's exit has been a source of market speculation for several years. Some have even suggested that it could leave Oil Search vulnerable to a takeover, especially after a softening in the share price earlier this year due to the delays in the $US14 billion ($20.7 billion) LNG expansion.

Speaking to The Australian Financial Review, Dr Wulff rejected any suggestion that Oil Search was vulnerable, pointing to the managed transition process that will see Mr Botten remain an asset for the company for some time.

Long-standing CEO Peter Botten is retiring. Brendon Thorne

"Peter has been such a strong leader, we've made sure that we're not just overnight going to be in a situation where there's a vacuum and there's certainly not," he said.

"There's never a good time for a leader of 25 years to leave and it's just a matter of making sure the company is well prepared when it does occur."

Success under Botten's leadership

Mr Botten, among the three longest-standing chief executives of ASX-listed companies, has taken Oil Search from a $250 million explorer into the big league, primarily through its stake in the ExxonMobil-led PNG LNG venture, which started up in 2014.

Should the next expansion go ahead as planned, Oil Search is set to more than double its production again over the next five years.

Wulff's remuneration

News of the transition comes amid heightened tensions over the benefits flowing from multi-billion-dollar LNG investment in PNG, and the public and political concerns over the UBS loan to the government for the purchase of Oil Search. But Dr Wulff said those issues had "zero" impact on the CEO changeover.

"It's been a long planned process that the board has gone through and those activities or circumstances have had zero impact and that’s categorical," he said.

A geologist by training, Dr Wulff worked at Oil Search from 1993 until 2008, before leaving for roles in Australia to be closer to his young family. These included a stint as managing director of Western Australian junior explorer and producer Buru Energy.

He rejoined Oil Search in 2015, taking charge of the cost and efficiency drive after the crash in oil prices, and leading negotiations that saw Oil Search enter the Papua LNG project, now led by French major Total.

Dr Wulff will receive fixed pay of $1.7 million plus short-term and long-term incentives and is on an ongoing contract with no fixed term.

That compares with Mr Botten's fixed salary of $2.374 million, which will continue until his retirement date, when he will receive six months' pay plus accrued leave. He is subject to a non-compete clause until August 2021 in return for a further $2.374 million.

Go to this link for more: https://www.afr.com/companies/energy/oil-search-taps-wulff-as-longstanding-ceo-botten-to-retire-20190930-p52w87