Smith CEO and Chairman Neely Resigns
In a move applauded by Wall Street, Smith International said Thursday that Jerry W. Neely has resigned as chairman and chief executive of the Newport Beach oil tool manufacturer, which recently emerged from 20 months of bankruptcy proceedings.
Neely, 51, had been chief executive since 1976, and chairman since 1978.
“Neely stated that, having culminated a 22-year career with Smith by successfully steering the company through bankruptcy, he had decided to relinquish these offices, but will continue to serve as a consultant and director,” the company said in a prepared statement.
Neely was unavailable for comment.
Succeeding Neely as Smith’s chief executive is H. Moak Rollins, a co-founder of Drilco Oil Tools, which merged with Smith in 1967. Rollins is a large Smith shareholder, with 140,000 shares, or about 1% of the company’s stock.
Rollins, president of an Austin, Tex., financial analysis consulting firm and former chairman of the Texas Public Utility Commission, served on a shareholder committee while Smith was in Chapter 11 bankruptcy reorganization. He joined the company’s board in April.
Products Familiar
“I am a major shareholder, and this is a major piece of my personal endowment, and I want to be here to help take care of it,” Rollins, 66, said of his increasing involvement in Smith’s business affairs.
“It is not a strange world for me,” he said. “Most of the people and all the products and product concepts are familiar to me and I have obviously followed the company very closely . . . Our primary concern right now is to be sure we will fulfill the plan of reorganization that was approved by the bankruptcy court.”
Other title changes were announced by Smith, although company officials said they simply reflect the management configuration in effect during the organization proceedings, which concluded Nov. 12. The reorganization becomes effective Dec. 31.
Doug Rock, previously a division president, has become president and chief operating officer. Loren Carroll, previously a vice president, will become executive vice president and retain the position of chief financial officer.
The board also created an executive committee consisting of Rollins, Rock, Carroll and two outside directors, Frank Benevento, executive vice president of Robert E. Torray & Co., and Robert Sutherland, executive vice president of Industrial Equity (Pacific) Ltd. Torray & Co and Industrial Equity are Smith’s largest shareholders.
Bryan Dutt, an oil industry analyst with Howard, Weil Financial Corp. in New Orleans, said the stock market perceived Neely’s resignation as “very favorable.”
He noted that Smith stock closed at $7 per share Thursday, up 87.5 cents for the day on the New York Stock Exchange.
Several oil industry analysts applauded Neely’s resignation, which they said appeared to have been encouraged by the new board formed when Smith emerged from bankruptcy last month. Company officials, however, maintained that the change of command was voluntary.
Carroll, the chief financial officer, said he wasn’t surprised by Neely’s resignation. Neely had been under “tremendous stress and pressure,” he said, while trying to guide the company through “the most difficult times” during its reorganization.
Joined Company in ’66
“I understand why he would want to step down from his responsibilities,” Carroll said.
Neely, son-in-law of company founder H. C. Smith, joined the firm in 1966 as a plant manager and rose rapidly through management ranks.
Analysts acknowledged that Smith’s financial difficulties were caused in part by a worldwide downturn in drilling activity caused by plunging oil and gas prices.
But they said Neely’s pursuit of a hostile takeover bid for Gearhart Industries of Fort Worth contributed to the problems. Neely wanted to incorporate Gearhart’s high-technology devices for detecting oil and gas deposits into Smith’s drilling tools.
In the end, Smith and Gearhart announced a settlement under which Smith sold the 33% interest it had acquired in Gearhart. Smith was able to recover only about half of the $163 million it had paid for the Gearhart shares.
Wall Street analysts also said Neely played a key role in starting a legal action that resulted in a Los Angeles judge awarding a $205-million judgment against the company for infringing on a drilling seal patent owned by Hughes Tool Co., Smith’s archrival.
The judgment forced Smith to seek protection from creditors under Chapter 11 of the U.S. Bankruptcy Code in March, 1986.
In June, 1987, shortly after Baker International merged with Hughes Tool to become Baker Hughes, the combined firm agreed to settle the case for $100 million.
