Oil Man Sees Opportunities in Energy’s Restructuring

A former executive of the defunct Tenneco Oil Co. speaks from personal experience when he tells independent oil and gas producers that the restructuring of the energy industry creates business opportunities.

“It will be, in my judgment, a good time during the 1990s,” Joe B. Foster said. “Not every independent will make it, of course. But many will thrive. New ones will be created, some by employees of companies who restructured them out of a job.”

Foster founded Newfield Exploration Co. Jan. 1, 1989. The young company, based in Lafayette, La., is owned by its 25 employees--all former Tenneco Oil personnel.

“My new life at Newfield,” he said, “is an outgrowth of the so-called restructuring going on in the oil industry for the past few years, and which will continue to go on for the next several years. Indeed, Newfield would not exist if Tenneco had not decided to sell its oil and gas properties.”

Tenneco Inc. sold its oil and gas properties for more than $7.3 billion in late 1988. Foster, 54, worked 32 years for Tenneco and was executive vice president and director responsible for oil and gas operations worldwide and Tenneco’s gas pipeline companies when he resigned.

Industry observers credit him among three Tenneco executives who established the company’s Gulf of Mexico offshore assets, for which Chevron Corp. paid $2.6 billion.

Although Newfield has no income or production yet, its exploration and acquisition strategy focuses on central Gulf of Mexico projects in offshore water depths of about 300 feet, primarily off the Louisiana coast.

At a recent energy symposium in Houston, Foster predicted that the majors will sell marginal and outlying properties as the U.S. production base declines, forcing the majors to concentrate primarily on international deep-water fields.

“The emphasis on selling marginal and outlying properties will continue,” he said. “The 80% of the properties that produce less than 20% of the income, and those properties with imminent abandonment liabilities, will be candidates for sale. So will small properties remote from areas where the major has important operations.

“These internal restructuring actions of the majors spell out opportunities for the U.S. independents. They will be able to buy the major’s marginal properties, cut costs, rework the properties, exploit them, find some up side.”

Newfield’s initial funding was provided by Newfield employees and two investor groups, Houston-based Duncan Cook & Co. and the University of Texas, through its Permanent University and Common Trust funds.

UT and Duncan Cook each own 30% of Newfield, with the remaining 40% ownership held by its employees.

“We don’t have any production. We have a lot of ideas, and if that makes us successful, we’re a successful company,” Foster said, adding that Newfield is gifted with “talented people, adequate backing and high hopes.”

He said a key principle behind Newfield is employee ownership: “Every employee of Newfield owns part of the company, not just by options, but with investment of his own money. It’s a pleasure to manage a company where everybody has a significant part of their net worth tied up in it.

“Motivation is not a problem. Getting people to speak up is not a problem. It’s driven by the fact that all of us, from me down to the secretary of the company, own a piece of this thing and want very much to see it work.”