They didn't get mad, they got busy
CALGARY -- Brian Dau, the former president of Anderson Exploration Ltd., bumps into old colleagues regularly.
Mr. Dau gave up the reins of Anderson Exploration after Devon Energy Corp. bought it for $5.3-billion in 2001. Following the deal, he and several other close associates, including company founder J.C. Anderson, started a new firm, Anderson Energy Ltd., which has its office in the same downtown Calgary building that houses Devon.
A new Anderson rose but the old Anderson is still very much alive, with veterans accounting for about half the top executives at Devon Canada Corp., one of the top 10 oil and natural gas producers in the country.
"We see each other in the parking lot all the time," said Mr. Dau, chief executive officer of Anderson Energy, a junior explorer.
He believes the company he helped build and shape is in good hands. "When you sell your baby, you want your people to benefit from it, the people that work there," Mr. Dau said. "In the case of Devon and Anderson, a lot of people stayed around and are still there, in fairly senior roles. That's been the real benefit. It wasn't like some of the other transactions, where a lot of people lost their jobs."
In 2001, there was a rush of acquisitions by energy companies from the United States that scooped up some of Canada's leading energy explorers. The deals included Burlington Resources Inc. paying $3.3-billion for Canadian Hunter Exploration Ltd. (now part of Conoco Corp.) and Conoco spending $6.7-billion for Gulf Canada Resources Ltd.
Fear was rampant in the cozy business community of downtown Calgary that the oil patch would be gutted, that every little decision would eventually be made in some distant head office in the U.S.
Of the flurry of acquisitions, Devon's move for Anderson was among the largest, but by all accounts, the deal has not contributed to the so-called hollowing out of Corporate Canada. In fact, just the opposite. Most key decisions are still made in Canada, where spending has surged and the employee count has increased.
As is traditional, the top-level managers departed after the deal, led by Mr. Dau and Mr. Anderson, but other senior names stayed, often in the same roles. Kevin Stashin, who was vice-president of operations at Anderson Exploration, is vice-president of operations at Devon Canada. Henry Assen remained vice-president of marketing. Drew Livingston is still vice-president of production.
And some old Anderson staffers benefited from the change by rising higher in the larger organization. Will Yakymyshyn, who was a manager of exploitation for British Columbia at Anderson Exploration, rose to vice-president of exploitation at Devon Canada in 2003.
"Initially, personally, I was skeptical," Mr. Yakymyshyn said. "I thought, 'Oh my god, here's an American company coming in and we are definitely going to lose our autonomy.' "
But Larry Nichols, Devon's chairman, was on the ground in Calgary quickly to reassure the team at Anderson he had another plan.
Mr. Yakymyshyn remembered Mr. Nichols' reassurances. "[He said], 'Whoa, hang on here, we're going to be employing a different business model [than other buyers]. We're going to strive to preserve, to the best of our ability to do so, your culture, your autonomy.' " Time, Mr. Yakymyshyn said, has proved that promise to be true.
"Lo and behold, the talk and the walk were definitely congruent. . . . That's one of the reasons the majority of the team that was around, in terms of managers and executives at the time of the acquisition, are still here."
Devon, based in Oklahoma City, Okla., gained a toehold in Canada in 1996 after it purchased some assets from another U.S. company, Kerr-McGee Corp. In 1998, Devon paid more than $800-million for Northstar Energy Corp. of Calgary, keeping the Northstar name. Mr. Nichols at the time said the strategy of giving the acquired company a lot of independence was "unique."
But there were skeptics at Northstar, too, including Chris Seasons, now president of Devon Canada. Mr. Seasons remembered sitting with Mr. Nichols before the deal was done, going over data in a room at Devon's Oklahoma City headquarters. "How are you going to be any different than all the other foreign-owned companies that have come in to Calgary and had remote decision making?" Mr. Seasons recalled asking.
He said Mr. Nichols promised he had a different plan.
"I said, 'Well, I'm skeptical, but I'll give it a shot.' And here I am, eight years later. We have really stuck with the model that the important decisions with regards to the Canadian business are made in Canada."
Essentially, once the corporate budget is approved, the Canadian team proceeds with its work unencumbered.
And that budget has increased steadily, reaching about $1.5-billion this year from roughly half that level in 2002, the first full year of Anderson's life with Devon. Mr. Seasons said the company's ambitions have not been curtailed at all, noting the firm is active in many different corners of the energy business, including drilling the first well in the Beaufort Sea since the late 1980s.
Making the story even more unusual, the president of Devon Energy in Oklahoma City is a Canadian, John Richels. He is a lawyer by training and ran Calgary's Bennett Jones LLP before moving to Northstar in the 1990s, leading the Canadian operations when Devon took over until his rise to president of Devon Energy in Oklahoma City in 2004.
The Anderson deal was a real challenge, said Mr. Richels, who faced the task of integrating about 2.5 Anderson workers for every Northstar/Devon Canada person at the time. A key goal was to retain Anderson's famous culture, driven by technically minded entrepreneurs.
Leaving the real decision making in Calgary was the main reason they were able to accomplish that.
"Unlike some previous models we might have seen in the oil patch over the years, if the Foothills regional team in Canada wants to drill a $1-million well, they're not calling somebody in Oklahoma City," Mr. Richels said, adding that allowing the Calgary office to "move quickly and with authority" was at the core of Mr. Nichols' strategy.
"It creates energy in people," Mr. Richels said.
As for the hollowing out of Corporate Canada, Mr. Richels questioned the theory.
"I don't put as much stock in that. When you look at it superficially, you can say there's a hollowing out, but I'm not sure that really happens. That sure hasn't been our experience. . . . If I put my Canadian hat on, the acquisition of Anderson was good for the Canadian oil patch."
Just having a Canadian running the big show is a "pretty significant coup," Mr. Seasons said, adding that Devon-Anderson is a model deal.
"We marvel some times at how well it's worked. It's been an excellent example of how you could put two companies together and one plus one equals two-and-a-half. And we're almost five years into it, so I don't think we're kidding ourselves."
HOLLOW FEARS?
Case Study No. 2 x Anderson Exploration & Devon Energy
Anderson timeline
1970: J.C. Anderson discovers the 1.4-trillion-cubic-foot Dunvegan field.
1982: Six private companies under Mr. Anderson's direction merge to form Anderson Exploration.
1988: Company goes public as investor BC Sugar Refinery distributes some of its stake to shareholders.
1995: Pays $800-million for Home Oil Co. Ltd.
2000: Wins bidding war for Ulster Petroleums Ltd. for about $650-million.
2001: Closes $773-million deal for Numac Energy Inc. in February.
2001: Devon Energy Corp. offers $5.3-billion for Anderson.
Before
Anderson Exploration was one of Canada's leading producers of natural gas and was expanding rapidly in its final years. It had 569 employees at headquarters and 410 in the field.
Takeover factors
From 1999 through 2001, a low Canadian dollar and the prospect of higher long-term natural gas prices spurred a rush of consolidation, led by U.S.-based explorers picking off players in Calgary.
Anderson's reputation for aggressive exploration and technical acumen made it an attractive target.
Prospects for growth in natural gas production in Canada appeared better than in the U.S.
Anderson had bulked up in 2000 and 2001 with two large acquisitions but was struggling somewhat with high costs.
After
Devon Canada has retained a position as one of the country's largest producers, and the cornerstone of the company remains the Dunvegan field, discovered by Mr. Anderson more than three decades ago. The firm has 850 employees at headquarters and 550 in the field and boasts diverse operations, including an oil sands project in development.
Upside
Employment increased and capital spending has roughly doubled to $1.5-billion annually.
Downside
The assets discovered and developed by a Calgary corporate icon ended up in the hands of a company based in Oklahoma City, Okla.
Key people
J.C. Anderson
Company founder, was still chairman and chief executive officer at 71 when the firm was sold.
Now chairman of Anderson Energy Ltd., a junior explorer, whose stock is down more than 50 per cent in the past year.
John Richels
Was president of Devon Canada's fairly modest operations prior to the Anderson deal.
Appointed president in 2004 of Devon Energy in Oklahoma City. Played key role in helping combine the companies.
The series
Saturday: An overview
Canadian companies are being swallowed up by foreign rivals at a record pace. Is it the end of Corporate Canada as we know it?
Today: Anderson & Devon
Anderson Exploration's executives lost their jobs when Devon Energy bought the company. So they started a new business in the same building.
Tomorrow: Discreet & Autodesk
Six years after it was bought out, Discreet Logic lives on as a software brand. And so does the entrepreneurial spirit of its former staff.
Wednesday: Newbridge & Alcatel
Nine executives were let go when Alcatel took over Newbridge in 2000. Almost everyone found their way into new tech enterprises.
Thursday: MacBlo & Weyehaeuser
Noranda's takeover of MacMillan Bloedel was the turning point in Vancouver's passing from a proprietor town to a branch office town.
Friday: Labatt & AmBev
Labatt found a happy union with a new Belgian owner. Then the parent merged with Brazil's AmBev, and the culture changed again.
On the Web
Reporter Gordon Pitts narrates a slide show at globeandmail.com
