2018 is the ten-year anniversary of hiring The Finder (no one else within the company was deemed competent to lead Exploration at that time, which is interesting, our current leadership was available then), and we’ve got another reorganization and layoff now, so let’s review our history. This information is mostly from company releases.
Upon hiring, The Finder brings in his crony right-hand man and hands GOM to him.
2008 annual report: reports the hiring and leadership of The Brilliant Finder, “the retooling of our acreage inventory... in the Gulf of Mexico, Chukchi and Beaufort Sea, and numerous onshore basins in North America and Indonesia and North Sea...”
2009 annual report “renewal through exploration... Browse Basin, Gulf of Mexico Deepwater, Chukchi Sea, unconventional in NA and Canada, Caspian Sea, offshore Indonesia... Poseidon discovery in Australia... Shenandoah and Giant Tiber discovery in prolific Gulf of Mexico...”
Therefore The Finder is promoted to SVP based on reported “Giant” discoveries.
The Finder sells half our interest in Eagleford for almost nothing, but our COO refuses to close the deal.
The Finder alienates every BU President and VP Exploration with his arrogance, demands, and refusal to listen to anything they suggest or say.
2009: Berkshire Hathaway starts reducing its position in ConocoPhillips... Warren Buffett: “...mistakes like this once again emphasize the importance of consulting people you trust before making a major investment. Sometimes, getting a different perspective is the best way to see the big picture...”
2012 Annual Report: The Finder, who never believed unconventionals, suddenly highlights all the unconventional plays he now takes credit for... Also, brags we are Top 5 Gulf of Mexico Deepwater leaseholders... Angola, Bangladesh, Barents Sea, Chukchi Sea, Browse Basin... 43 Billion BOE resource base...
2013 ConocoPhillips announces a significant oil discovery... “Shenandoah appraisal well encountered more than 1,000 feet of net pay in high-quality Lower Tertiary-aged reservoirs...”
YE 2013 Investor Update: 43 Billion BOE resources... but now everything suddenly unconventionals, which The Finder previously despised.
2014: announces another oil discovery in the deepwater portion of the Gulf of Mexico... Coronado wildcat exploration well encountering more than 400 feet of net pay, “the net thickness of an oil reservoir able to produce hydrocarbons... confirms the value of our portfolio in the Gulf of Mexico and provide visibility on our future plans to grow through organic exploration...”
“COP CEO... names ultra Deepwater drillships... Part of our long-term lease commitment to two new state-of-the-art drillships...”
2014: “Although the Kamoxi well results were disappointing, we continue to see potential for this subsalt Angola play...” The chickens come home to roost as The Finder’s incompetence can no longer be disguised. The Pcs for Angola was... large.
2015: We give up on Deepwater worldwide (again!). We cancel contracts for Deepwater drillships and agree to pay contract’s penalty, which is basically lease commitment terms.... so we agree to pay cost of drillships with zero wells drilled.
The Finder “retires” and is rewarded with, after 7 1/2 years employment... an 8-figure (that is not a typo) severance package. He has spent billions in capital and expense during his tenure with almost zero results. Total cumulative executive pay for his 7.5 years about $35 million; roughly $7B in losses for us.
COP puts Deepwater portfolio up for sale. Market subsequently deems worthless with the exception of a pittance for Senegal.
2015 annual report: “we decided not to conduct further activity on certain Gulf of Mexico leases. ...we held approximately 1.8 million net acres... The operated Harrier and nonoperated Vernaccia wells were expensed as dry holes in 2015. The operator of the Gila prospect -{coincidentally The Finder’s previous employer} has elected to discontinue exploration and appraisal activity. Accordingly, we recorded $111 million in after-tax dry hole expense for a previously suspended well in the Gila prospect, and a $100 million charge for the impairment of undeveloped...”
2016: “Shell, ConocoPhillips, and others have officially relinquished drilling rights in the Arctic waters off the coast of Alaska, according to reports... The companies originally paid about $2.5 billion combined for the relinquished leases...” History repeats AGAIN.
2017: Let’s face it. In the 2017 annual report, exploration results are a joke. No mention at our stockholders meeting, except for sudden mention of Alaska bolt-on... highlighted in recent press release: .5-1.1 BBOE gross. An exploration area we previously hardly mentioned is now suddenly our future.
But there’s much more to this incompetence than this. People inside know that the incestuous relationship between “explorers” and subsurface means almost all major projects are late with first production, reserves and resources are ultimately less than promised at authorization, and production profiles are smaller and flatter. So infrastructure is over-sized and over-built for the reservoir development because our G&G “expertise” actually incentivizes saying there’s more hydrocarbons there.
In conclusion: we’ve lost roughly $7B over the last ten years in Exploration through management/technical bias and incompetence. We continue to waste money in the Browse Basin, Europe, South America, and Alaska, which we will mostly ultimately walk away from or sell. Or actually worse, declare a discovery and develop at considerable cost for disappointing results. Exploration has almost no future value for the company. But after these new layoffs we will continue to pay the surviving “finders” exceptionally well in the new current organization as we move the deck chairs around once again.
P.S. Shell recently announced that Deepwater drilling was more profitable than shale, so expect us to be back within five years, if we’re still around. It’s what we do.