Randy Eresman, the president and chief executive officer of natural gas giant Encana Corp., has stepped down.
Mr. Eresman informed the Encana board Friday that he will retire. He has spent 35 years with the company and its predecessor entities. He is the latest in a string of high-profile departures from the oil patch, which in the past year has seen longstanding leadership leave from Suncor Energy Inc., Enbridge Inc., Nexen Inc. and Talisman Energy Inc.
Encana said director Clayton Woitas, who serves as CEO of Range Royalty Management Ltd., will serve as interim head of Encana while it searches for a replacement.
Mr. Eresman “and the team have done a pretty good job of strengthening the balance sheet and doing what they said they were going to do,” said Encana spokesman Jay Averill. “And I think it’s more of a timing thing for Randy.”
Observers immediately doubted that this was a standard retirement, however, pointing out that companies typically give lengthy forewarning that a top executive is leaving. Mr. Eresman’s departure was announced suddenly in a Friday afternoon news release that some traders call an “f-bomb.”
“It’s always nice to be able to say you retired. Effective today. And also from the board,” said a sardonic Jennifer Stevenson, a portfolio manager with GCIC Ltd. who runs the Dynamic Energy Income Fund.
She added: “I think the effectiveness of his leadership is evidenced by the performance of the shares.”
Mr. Eresman will stay on the board until the end of February as an adviser “to assist with the transition,” the company said. In a research note, BMO Nesbitt Burns analyst Randy Ollenberger called his retirement “potentially positive” for Encana shares.
“I think it’s about bringing in a fresh set of eyes that might identify some additional opportunities,” he said in an interview.
“The strategy is relatively new and they’ve just completed some reasonably good transactions,” Mr. Ollenberger added, pointing to Encana’s recent Duvernay joint venture with a subsidiary of PetroChina. Under the terms of the deal announced last month, PetroChina – China’s largest international oil company – will gain a non-controlling, 49.9-per-cent interest in Encana’s 445,000 acres in the Duvernay in west-central Alberta for $2.18-billion.
“I actually anticipate some additional transactions in 2013 – joint ventures in Canada,” he said.
Encana has struggled financially with a heavy focus on natural gas, a commodity whose prices have been low for several years. Encana has built up debt, sold off numerous parcels of its land through joint ventures with foreign companies and worked to reinvent itself by pursuing oil and other hydrocarbon liquids that attract a greater value. But it has not won market favour. Its shares, following a spinoff of oil assets into Cenovus Energy Inc. that Mr. Eresman engineered, traded in the mid-$30s. On Friday, they closed at $19.50.
Mr. Eresman also led Encana during a time when it was accused of colluding with Chesapeake Energy Corp. to keep prices low at land auctions in Michigan. Those allegations triggered an investigation by U.S. federal and Michigan authorities, although Encana said it was cleared of wrongdoing by an internal investigation.
Mr. Eresman was also atop Encana when it failed in a 2011 bid to complete a $5.4-billion joint venture with PetroChina, although a series of subsequent deals injected substantial money into the company. His leadership, which saw the company promise to double production in five years, then abandon that goal amid sinking gas prices, triggered longstanding grumbling in the investment community.
In late 2011, Laura Lau, a Toronto energy fund manager, accused Mr. Eresman of changing “his strategy four or five times in the last year. ... He’s getting pretty close to capitulating on most of his plans.” At the time, Mr. Eresman shot back: “We’re not really changing our strategy. We are altering it to the reality of the market.”
Oil patch rumours, however, suggested that, according to one investment banker, “the board was having a lot of oversight on the management of Encana, which to me meant they were concerned.”
In a statement on Mr. Eresman’s departure, Encana board chair David O’Brien said Mr. Eresman “has played a key role in the development of Encana and in his more than three decades with the company; he has made many important contributions to the company’s success.”
Mr. Woitas, the interim successor who is to speak with reporters next week, said in the statement: “Encana has a number of world class resource assets as well as a strong management and technical team capable of delivering strong returns. I look forward to working with this team.”
Mr. Woitas won plaudits from Ms. Stevenson as a “huge tradeup” from Mr. Eresman, who was born in Medicine Hat, Alta., in 1958 and began with the company as a summer student in 1978. He worked up the ranks, becoming chief operating officer in 2002 before taking the top spot in 2006.
In the company statement Friday, he said: “after a highly successful 2012, Encana is once again financially and operationally very strong, and well positioned to execute on its plans to rapidly transition to a more balanced commodity portfolio. Now is the right time for me to step down and to turn over leadership of Encana to someone with the focus, drive and commitment to complete the transition. While I have always had a wide variety of interests, I will now be able to pursue them more extensively.”
With files from Kelly Cryderman