PanCanadian's role in merger looks better

PanCanadian Energy seems to have more influence in its proposed merger with Alberta Energy Co. than originally thought.

The conventional wisdom has been that since Gwyn Morgan, AEC's president and chief executive officer, is poised to head the combined entity, AEC's corporate culture will run roughshod over PanCanadian's.

In a memo to employees of the two Calgary-based producers last week, Mr. Morgan took a swipe at the media for dwelling on which side will come out on top in the proposal to create a new company called EnCana.

"I know the media would have us 'keeping score' of who gets what job in the new company," he wrote. "We must avoid the counterproductive trap of this 'winners and losers' thinking, or we will have no chance of achieving the enormous potential of our merged company."

Well, with apologies to Mr. Morgan, here's the scorecard so far: AEC 5, PanCanadian 3. That's based on AEC executives heading five of eight transition teams -- hardly lopsided, but it sets the tone for AEC to dominate this so-called merger of equals.

Digging deeper into his memo, however, the AEC chief appears to have done a commendable job in ensuring fairness -- as far as it's possible to do so in mergers.

Randy Eresman, president of AEC's North American production division, would spearhead the largest unit, overseeing onshore oil and natural gas properties in Western Canada and the United States.

But PanCanadian executives would be leading two other important EnCana units.

Gerry Macey, PanCanadian's executive vice-president in charge of exploration, has been tapped to lead the offshore, international and new ventures division. That unit would be the key to finding new reserves in places such as Brazil, Ecuador, North Africa, the Middle East, Australia, Azerbaijan, Alaska and the Mackenzie Delta in the Northwest Territories.

Dave Boone, PanCanadian's chief operating officer, has been asked to oversee EnCana's properties off Canada's East Coast, the North Sea and Gulf of Mexico. Mr. Boone is widely seen as a rising star.

Had PanCanadian opted to stay independent, he would have been on the short list to succeed David Tuer, who resigned as president and chief executive officer in October.

If you're keeping track, which you're not supposed to if you're an AEC or PanCanadian employee, that's PanCanadian 2, AEC 1, at least for the top three divisions. Bill Oliver, executive vice-president of AEC marketing, has been named to head the fourth division -- midstream and marketing.

The remaining four units have been categorized as corporate groups: AEC chief financial officer John Watson is slated to head finance. PanCanadian CFO Wesley Twiss will help with the transition, but will leave EnCana soon after the merger is completed. Barring any surprises, such as rival bids, EnCana's creation is expected to win shareholders' approval in April.

Drude Rimell, vice-president of corporate services at AEC, would guide human resources and information technology at EnCana. Ms. Rimell has the highest-ranking job among five women named in the memo outlining plans for the top tiers of management, but those four other women are all from the PanCanadian camp.

Meanwhile, AEC corporate secretary Brian Ferguson is set to take charge of investor relations and legal matters, while PanCanadian's Gerry Protti would have responsibility for public affairs and an array of duties related to communications.

Mr. Morgan doesn't address speculation that at least 10 per cent of EnCana's payroll of 3,800 employees could get chopped.

With annual savings of $250-million promised from the "synergies" of slashing general and administrative costs, something's got to give; expect a scouring of staff lists to eliminate duplication.

Mr. Morgan, 56, is counting on higher oil and gas production to bolster EnCana in the long run, which would protect the jobs left over, and perhaps lead to a time when the new company could be in a hiring mode.

Trained as a petroleum engineer, Mr. Morgan joined AEC in 1975 and rose through the ranks to become president and CEO in 1994. As AEC grew bigger in recent years, he decentralized AEC's business structure, giving individual departments greater power. PanCanadian hasn't gone quite as far in decentralizing, but it has been moving toward that model of clear performance targets for individual units.

It will be human nature for AEC and PanCanadian employees to keep a scorecard in the months ahead. But if Mr. Morgan's decentralized business structure works smoothly and EnCana thrives, it won't matter much in a few years whether AEC brass win a few more plum postings than PanCanadian executives do.