Bye-bye Don. Hello John. We've heard the first bit, the planned departure of Woodside boss, Don Voelte. Soon we'll be greeting the new behind-the-scenes man, a human buy-signal called John Argenti.
Bye-bye Don. Hello John. We've heard the first bit, the planned departure of Woodside boss, Don Voelte. Soon we'll be greeting the new behind-the-scenes man, a human buy-signal called John Argenti.
"John who", will be the reaction of some people, but older readers, especially those familiar with the financial history of Wesfarmers will recognise that a dose of Argenti could be the best thing that has happened to accident-prone Woodside in the past 10 years.
Argenti is the man behind a management system which revolutionised Wesfarmers more than 20 years ago when a young chief financial officer by the name of Michael Chaney subscribed for a set of his books.
Top priorities in the Argenti system are an absolute focus on generating wealth for shareholders, the allocation of capital to business units that are performing well - and the sale or closure of units which are not hitting key performance targets.
In one sense, Argenti is a brutal system which demands the rigorous application of a strict set of financial and management rules.
In another sense, Argenti produces companies which are disciplined, consistent, and dedicated to maximising the return to the owners of the business, the shareholders.
If he ever has time to look back on his career, Chaney might regard the purchase of a set of Argenti manuals as one of his true life-changing moments because it propelled him into the chief executive's chair at Wesfarmers which, in turn, saw him win the chairmanship of National Australia Bank and Woodside.
NAB has its own issues to keep Chaney busy, but at Woodside there is a much greater challenge because it is a company showing the hallmarks of having lost its way.
A breath of fresh air when he blew in from the U.S. Voelte has gone as far as he can at Woodside, perhaps too far, by promising things he could not deliver, under-taking projects beyond the scope of the staff he employed, and negotiating too aggressively with potential partners, and failing.
The result is a company in desperate need of a new broom as this check list of problems highlights:
- Bungled the design of the flare tower at the new Pluto project, a mistake which could delay the start of LNG production and add to the final cost.
- Invested in the expansion of Pluto before the discovery of sufficient gas.
- Failed to secure third-party gas for Pluto 2 and 3 from other oil companies.
- Failed to secure a land-holders agreement for the ambitious Browse Basin LNG development.
- Failed to secure agreement with East Timor for the Sunrise LNG development.
None of those events is a show stopper in their own right. Taken collectively and Woodside can be seen as a company which has deep management problems.
Enter chairman Chaney, perhaps with his faithful set of Argenti manuals under his arm, and almost certainly aided by another Woodside director with Argenti coursing through his blood, the former finance director of Wesfarmers, Eric Fraunschiel.
Between them, Chaney and Fraunschiel have decades of Argenti training and will understand the importance of a clear focus on what's best for shareholders which is why right now, with the price depressed, could be a time to dust off your Woodside files.
Another reason to welcome the changes underway at Woodside is that BHP Billiton might finally move on the stock in the wake of Shell's partial sell-down.
Whether a bid emerges, or not, the point is that everyone (from Shell down) has had enough of Woodside's seemingly never-ending mistakes.
Time's up, is what institutional investors are saying to Chaney and Fraunschiel. Whether it's a new owner or new broom is irrelevant. Just get on with a change which brings greater financial discipline, clearer thinking, less aggression, and a more collaborative approach to deal-making.
