The morning Anadarko Petroleum’s Paul Taylor returned to Houston after the 1999 Investor Relations Magazine US Awards in New York, he met CEO Bob Allison in the parking lot at headquarters. Taylor spread his five trophies over the trunk of the CEO’s car. Allison nodded appreciatively, but commented laconically, ‘I hope you’re not expecting a raise out of this.’
Taylor recounts the story with a grin, knowing that it shows that team spirit and acceptance of excellence are all part of the natural order for the fast growing Texan oil and gas company.
In fact, with his amusing performance on the stage in New York, Taylor would have been brought back by the calls of ‘Encore!’ even if he hadn’t been required to return repeatedly to the stage to collect trophy after trophy. In succession he accepted awards for best IRO, best investment community meetings, best use of conferencing, best use of technology and best overall IR – all in the category for companies with a market cap below $10 bn.
To those who watched Taylor’s bravura performance, it will come as no surprise to hear that his background is communications. Starting out in the public relations department of an electric utility in his hometown of Shreveport, Louisiana, he then moved to the chamber of commerce where, after five years, he ‘sort of drifted into government relations.’
Taylor returned to PR with Panhandle in 1982 and it was there, after two years, that he inherited his first IR job. ‘I went through some marvellous experience and training to learn the language,’ he says. He also, of course, developed strong ideas. ‘I’m a big believer that IR is more communications than it is finance, so it follows that the guys doing it ought to be communicators rather than number-crunchers.’
For Taylor, then,’Investor relations is really public relations. Explaining how this company’s goals and objectives match a fund’s investment strategies is a communications job, not a financial job.’ Moreover, Taylor maintains, ‘If an analyst, buy or sell-side, has 20 questions about our company, maybe one or two of them are financial. The rest of the interest is story-driven: What do you make? Where are you going? What are your goals? What are your objectives? Those aren’t financial questions, those are issues. How you frame the questions, and how you sell them, these are communications functions.’ As someone who thinks a lot about his job, he concludes, ‘You’re almost an ombudsman between the company’s goals and objectives and the goals and objectives of the investors.’
Spinning out
In 1986, Panhandle, under pressure from a hostile bidder, spun out Anadarko. ‘It was a great move,’ Taylor says enthusiastically. ‘We started from scratch: we had no preconceived notions of how to do investor relations or shareholder relations or what an annual report should look like. But I was blessed with a boss who said, Do it however you want.’ Taylor pauses and grins: ‘And you know, I think we’ve done real well by our investors.’
His other advantage is Anadarko’s very flat management structure. ‘There’s the chairman of the board,’ he explains, ‘about ten vice-presidents who run various pieces of the business, and the only other title we have in the company is manager – we don’t believe in big titles.’ As vice president for corporate communications, Taylor’s office is next to the chairman’s and he attends board and strategy meetings. ‘Being on the inside is sometimes a double-edged sword,’ he confesses, ‘because you learn more than you can disclose, and in some cases more than you want to know. But that knowledge helps you to shape what is disclosed.’
Taylor reels off investor relations theories like a Niri guru. ‘Being an insider is key. You have to be close enough to the chairman of the board to know what the company’s going to do, and it really doesn’t matter what your title is – manager, director, vice president of IR or PR or communications. It really doesn’t matter so long as an investor can call you – your title could be mailroom clerk. Provided the investor gets an answer that’s right then he’s had his information requests met.’
Making odious comparisons with some investor relations departments he has seen, whose job was to pass on press releases prepared by someone else, Taylor offers the following recommendation: ‘I think you should bring IR on the inside, teach them the goals and strategies and let them speak for the company.’
The bulk of Anadarko stock is in the hands of large institutions, with some 5 percent held by insiders and employees. ‘We’ve never made much of an outreach effort to get individual shareholders beyond nominal participation in NAIC activities. This isn’t a yield stock, it’s an asset growth stock. We only pay small dividends, it’s very cyclical and a lot of individual shareholders just aren’t comfortable with the risk,’ he explains. Nevertheless, the company does have direct stock purchase and dividend reinvestment plans. Thinking big and Texan, Taylor adds, ‘I’m comfortable enough with the big names – the Fidelities and Oppenheimers and State Streets, and American Express.’
Mo for your money
There’s no need to worry about momentum players at Anadarko, according to Taylor. ‘The mo guys left the energy stocks a long time ago,’ he says. ‘We look forward to them coming back once the commodity prices firm up as we expect they will. I think that now energy is still very much underweighted in most portfolios. The deep value buyers are already there, the value buyers, the growth buyers will buy next, and the mo guys will be the last – they always are.’
Taylor clearly knows who his holders are. He attributes that to ‘a healthy sense of paranoia,’ adding, ‘I think they’re out to get us. In my career I’ve been through two attempted takeovers. I invest a fair amount of money in stockwatch, using the Carson Group. I like to have monthly, weekly and sometimes daily updates when I’m particularly nervous. We try to know who owns us, who’s buying, who’s selling.’
Once he knows who his investors are, Anadarko does ‘all the standard things,’ Taylor says. ‘We do annual and quarterly conference calls. We try to get on the road and do formal company presentations in the big cities, in New York, Boston, Philadelphia, Chicago and Los Angeles.’
Senior management joins these tours but Taylor usually attends sell-side industry conferences on his own. ‘I take the position that any sell-side analyst who’s got a buy recommendation deserves our support, so I show up ten or 15 times a year at sell-side conferences where they highlight not only our company, but ten others in our sector.’
High ownership levels will provoke further attention from Anadarko. ‘We have a rule that if you own 1 mn shares of stock, we ought to go see you once a year,’ explains Taylor, whose other specialty is trawling the smaller cities. He notes the number of fund managers away from the big centers who are equally deserving of companies’ notice. His best example is Austin, Texas which houses the Texas Teachers Investment Partners. ‘Everybody’s heard of Calpers, but not everybody’s been to see the Texas Teachers Fund, which is as big as New York’s. You go to see them, they appreciate the time you’ve taken to go to their city, to call on them. We do a fair amount of that.’
Hands across the water
Overseas outreach by Anadarko involves as many as 22 meetings over three days in the UK. ‘We’ve had overseas ownership as high as 25 percent sometimes. We’ve cultivated the UK market, where they’ve been very good to us in the sense of being contrarian investors. Normally when we get a down cycle of low energy prices and the US investors are bailing out, that’s when I’ll go to London and Edinburgh. With a long-term growth story in a cyclical business, you know as sure as death and taxes that it’ll come back.’
Even so, as a ‘grizzled old veteran,’ Taylor does not expect diehard loyalty. He expects people to take profits from such a volatile stock. But, he notes, ‘If they leave happy,’they tend to come back.’ His peregrinations are part of the branding exercise. ‘I want to be a household name. If you’re thinking of an energy company I want you to think about Anadarko, and that comes down to repetition. You know, we show up more times at your front door, good times, bad times, good years, bad years. The bottom line is that I’m looking for one more buyer; I need one more stock buyer today, one more the next day, and so on.’
Of course one way to get more is to hit the indexes. When Anadarko made it onto the S&P 500, ‘That was one of the best wells we ever drilled. The day we got picked for it, the stock went up $2-3.’ He estimates that there are five large index funds in the top 20 holders, but ‘I tend to ignore them – I know why they’re there.’
While investing the time in one-on-ones, analyst meetings and sell-side conferences, Taylor has no intention of emulating one of his golf buddies who fields some 70-80 calls after each earnings announcement. He believes in wholesale calls, and believed in them even when they were not always worthy of his faith. Anadarko started analyst conference calls in 1992, and Taylor recalls: ‘That was way early in the conference call business, when lines went dead in the middle.’ Things have improved. Now the company hosts four a year with American Teleconferencing Services, with as many as 200 people participating in each. Taylor advocates a separate communications line between his assistant and the operator, ‘so that when they call on Mr X to ask his question, they can pronounce his name correctly – as befits someone who happens to own 4 mn shares.’
In 1998 Anadarko began videocasting its analyst calls – a first for the sector. Beginning with a slide show, Taylor is gradually upgrading the image content in what he calls a ‘visioncast’. But really, it would be difficult for any video to match the sound of Paul Taylor in full flow. With his trademark larger-than-life diffidence he sums up his approach: ‘I’m blessed with a chairman who recognizes the importance of what we’re doing. We’re making money for shareholders. Anadarko’s performance, the numbers in our peer group, are best-in-class. One thing you have to emphasize is that it’s hard to do IR if your company’s performance is poor. People reward you for being best-in-class. We’re the best – but if we never stood up publicly, no-one would ever know it.’
