It was strain rather than panic stations for Chris Perry, IRO for Ireland’s Tullow Oil, in May. The company’s stock had plummeted from £4.20 to £3.60 ($7.71 to $6.61), and he had been perplexed trying to explain what was happening. Nothing fundamental had changed in the company, he kept reassuring investors, and it soon became clear that right across the sector, every exploration and production company had experienced exactly the same dip.
Clearly, an IRO cannot turn back a tide of investor sentiment driven by Iran, oil prices, interest rates and other external factors. Analysts agree that Perry did all he could, reassuring investors about the fundamentals of the company, and soon the stock regained its upward momentum.
‘Tullow’s share price growth has been very strong recently, and I suppose this puts us back a bit, but we are still outperforming our peers so far this year,’ Perry continues to reassure. Although the company has some large and loyal institutional holders with stakes over 5 percent, the stock is, Perry notes, quite liquid. He also comments, wryly, that there has been a lot of hedge fund activity: ‘We benefited on the way up, but suffer now on the way down.’
Tullow has been progressing toward entering the FTSE 100, and when asked about the ‘index effect’, Perry says: ‘Honestly, we have not really discussed it. Our ambition is to continue to grow the company. Being in the FTSE 100 would be an added benefit and I’ll hopefully be in a position to let you know if it has any effect.’
Ireland and beyond
In any case, Perry’s job is safe. The company was chosen by fund managers and analysts as having the best IR by a resource company at the IR Magazine Ireland Awards 2006. CFO Tom Hickey is very urbane about its success: ‘We had a remarkable run over the last twelve months, from £1.53 to £4.45, which was very gratifying. But could you really say the business was three times as valuable as a year ago? Even so, there are very few stocks that can say that they are up 30 percent since the beginning of the year.’
Tullow Oil began in Ireland and is still listed on the Irish Stock Exchange, where it has a loyal local following. CEO Aidan Heavey had set Tullow up as a small exploration company in Africa, but he found bigger fish to fry in the North Sea. Six years ago Tullow also listed on the London Stock Exchange, taking advantage of a larger pool of capital when it bought former BP assets in the North Sea.
Hickey, who joined the company in May 2000, recalls: ‘The change from Dublin to London reflected the fact that most of our shareholders were UK-based – about 70 percent of our register – so most of our IR effort was over here anyway. It was better for our big shareholders, giving them more flexibility. Moving from the Irish exchange to London was not a big cultural shift.’
He adds: ‘Although we had a couple of core shareholders, as the company grew we had to create an interest base of people who, even if they did not have a current interest, may well have wanted to acquire a holding in the event of an acquisition. So we put ourselves in a position to do bigger deals. And then, when 2004 brought the chance to acquire Energy Africa, we knew that as long as we could get the commercial aspects of the deal right, we would have good shareholder support.’
Now, says Perry, Tullow’s register consists of around 55 percent British institutions, 10 percent US groups and an interesting 18 percent of African holders who took Tullow stock when the company acquired Energy Africa. In deference to its Irish roots, the company still holds an annual shareholders’ meeting on the Emerald Isle – ‘serving them the same way we did when we were in Ireland.’
Heavey still maintains close relations with some of the African investors, whose confidence in the company has been amply rewarded as their stakes have trebled in value.
Reporting lines
Perry works directly for Hickey but also works closely with Heavey and with Tullow’s COO, Paul McDade. ‘It’s a good team on the road,’ he says. ‘We tend to travel in teams of two for roadshows and conferences.’
Perry has only been IRO for a little over a year but has already made his mark on the profession, helped by his hands-on connections in the industry. Beginning as an engineer with US oil company Arco, he subsequently became an energy analyst at Deutsche Bank. ‘Then I decided I wanted to get back into the industry,’ he recalls. He came to Tullow as a commercial analyst.
As Hickey explains, management decided the expanding company’s IR needs were too demanding for the CEO and CFO to handle on their own: ‘We realized we had moved up to a new level. When you double the size of the business, you’re almost starting again. We had a better business, a better portfolio and a better balance sheet, and we needed to go out and reintroduce ourselves. It was important for us to go up a step to match the new expectations the market had for a bigger company. It wanted more consistent and extensive communication: a dedicated IRO, a better web site, more diverse publications. There were a lot of things to do in a short time, and bringing Chris to the role from within the company was a good move at that stage.’
A great communicator
Perry himself made communications his priority when he moved into IR, ushering in ‘an improved annual report, corporate profile and, above all, web site,’ he says. His pride in these achievements is vindicated by vocal analyst appreciation of the readily accessible data on the site, which was shortlisted in the best web site category at the Investor Relations Society’s Best Practice Awards in the UK this year.
Perry points out that the web site also serves retail investors, who have had a ‘much larger uptake over the last year,’ but for whom he does not have the resources for a specific program.
Perry has to cope with a growing contingent of analysts – there are currently 17 of them. ‘Morgan Stanley, UBS and Citibank came on over the last year and we have quite a following with the smaller brokers – especially the Irish ones, but also those in London,’ he says.
While oil has been doing well, constant news of political unrest in African countries does entail some stroking and reassurance. ‘Investors always want to know about political stability,’ Perry says, ‘but we tell them that politically, one of the most unstable areas we work in is the UK. Chancellor Gordon Brown has increased taxes on oil and gas companies
twice over the last four years.’
Governments elsewhere have also been tougher as they capitalize on rising energy prices, but Perry reassures: ‘While licenses that we acquire now are on much stiffer terms than before, the governments we work with abroad have not altered the terms of their existing licenses.’ Additionally, he says, ‘In most of the countries we work offshore. For example, despite the unrest in Côte d’Ivoire, neither the oil nor the cash lands on shore, and not one day’s production has been lost.’
As the company has reinvented itself, it has put renewed emphasis on tracking and targeting, recently upping its Georgeson service to include monthly reports. ‘Previously we had quarterly reporting, but it was not really viable to track movements for IR purposes,’ Perry says. One target is Europe, where Tullow is seeking to expand on its 8 percent ownership with roadshows to Paris, Frankfurt and Holland.
The US has also been an important target for expanding Tullow’s investor base. ‘The US tends to understand our story because it has a much larger exploration and production [E&P] sector, with companies taking mature assets and exploiting them the way we do,’ Perry says.
‘Unlike some other smaller E&P companies,’ Hickey adds, ‘we’re not trying to polish up the assets to sell it on. That’s not on our radar screen.We really want to develop the business long term.’ It takes real commitment to get good IR work like Tullow’s flowing down the pipeline to investors.
