Oil boss rolls out more barrels

He sounds unconvincing. Heavey won’t say what car he does drive, but you can bet it isn’t a Ford Mondeo. He was paid €2.8m last year — enough to buy a Lamborghini for each day of the week. That’s small beer compared to his 2008 pay packet, which reached about €35m with bonuses and stock awards.

It could be argued, however, that Heavey is the L’Oréal of FTSE 100 chief executives: he’s worth it. Tullow Oil, which is mainly focused on Africa, with operations in Uganda, Ghana and Kenya, is a money-making machine. Heavey is the FTSE’s longest-serving CEO, beating WPP’s Martin Sorrell by a year.

Last week Heavey met the Irish shareholder base of the exploration company he founded 27 years ago, with a shadow annual meeting — following the meeting in London last month — at Dublin’s Royal College of Physicians club. The room burst into applause before he had uttered even a single word.

And why not? Revenues for 2011 were more than $2.3 billion (€1.9 billion), up 111%. Net profits were up 670%. Earnings per share were up 795%. Total shareholder return was 12%, with the promise of more riches to come from Kenya.

The only moment of awkwardness during his presentation was when he cracked a joke that fell a little flat. Tullow’s Irish shareholder base, as was evident by those who shuffled in to the meeting on Thursday, is rather elderly.

While speaking about rock formations, Heavey urged his audience to remember their school geology lessons, adding: “That might be pushing it for some of you.” There was a slight ripple of nervous laughter from some of those present. The other 90% glowered back at the young buck standing at the lectern.

The history of Tullow is the stuff of Irish corporate legend. In the early 1980s, Heavey, an accountant, was financial controller of a Mickey Mouse outfit called Tullow Engineering. With a couple of partners, he bought a clapped out Senegalese oil field as a spin-off, and Tullow Oil was born.

After steady if unremarkable growth throughout the 1990s, when it picked up a succession of unfashionable but cashproducing oil and gas assets, Tullow’s big breakthrough came in 2000, when it bought the North Sea gas assets of BP for £200m (€250m).

In 2004, it acquired Energy Africa for $500m, which gave it the oilfield in the Lake Albert basin that has fuelled much of its recent shareholder returns. About 18 months later, it paid £600m for Hardman Resources.

“From that point on, it has been all about steady expansion,” said Heavey.

Tullow is just a level below Shell, BP and Chevron. It is the largest, and most successful, independent oil company in the world that is focused on exploration. It has plenty of production assets, but at heart, Tullow is a good ol’ wildcatter, drilling holes and looking for pay dirt.

“The majors used to be the big explorers, but for the past 20 years, most exploration has been done by smaller outfits, but in a haphazard way,” explained Heavey. “It wasn’t scientific — they might strike it lucky, they might not. If they did open up a basin, the majors would come in and buy them out. The explorers were just pathfinders.”

His big idea was to assemble a crack team of geoscientists in Dublin who took a more methodical approach to seeking out particular types of rock formations, snapping up exploration licences for them before anyone else could.

“Every now and then we hit oil. When that happens, you will usually find that Tullow has had the foresight to buy up the rights to the surrounding areas before we start drilling,” he said.

Its strike rate in recent years has been impressive. Last week the company announced a further 30 jobs and a link-up with the science department of University College Dublin.

The Jubilee oilfield in Ghana is its big cash-producing asset, knocking out 66,000 barrels of the black stuff each day, despite some technical issues. In Uganda, it hit a massive oilfield on Lake Albert, although it “farmed down” 50% of its interest in February, for $2.9 billion, to its partners Total and the Chinese outfit CNOOC.

It has reams of other promising assets, such as the Ten fields in Ghana and a new basin it has opened up in French Guiana, but it is its latest find in Kenya that has the analysts reaching for their calculators.

Tullow recently inadvertently let slip it had come across a potentially massive oilfield in the Nagamia well, and was forced to rush to the stock exchange with an announcement. It didn’t just find oil in Nagamia, it found a tremendous depth of it. “To find that thickness of a column is a spectacular start. It is early days, but we believe this will be a good basin. And it will be easy to develop: there’s already a port at Mombasa, and it would be easy to build a pipeline.”

As usual, Tullow owns all the acreage around the spot in Kenya where it is focused.

Meanwhile, the company has its Asian assets, in Pakistan and Bangladesh, on the blocks. It hasn’t hired an investment bank, Heavey says, but is conductin a sales process itself. “We want to sell both together. We are speaking to a few companies and we have a price in mind. We want to sell to the right company — one that will look after our teams there.”

Heavey says Tullow is still interested in offshore Ireland, but it didn’t apply for any licences in the latest round held by the government. “We haven’t yet seen the type of geology off Ireland that we usually go for. If we see it, we will be interested.”

Geology, not geography, is what drives Tullow.

Heavey is closely linked with a number of charities that work in Africa, most notably Traidlinks, in which Carey is also heavily involved. He thinks aid has damaged Africa, and that its future is dependent on encouraging enterprise.

“People sometimes try to do good in Africa the wrong way. People going down there and doing a few good deeds for Africa to make their conscience better is not good for the place.”

Traidlinks will in September, he says, announce a huge project that will see a number of Irish companies become involved in co-ventures with some of their African counterparts. “Wait and see. I think it is going to be really interesting,” he said.

One morning, Heavey says, he will wake up and decide it is time for him to step down.

“I am not the type of guy to pick a date, because if I do, I may as well go then. But maybe one day the board will call me up and say, ‘Aidan, it is time to move on.’ Maybe the chairman will tell me some day to go off and play some more golf.”

Does he ever envisage a scenario where he could stay on after his term as chief executive in some sort of elder statesman role?

“No, you can’t have that. When a CEO goes, he has to go. The CEO should never become chairman. He would just interfere with the business. Just get the hell out.”

As for Tullow, Heavey insists, as he always has done, that it is not for sale.

“There are only a couple of companies that could raise the cash to buy us. And we have no intention of selling. We are building something for the long haul. Even if we were to be sold, there would be a huge bidding war. Just look at Cove Energy,” he said.

The message for Tullow shareholders is that he intends to deliver “more of the same”.

“Nothing ever changes with us,” he said. “A solid financial base, plenty of production, lots of exploration.”

The life of Aidan Heavey

Age: 59

Home: next to Wentworth golf course in Surrey

Family: Married, three children

Favourite book: Michael Anthony’s The Mental Keys to Improve Your Golf

Favourite film: As Good As It Gets

Working day

Travel commitments mean there isn’t an average day for me. I travel around Africa at least once or twice a month. When I am around it is meetings with staff, directors, current and potential business partners, investors and so on.

Downtime

I find golf a great way to relax. Otherwise it is time with family, including holidays in Africa.