The Taqa Plan

?Peter Barker-Homek was charged with creating an energy giant of Abu Dhabi National Energy Co., which he leads as CEO.

?Peter Barker-Homek was six years into a career at BP Plc when he received an offer to head up energy company Abu Dhabi National Energy Co. (Taqa). The freedom to help shape the direction of the company intrigued him and he jumped at the chance.

Barker-Homek graduated from Polytechnic Institute in Brooklyn (now part of New York University) with a bachelor’s in industrial management and technical journalism, and then earned his MBA in international finance and entrepreneurism from The University of Southern California.

He worked as a senior advisor on mergers and acquisitions with British Gas, Merrill Lynch and BP. He was approached by Taqa, which was interested in expanding to become a major energy force, and was asked what he would do to create an energy giant if given carte blanche to build it. He responded that the company would need to have strong upstream, midstream and downstream assets.

He joined Taqa in April 2006 and set about getting a positive credit rating and helping to close its first global bond issue, which was done with Goldman Sachs and valued at $3.5 billion.

He then built the company up quickly, closing six transactions in 2007 that expanded the company’s assets from a value of about $8 billion to $20 billion, and which are today valued at $25 billion. He managed to do so with only himself and his secretary as permanent employees, bringing in interns from the London Bus­iness School, Harvard University and Stanford University.

Today, Taqa has assets in nine countries, employs 4,800 people representing 40 different nationalities, and has a corporate profile that is 48% upstream, 48% downstream and 4% midstream. By 2012, the company is seeking $60 billion in assets and a balance of 40% upstream, 40% downstream, 20% midstream.

Barker-Homek spoke with Oil and Gas Investor about Taqa’s fast growth, the expectation-defying actions of a Middle Eastern company seeking energy assets abroad and his desire to have an ergonomic work environment.

Investor What made you decide to join Taqa?

Barker-Homek In 2005, I got an invitation to interview at Taqa. The company had just recently been formed that October. At that time my career was at BP, and my aspirations were within that global franchise. But you don’t get offered CEO titles every day, so I met with the board. They basically said they wanted to create a global energy company. They asked, if you had it, what would you do with it? It’s not often you get that kind of open-ended question in business. I said I’d create upstream oil and gas E&P, midstream oil and pipeline, LNG storage, and carbon sequestration and downstream power generation.
The whole philosophy was that margin migrates between those areas. The idea here was a balanced portfolio that would create growth and income for the shareholders.

Investor What led a Middle Eastern company to seek E&P assets abroad?

Barker-Homek I would ask, why would anyone want to do business in the British North Sea or Dutch shelf, or in Canada or the U.S. with the higher cost of producing the oil, either because of technical challenges around the geology or because costs potentially are higher?
It goes back to what they’re trying to do in the Middle East in general, which is create institutions that have the same type of depth and role in the world as the Exxons, the Shells, the BPs. People have a very two-dimensional view of what the Middle East is about, but suddenly realize the governments have the same or better benefits for growing a company and creating jobs.

Investor How did Taqa become interested in Pogo’s Canadian assets? Pioneer’s?

Barker-Homek Being in the right place at the right time. We did the bond offering with Goldman Sachs, so I had a clear, open dialogue with their principals. Goldman got called in as the advisor to Pogo on evaluating their strategic direction. It was at that point in a side conversation I had that someone mentioned there was this divestment happening in Canada. I looked at the Canadian market and there were two things that occurred to me. Gas prices in the U.S. and Canada were really depressed at that point. And there was a lot of mood in the Calgary market about consolidating. And of course Pogo was getting broken up.
We went in with the thought that (Pogo’s) Northrock Resources would be the first step in assembling a Canadian company. And after that, Pioneer Canada called us up and asked if we were interested in acquiring that, because Pioneer is trying to convert itself into an MLP and would like to get rid of its foreign assets. Then we got a call from advisors to PrimeWest Energy Trust that said that company was thinking of doing a merger. We looked at it and saw the acreage of the three companies overlapped perfectly, to create a company of scale.

Investor How are all the Canadian assets doing for you?

Barker-Homek They are doing very well. It would be nice if these deals ended with acquisitions, but the reality is they never end. You’re always in integration and optimization mode. We’ve been developing Taqa’s character as an employer. That includes everything from us taking positions on governance, to conditions in climate change to railing up our restrictive stock programs for employees.

Investor Describe Taqa’s North Sea assets.

Barker-Homek The North Sea was our entry point, where we picked up BP Netherlands, which gave us offshore and onshore E&P experience, pipeline and gas storage. We picked up nonoperated assets from Talisman. Our recent transactions with Shell and Exxon gave us platforms in the North Sea, which added 40,000 barrels of Brent oil to our production. Today our North Sea portfolio, considering the Netherlands as well as the U.K., is about 65,000 barrels of oil equivalent. We think we can organically grow that production up to 85,000 barrels per day in 12 months. It will establish us as one of the larger operators and license-holders in the North Sea.

Investor Is Taqa considering any U.S. acquisitions? If so, onshore or offshore?

Barker-Homek We have nonoperated oil assets in the Rockies that produce about 5,000 barrels per day. We would also be very interested in getting into the Gulf of Mexico, probably in the deep water.

Investor What are your views on the global energy space?

Barker-Homek First, I should say thank God for a recession, because great oil demand growth has been building over the last few years. Quite realistically, we were going to run into a supply-and-demand imbalance. The recession has killed about 4% of U.S. demand and had a dampening effect on European demand, and as a result you’re seeing a slowdown in Chinese and Indian growth.
As we look out into the future, we have to emphasize conservation and efficiency. Today, we’re still wasting a majority of our gasoline in congestion in our urban centers. In London, over 60% of the petrol used each day is wasted because people are stuck in traffic jams.
The other thing is if we look at where the world is going with an emerging middle class, moving from low-income families into middle-class families, we can’t just say petroleum will be the answer. We have to look at other sources and how they’ll affect the environment. Do ­­­we have to look at nuclear? Absolutely. Do we have to look at clean-burning coal technology? Absolutely. Do we have to look at conservation and efficiency? Absolutely.
Otherwise we will have a return to the conditions that precipitate world conflict. Going back to World War II, that was in part about resources and oil.

Investor How important is the architectural design of Taqa’s various offices to you?

Barker-Homek Any number of industrial psychologists will look at the working environment workers are exposed to and say that it contributes to their production as well as their sense of well-being. With our facility in Ann Arbor, Michigan, which is the seat of our power group, we brought in an architectural firm that not only made it environmentally friendly, but made it user friendly in terms of using natural light and making sure there was enough air circulation.
The green side of the office is very important too. Even in our smaller offices, we produce about 250 kilograms (500 pounds) of recycling every week. We also have a very generous hydrocarbon program with our employees, with the idea of trying to change behavior at home. The company will give an employee the equivalent of $5,000 to purchase a hybrid vehicle.

Investor Any interesting stories from camping in the desert?

Barker-Homek That’s something we do for fun, and we go to camel races. The desert is a great place.
It’s amazing seeing the large-scale cities go up almost every night. I often get asked what’s the difference between Abu Dhabi and Dubai? Dubai is sort of a fusion of Las Vegas, Los Angeles and Palo Alto. Abu Dhabi is kind of a fusion of New York and Washington, D.C.