Charles D. “Chuck” Davidson, Chairman and Chief Executive Officer, Noble Energy
Chuck Davidson, CEO, discusses the challenges and opportunities facing Noble Energy. He also reflects on his career.
Thinking back to when you started working in the oil and gas industry, can you think of specific decisions or relationships that had a lasting impact on your career?
When I think of how my career development has evolved, the decisions that made a difference were those that led to taking on something completely different and outside my comfort zone. I was a chemical engineer and wasn’t trained in petroleum engineering. I started out in the midstream part of the business, handling gas processing and designing and building gas plants. I stayed in the projects and facilities part of the business for the first 8 or 9 years of my career, and then I had an opportunity to manage a reservoir engineering group in one of our districts. I didn’t know a thing about it, but it gave me a chance to move into the so-called “black oil” end of the business. I worried about the decision because I was asked to manage a group and I technically didn’t have that expertise; but, it stretched me. Sometimes, those moves are done at personal risk; but, I point to that as one of the personal decisions I made to step beyond my comfort zone to develop my career.
Another one happened a couple of years later when I took on a position as an executive, leading external affairs for ARCO in Alaska. I was basically doing lobbying, politics, and PR work in addition to environment, health, and safety—all totally outside my comfort zone, especially the lobbying. It was a real change for an engineer suddenly carrying a lobbyist hat, but it caused me to think about things very differently.
A different mentor was part of each of those decisions. In both instances, they recognized those disciplines weren’t my forte but they gave me the opportunity to grow.
With such a high demand for bright YPs in the market, what does Noble Energy do to retain talented YPs?
The talented YPs will eventually reach a point in their careers where they want to do something different, take on new things, or make a difference.
To retain them, we must respond to these needs.
We do this by understanding their career objectives, then assigning appropriate responsibilities or increased challenges when they are ready. We also provide relevant training required for their new or broadened roles.
Also, people want to be part of an organization that is making a difference. That’s why I spend so much time on our purpose, “Energizing the World, Bettering People’s Lives.” It’s something we’re truly trying to do, and I think that’s inspirational.
Inspiration and retention go together. We always try to make sure important things like compensation and rewards are competitive because we want to reward people; but, pay is just one piece of the decision.
People want to feel valued and make a contribution that has an impact on the performance of the company. It is also important that the company makes a difference.
What makes somebody a CEO? What are the characteristics one needs to have to make it to this level?
You need a track record of accomplishment and a lot of experience because things get thrown at you every day from all different angles. The essential quality is a track record of making good decisions, because leadership roles are all about making decisions, not about calculations. My days of using a calculator and a slide rule are gone.
Is that something that comes naturally to leaders, or can young professionals work toward it?
At the early stages of a young professional’s career, you may be tasked with creating recommendations for certain projects. The key is doing the homework—being thorough and keeping an open mind while you look at different options.
It is all about possibilities. My stand for this year is “limitless possibility”—so, even at this stage of my career, I am pressing myself to think of all things as being possible.
What is your advice to young professionals who are looking to increase their professional worth?
My advice is to take every opportunity to broaden yourself, learn new things, and be proactive. Don’t wait for opportunities to drop in your lap. Sometimes you have to cause things to happen. Voice what you want to do or where you want to work. By trying new things, you will gain proficiencies, build relationships, and broaden your experience. You should also take advantage of training. Technical training is important, but nontechnical training in communication and teamwork is very valuable to career development.
What sort of qualities does Noble Energy look for when recruiting YPs?
We are looking for young people early in their career with a good track record. We also look for team players who are good communicators, enthusiastic, and flexible. Most of the work here is done in teams, so these qualities are crucial. You can have the best technical person, but if he or she does not work well with others, the team will not be functional.
How would you identify the role of independents in the industry, and of Noble Energy in particular?
I think of independents as the companies that generally fully invest their cash flow in exploration and production [E&P] projects. Historically, that has meant they have done most of their drilling in the US. That seems to be the way things have evolved and how it continues to be today. Independents have often been the ones to take on the smaller projects and have left the big, high-risk, long-lead projects to majors. I think the role of independents is to get the E&P work done. In the US, certainly, a lot of that risk is taken on by the independents.
Noble Energy is a little bit different; We’re a blend. We operate US onshore projects typical of an independent, but we’ve also taken on large-scale multibillion-dollar projects similar to what might be in a major’s portfolio.
What was Noble Energy’s view of shale plays when it entered the DJ basin and the Marcellus shale? How has it changed since?
It’s not so much the view of shale but, instead, the view of technology. Technology has driven the development of shale. We always knew there was gas in the various shales, but we didn’t know whether it was commercially recoverable or not. Our view of technology has continued to evolve. Our first entry of any significance into the DJ basin was when we acquired Patina Oil & Gas back in 2005. At that time, the Wattenberg field was being developed with vertical wells. As horizontal technology has evolved, essentially all the drilling is now horizontal.
Entry into the Marcellus gas shale play through acquisitions demanded high asset prices, so we were a bit hesitant early on. However, with reduced commodity prices last year, we became more comfortable with matching the asset values with the opportunities. That led us to form a joint venture in the Marcellus that we’re very excited about. In my opinion, the Marcellus is one of the best shale plays in the US, and it’s in one of the best markets in the northeast.
Why do you think Noble Energy became the first operator to get a drilling permit after the moratorium on drilling in the Gulf of Mexico? How have your operations changed since 2010?
We took a stand that we were going to get beyond the incident (that sparked the moratorium), and we were going to come out of it a better company. Our multidisciplinary team took a lead role in working with the government to build a permitting template that could meet the new requirements. We proactively worked with 24 other independent deepwater energy companies and Helix Energy Solutions Group in a shared mission to develop a completely new approach to deepwater spills. The success of this endeavor allowed us to lead the industry back to work in the Gulf.
From Israel and Cyprus in the eastern Mediterranean to Equatorial Guinea and Cameroon in west Africa, the Gulf of Mexico, Nicaragua, and now the Falkland Islands, it seems Noble Energy is very comfortable in offshore operations, especially deep water. What makes deep water so attractive to Noble Energy?
For us, deep water is just a natural evolution of the technology the industry has continued to build upon. As we go into deeper water, it opens up basins and exploration opportunities not available before. What’s appealing about deep water is you can explore in areas with significant resources that have not been explored. The eastern Mediterranean and Falkland Islands are perfect examples of that.
What do you find to be the most pressing business challenges today?
Today, we have more opportunities than we have capital to spend. What I find most pressing in our industry is managing project risk. Big multibillion-dollar projects can face risks of overruns and poor performance. As an international company, we also have to consider political risk as we are dealing with many different governments with different views and policies.
Finally, what many in the public don’t realize is the price risk we take. In a very short period of time, the price at which we sell a primary commodity can drop in half. We’re seeing it with natural gas, and we saw it with oil during the economic recession of 2008. What manufacturing or retail business out there can survive their sales prices dropping by half overnight? It’s very few, and yet we do manage that.
At Noble Energy, we do it through a diversification process. Our portfolio is diversified geologically, geographically, and by commodity type. We help mitigate commodity price risks by hedging. We hedge up to half of our production for as long as 2 years to reduce volatility in cash flow.
What will be the main drivers of Noble Energy in the future? How will you evolve? What is next for Noble Energy?
We have a very clear pathway for growth that has been set up by some major discoveries we made over the past several years. When we look at the next 5 years, and perhaps even beyond, what’s really driving us is the development of these discoveries. When we look at our growth, we see our production doubling over the next 4 to 5 years through the execution of these major projects and our ongoing development of unconventional plays in the US Niobrara and Marcellus.
We have five core operating areas in the company: DJ basin, Marcellus shale, deepwater Gulf of Mexico, west Africa, and eastern Mediterranean. All these regions are expected to grow more than 10% per year over the next 5 years. We have exploration projects in our core areas and a new ventures program, which led to our recent Falkland Islands announcement. We also plan to drill in Nicaragua. These exploration programs will produce new projects that will become drivers in the more distant future.
Have you, personally or with a company, had professional interaction with SPE in the past? Has your workforce had the opportunity to leverage company activities with SPE expertise?
I personally have been a member of SPE for a little over 25 years and have benefitted from the various programs and conferences. I also contributed to papers that have been published.I encourage our employees to get involved in professional organizations. They provide learning experiences, personal development, and great opportunities to network and build relationships.