Gallagher prunes Santos executive ranks

NEW Santos CEO Kevin Gallagher was always going to wield the axe to start his rescue mission of the company, and this week he started from the top, axing two senior executives including one seen as a potential successor to his predecessor David Knox.
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Kevin Gallagher, Santos' incoming CEO

Anthony Barich

Gallagher has disposed of long-serving executive James Baulderstone and Trevor Brown, the man who, it is believed, many investors saw as a potential successor to Knox having overseen Knox’s baby: the successful development of Santos’ CSG fields for the Gladstone LNG project.

Vince Santostefano, who was Woodside Petroleum’s chief operating officer until being replaced by Mike Utsler at the end of 2013 and also worked for ExxonMobil’s Australian arm, will now take up the same role at Santos to look after GLNG as part of his role leading Santos’ new production division.

He will immediately start working on the transition of assets to that new structure.

Gallagher also recruited management consultant Angus Jaffray, who established Boston Consulting Group’s Perth office before joining Azure Capital’s consultancy, to become executive VP, strategy and corporate services.

Jaffray will be Santos’ EVP, strategy and corporate services.

A Santos spokesperson told Energy News that the move was “normal business activity and is the first step in Kevin’s plans to restructure the business”

“Mr Baulderstone and Mr Brown have been valued members of the senior leadership team and they leave with the company’s best wishes,” the spokesperson said.

Santos chief financial officer Andrew Seaton, who many see as partly responsible for the oiler’s fall over the past two years, has kept his job.

Santos staff were advised yesterday of what was Gallagher’s first step at restructuring the company. A more formal announcement will be made in the next month, possibly detailing more moves by the new CEO and what they mean for the business.

Independent analyst Peter Strachan has been highly critical of Santos in the past due to its destruction of shareholder value, but believes BG Group, Origin Energy and ConocoPhillips were equally culpable for not sharing infrastructure and saving billions.

In light of this, he said Santos could do with more of a “collegial” attitude from Gallagher in his decision making with his new band of senior executives to help rebuild what was once a reasonably effective SA oiler.

“There needs to be a more collegiate management structure so that they’re not always making these decisions that are just driven by the guy at the top,” Strachan told Energy News.

“You’d think that after such a massive stuff-up at Gladstone there needs to be a serious reconsideration of what they’re doing, why and how they’re doing it.

“I talked to Knox at the APPEA national conference in Perth while Santos was still going through its engineering design process, and asked why they’re not talking to other LNG players like Shell, which was still in the game at the time, so you only need to have one port and power facility and share your pipelines.

“Each proponent can then build their own liquefaction facility, but his idea was that once they made final investment decision the others would have to talk to him.

“As it was they each built their own port facility, LNG storage facility, separate power generation facility ... complete madness to build three virtually identical projects side by side when they could’ve had shared infrastructure that would’ve saved an absolute [heap] of money in developing those fields.”

He said that within Santos itself, the oiler needs to have a more rigorous decision making process rather than people blindly going along with whatever the CEO says.

“As a CEO you have to be able to cope with the loneliness,” Strachan said.

“You don’t need your staff to all be friends with you because you have to make the hard decisions, but there is a difference between being friends with your staff and being collegiate – trusting them and bringing them into the decision process in evidence-based decision making would be a good way to formulate plans.”

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