Oilman defiant under siege

the Hilary Clarke interview; Despite being pilloried over last week's results, Enterprise's chief executive insists the company is on the right track
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The Independent Online
PIERRE JUNGELS knows what it feels like to dodge bullets. For five years, the ebullient chief executive of Enterprise Oil, Europe's biggest independent exploration company, held the fort in Angola for oil giant Petrofina during the African nation's bitter civil war. Even so, the Belgian oilman with the build of a Texan was feeling slighted, hurt even, by the snipes fired in his direction at the end of last week by the financial press.

It had been a difficult couple of days all round for the 54-year-old engineer. On Thursday, Enterprise reported an 85 per cent drop in first- half net profits to pounds 12m as the slump in oil prices took its toll. On announcing these results, Jungels, true to his reputation for outspokenness, broke ranks from other oil companies that had already reported their earnings and said he believed oil prices would remain low for the rest of the year. As a result, he told the world, the company might slash its dividend. The share price immediately plummeted 12 per cent.

Then, to top it all, the Observer column in the Financial Times ran the following day what Jungels describes as a "bitchy" attack on the opulence of his office overlooking Trafalgar Square. It also referred to Enterprise's shares "dropping like a paralysed partridge", in reference to his penchant for shooting.

Its not always easy being Belgian and heading a company as British as Enterprise, created from the oil exploration and production interests of British Gas when the latter was privatised in 1983.

"Usually I'm the cigar-smoking, swearing Belgian," he says, drawing on a gentler Silk Cut cigarette.

After such treatment, it is to his credit he still agrees to be interviewed by a journalist and even manages to inject a fair amount of humour into the proceedings. When the photographer arrives he hurriedly puts on his jacket "to avoid a little pointed remark about my wearing braces".

But then no one ever said heading an oil company was a bed of roses. "It's one of those industries that can not win. It has an image of being as powerful as some governments, uncaring and aggressive and on top of that, it sells something no one would buy by choice," says Jungels, with just a hint of a French accent.

"In reality, we are at the cutting edge of technology, staffed by sophisticated intellectuals and not rough-necks as Hollywood would like to portray them in films like Armageddon. Our nearest equivalent in terms of the kind of people employed would be the pharmaceutical industry. But unlike them, we don't have a Viagra."

So what is the wonder cure Jungels has up his sleeve for Enterprise that has so far been lost on the financial markets? Firstly, he believes, the company's fundamentals are better than the majority of its competitors because its producing assets are in the UK and Norway, which contribute to earnings even at the low oil price of $12 a barrel, he says. The eight new fields that will start production over the next two years will, he argues - even at that price - all return more than 15 per cent on capital invested. Secondly, the company plans sharp cuts in exploration spending to pounds 125m next year from pounds 180m this. Jungels also plans to squeeze costs hard, bringing them down from pounds 6.20 per barrel of oil down to pounds 5.80.

Jungels admits Enterprise's offices, which resemble a massive Victorian indoor botanical garden, are expensive. But then such opulence is necessary for a company that needs to play host to government ministers. "We can probably squeeze ourselves onto fewer floors and sub-let part of this building, but that won't make any real difference to Enterprise's profits. It will just make a statement that we are pushing down overheads."

Reduction in staff numbers are unlikely in a company whose 750 employees are nearly all graduates and who can count 50 PhDs among them and an average salary of pounds 45,000.

"Following the BP and Amoco merger [in August], the whole industry has again been asking if size matters. The answer in the refining market and chemicals is clearly: `Yes.' That's where in the oil industry the majority of people are employed. But for an exploration company like Enterprise, the issue not employment of people, it's what we do with the investment."

Part of Jungels' recovery plan is to pull out from the more risky areas where it is exploring for oil, such as Vietnam, Bulgaria and Cambodia and possibly Peru. "I would have thought all this was a very good message for investors. But obviously if the sector is in doubt, then it is difficult to convince them." Enterprise shares recovered slightly by the end of the week, closing up 25.5p at pounds 3.55.

Jungels has been battling with low oil prices for some time now. He joined the company in 1996, taking over the chief executive post from the chairman and founder, Graham Hearne. It was the year in which Enterprise posted its best-ever profits. "The oil price went south from there. Magnificent timing."

But then, Jungels has a penchant for turning up just before adversity sets in. His best career break was being sent by his company at the time, Petrofina, to measure an oil field in Angola. When war broke out, he found himself catapulted into the subsidiary's chief executive job.

"The Portuguese running the Petrofina subsidiary there had to leave. It led to an extremely quick promotion because no one else wanted the job. It was a question of being in the wrong place at the right time," he laughs.

Jungels, who was educated at the University of Liege and the Californian Institute of Technology, continued in various senior management jobs for Petrofina before his move to Enterprise in 1996, via a brief stint heading British Gas's exploration and production department.

The BP/Amoco merger has sparked a merger frenzy in the oil industry, its latest manifestation being the combining of Texaco and Shell's refining and marketing operations in Europe. Even so, Jungels says a second attempt to merge Enterprise with the UK's second biggest oil explorer, Lasmo, following Enterprise's abortive attempt at buying the company in 1994, is unlikely. That is because Lasmo operates in high-risk, high-return areas such as Algeria, Libya, Venezuela and the Caspian region, whereas Enterprise is mainly in the "safer" but less potentially profitable OECD countries like the UK, Norway and the Gulf of Mexico - a fact that has led to criticism from investors. One oil analyst commented: "Enterprise is an OECD oil player when all the action is in the non-OECD areas and that's their main challenge. Jungels is very outspoken, but action speaks louder than words."

Even Jungels admits that while the OECD areas might offer democracy, that does not necessarily mean Enterprise is better off. "From time to time they will throw a brick in your quiet little lake by talking about tax reviews and changes." In short, while you might risk getting your throat cut in Algeria, the government does not raise taxes every two to three years like here. Moreover, says Jungels: "There are technical risks in the North Sea which don't exist to the same extent if you drill in the desert of Libya. But at least, if there are risks in the OECD area, they apply to everyone the same. And there is absolutely no corruption, which is not the case elsewhere."

His Angolan experience made him think a lot about the follies of human kind, and the chaos and destruction of war. His favourite book is by an American historian called The Distant Mirror, about the Hundred Years War.

That said, concern about political problems in Nigeria and Russia has edged the oil price up slightly. Jungels would rather see a more co-operative and diplomatic solution to the industry's current crisis. "Other than destructive things like civil war in Russia, the only thing that could bring the oil price substantially back up is a cut in production by OPEC rather than just talk about it. And a very hard winter would help as well."

Jungels, who - apart from his native French and impeccable English, speaks fluent Portuguese and understands Italian - is, as all good oilmen should be, well versed in international politics, as happy to talk about coalition politics and angry fishermen in Norway as he is about the "lunatic" Taliban Sunni Muslim fundamentalists that have taken control in Afghanistan. The US, he believes, is making a big mistake by continuing its embargo on the Shiite government of Iran which, 20 years after the Ayatollah Khomeini's revolution, is emerging as one of the most stable countries, and oil producers, in the region.

All that is a long way from Newbury, where Jungels now lives with his wife and two step-children. Despite his pounds 345,000-a-year salary, Jungels says he drives a battered BMW station wagon, and travels to work every morning on public transport. He has two other children from an earlier marriage. Like many of his compatriots, he loves animals and has three horses, "two old boys and a 28-year-old female pony" and a black Labrador.

His main passion, though, remains his work. "There is nothing better in life than watching the test of an oil discovery," he says.