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Former Halliburton COO Douglas Foshee named as El Paso Corp. CEO


www.ap.org
Associated Press (07/16/2003)
Kristen Hays

 

HOUSTON — El Paso Corp. has chosen Halliburton’s chief operating officer as its new leader.

Douglas L. Foshee, 43, resigned from the oil services company Wednesday to become El Paso’s chief executive officer beginning Sept. 2.

He will replace interim CEO Ronald Kuehn Jr., who stepped into the role in March when Houston-based El Paso fired William Wise as CEO and chairman. Wise, who had served as CEO since 1990 and chairman since 1994, had been under fire for El Paso’s plummeting stock, junk credit ratings and burgeoning debt throughout 2002 and early this year since the fallout of Enron Corp.’s 2001 collapse.

Kuehn will continue as El Paso’s chairman. El Paso shares shares fell 17 cents, or 2.1 percent, to close at $8.04 in trading on the New York Stock Exchange, while Halliburton shares dropped 35 cents, or 1.6 percent, to $21.50.

Halliburton won’t replace Foshee as chief operating officer. Dave Lesar, Halliburton’s chairman, president and chief executive, will assume operational responsibilities, spokeswoman Wendy Hall said.

Foshee, who joined Halliburton nearly two years ago as its chief financial officer, led the oil services company’s efforts to reach a $4 billion settlement to resolve all present and future asbestos claims. Halliburton, once led by Vice President Dick Cheney, inherited most of the claims more than four years ago when Halliburton acquired Dresser Industries Inc. Cheney oversaw the Dresser acquisition before he left in 2000 to be President Bush’s running mate.

The Securities and Exchange Commission is investigating Halliburton’s accounting when Cheney led the company, before Foshee’s arrival.

Pierre E. Conner, an analyst with Hibernia Southcoast Capital, said Foshee’s efforts on the asbestos issues demonstrated turnaround aptitude in addition to organizational efficiency.

“ My take would be that El Paso’s getting quite accomplished management skill,” he said.

Analysts said El Paso can use turnaround experience because the nation’s largest pipeline company is selling assets and cutting costs to overcome earnings losses and other problems that led to Wise’s ouster. The problems and El Paso’s initial refusal to fire Wise sparked a nasty proxy fight where nine dissident directors sought to replace the company’s 12 incumbents at El Paso’s June 17 annual meeting.

Last month the incumbent directors, including Kuehn, survived the challenge launched by Selim K. Zilkha, El Paso’s largest individual shareholder who owns 1.5 percent of the company. Shareholders favored the incumbents by a slim margin. A spokesman for Zilkha didn’t immediately return a call for comment.

Mike Heim, an analyst with A.G. Edwards & Sons, said Foshee faces plenty of challenges.

“ One of our concerns - and we have a sell rating on the stock - is that no one really knows what earnings and cash flow are going to look like after this year’s done. They’ve been selling lots of assets. One of the consequences is they’ve lost a lot of earnings and cash flow power.”

Hope Crifo, an analyst with KDP Investment Advisors Inc., questioned Foshee’s ability to run a company whose future business will be heavily weighted in pipelines since El Paso scrapped its energy trading unit and other unprofitable ventures.

Foshee resigned as chairman and chief executive of Nuevo Energy Co., a small Houston exploration and production company, in May 2001, a few months before joining Halliburton. From 1993-1997 he held various positions at Torch Energy Advisors Inc., an energy services company, including chief operating officer and CEO.

The graduate of Rice University and Southwest Texas State University also worked in commercial banking as an energy lender and specialized in finance and new business ventures for ARCO International Oil and Gas Co.

“ One would have thought they would have gotten someone with more pipeline experience,” Crifo said.

Donato Eassey, an analyst with Royalist Research, wished Foshee well in efforts to turn El Paso’s fortunes around, but said the six-week lag until he shows up to work is disappointing.

“ The only bad thing is he won’t roll up his sleeves until September,” he said.

Hall said Foshee would be in a “transitional role” at Halliburton through the end of July. El Paso spokeswoman Norma Dunn said he will then spend a month with his family before stepping into his new job.