T. Boone Pickens, the wildcatter “Oracle of Oil,” hedge fund founder and philanthropist who rewrote the playbook for corporate raiders, has died. He was 91.
He died Wednesday of natural causes.
Pickens had been in declining health, suffering from a series of strokes and a serious fall in 2017. In late 2017, he put his sprawling 100-square-mile Mesa Vista Ranch in the Texas Panhandle on the market for $250 million, and a few months later, he closed his energy hedge fund, BP Capital, to outside investors.
“I will sorely miss his friendship and his great wit. He was a stand-up guy from the old school. I wish there were more like him today,” said billionaire investor Carl Icahn. “He and I agreed on corporate governance … we shared the same values on shareholders’ rights.”
Pickens was known as a corporate raider in the 1980s, targeting Gulf Oil, Unocal and Phillips Petroleum, a company later targeted by Icahn. Icahn described Pickens’ Texas charm and wit. He recounted how Pickens told a major oil company CEO that his earnings were down for 10 years. Revenues were also down for 10 years, as was cash flow. Icahn remembers laughing, when Pickens said “Don’t you think that’s a trend?”
In a career that started with Phillips Petroleum, Pickens later pursued clean energy projects in wind power and natural gas.
He also was a big Republican political donor, backing George W. Bush in the Texas gubernatorial and presidential races. Guests at his ranch included Dick Cheney and Nancy Reagan.
Boone Pickens quail hunting on Mesa Vista Ranch. | Handout: Mesa Vista Ranch
He also donated more than $1 billion over the years, including hundreds of millions to his alma mater, Oklahoma State University, which named its renovated football stadium after him.
Thomas Boone Pickens Jr. was born May 22, 1928, in Holdenville, Oklahoma. His father was a “landman,” who sold oil and mineral rights. During World War II, his mother was in charge of rationing in her region as head of the local Office of Price Administration.
As a 12-year-old paperboy, Pickens started out with 28 customers, but by acquiring adjacent routes one at a time he quadrupled his business.
“That was my first introduction to expanding quickly by acquisition — a talent I would perfect in my later years,” he recalled on his website.
His family moved to Amarillo, Texas, where he attended high school. After graduating in 1951 from Oklahoma A&M (now Oklahoma State) with a degree in geology, Pickens started working at Phillips Petroleum.
He left three years later to drill wildcat wells, first founding Petroleum Exploration with $2,500 in cash and $100,000 in borrowed money for projects in the Texas Panhandle, and later establishing Altair Oil & Gas for exploration in western Canada. The companies became Mesa Petroleum, which Pickens took public in 1964 and became one of the largest independent oil and gas companies in the United States.
Boone Pickens, Chairman, BP Capital Management | Adam Jeffery | CNBC
“Pickens was one of thousands driving around the oil states, using public phone booths as their offices, hustling, looking at deals. Selling them, getting a crew together and a well drilled and, if lucky, hitting oil or gas, dreaming all the while of making it big, really big,” Daniel Yergin wrote in his Pulitzer Prize-winning book “The Prize: The Epic Quest for Oil, Money & Power.”
“Pickens got farther than most. He was smart and shrewd, with an ability to analyze and think through a problem, step by step.”Corporate raider: ‘Big Oil was never the same’
Five years after creating Mesa, Pickens targeted Hugoton Production for a hostile takeover, seeing that the value of Hugoton’s extensive gas reserves in Kansas dwarfed its low stock price. Although Mesa was substantially smaller than Hugoton, Pickens gathered the support of its shareholders by promising greater returns and better management.
During the early 1980s, Pickens took his corporate raider talents to new levels, investing in chunks of undervalued oil companies, trying to take them over and making big profits even if the buyout failed. As described on his website:
“Pickens and his young band of hungry Mesa Petroleum managers grabbed hold of a monster and shook it like it’d never been jostled before. They rode that monster, and got thrown some, but Big Oil was never the same again.”
After accumulating more than 5% of Cities Service stock over the years, Pickens led Mesa’s attempt in 1982 to acquire the much larger oil company. Cities Service counterattacked by trying to acquire Mesa. A wild bidding war ensued, with Occidental Petroleum eventually winning Cities Service for $4 billion. Pickens still reaped $30 million in profit on his shares.
Later, Pickens made similar, but failed, attempts with Phillips Petroleum, Unocal and Gulf Oil. Gulf, one of the “Seven Sister” oil giants, defended itself by turning to Chevron as its “white knight.” Chevron wound up swallowing Gulf for $13.2 billion, but Pickens netted $404 million for Mesa shareholders for their Gulf stake.
Some accused Pickens of being a “greenmailer,” in which an investor purchased large amounts of a company, then launched a takeover to run up the price before bailing out. But Pickens rejected that label. “I never greenmailed anybody,” he said in an interview on his website.
But there was no arguing that Pickens’ takeover tactics made him a bundle. They also landed him on the cover of Time magazine. There he was in 1985, sitting behind a pile of poker chips — blue chips — and holding a hand of cards decorated by oil derricks.
Source: Birney Lettick
“He was Gordon Gekko before ‘Wall Street,’ and his influence was profound,” The New York Times’ David Gelles wrote in a January 2018 profile, referring to the villain in Oliver Stone’s 1987 movie.
As a corporate raider, Pickens was a leader of the budding “shareholders rights” movement. He founded the United Shareholders Association in 1986 to pressure corporate leaders “to give the companies back to the owners, which are the shareholders.”
“I have always believed that maintaining the status quo inevitably leads to failure,” Pickens wrote in a September 2017 column for Forbes. “Back then, the notion that shareholders own the companies and managements were employees was foreign to big oil companies that would rather operate like empires. I was hell-bent on shaking things up. I was a disrupter before disrupters were cool.”‘Halftime’ at age 68
In 1996, at age 68, Pickens sold Mesa, but rather than retire, he started a new business, BP Capital Management, a hedge fund focusing on the energy industry. (BP stands for his name, not British Petroleum.)
T. Boone Pickens, founder and chief executive officer of BP Capital LLC. | Andrew Harrer | Bloomberg | Getty Images
“For most people, that would have been the end. For me, it was halftime,” he wrote in the Forbes column.
The hedge fund managed billions of dollars for investors until Pickens closed it in January 2018 because of his declining health.
A year after starting the hedge fund, he formed Pickens Fuel Corp. in 1997, promoting natural gas as an alternative to gasoline. In 2007, he spent $100 million of his own money to launch the Pickens Plan, a campaign with the goal of declaring U.S. energy independence.
The same year, the oilman announced plans to build the world’s largest wind farm — 4,000 megawatts — in the Texas Panhandle, but subsequent low natural gas prices helped to derail the plans. He turned his focus to getting Congress to offer incentives for conversion of trucks from diesel to compressed natural gas.
“I’m all American,” Pickens said. “Any energy in America beats importing.”‘Yes, I’m for Donald Trump’
During Bush’s 2004 re-election campaign, Pickens helped finance the “Swift Boat Veterans for Truth” campaign that questioned John Kerry’s Vietnam War record and helped undermine the Democrat’s presidential bid.
He backed Republican Rudy Giuliani in 2008 and Donald Trump in 2016.
“Yes, I’m for Donald Trump,” Pickens declared in May 2016. “I’m tired of having politicians as president of the U.S. Let’s try something different.”
He supported Trump’s withdrawal from the Paris climate accord and his attempts to restrict visitors from predominantly Muslim countries from entering the United States.
“I’d cut off the Muslims from coming into the United States until we can vet these people,” he said. “Cut them off until we can figure out who they are.”
Aside from Republican politics, Pickens was a benefactor of numerous organizations, including the University of Texas Southwestern Medical Center in Dallas and the M.D. Anderson Cancer Center in Houston ($50 million each in 2007). His $165 million donation to his OSU’s athletic department helped fund the stadium renovation. The school named the complex Boone Pickens Stadium to thank him for what it said was the largest single donation ever to any university athletic department.
On Valentine’s Day 2014, the 85-year-old Pickens married Toni Brinker, widow of Dallas restaurateur Norman Brinker, in a small ceremony in the Mesa Vista family chapel. His four previous marriages ended in divorce. She survives him, as do three daughters and two sons from previous marriages.
Days after Pickens suffered “a Texas-sized fall” in July 2017, he wrote a LinkedIn post titled “Accepting (or Embracing) Mortality.”
“Now, don’t for a minute think I’m being morbid,” he wrote. “Truth is, when you’re in the oil business like I’ve been all my life, you drill your fair share of dry holes, but you never lose your optimism. There’s a story I tell about the geologist who fell off a 10-story building. When he blew past the fifth floor he thought to himself, ‘So far so good.’ That’s the way to approach life. Be the eternal optimist who is excited to see what the next decade will bring.”
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International expansions for Saudi Aramco – the largest oil company in the world – are not uncommon. But up to this point, those expansions have followed a certain logic: to create entrenched demand for Saudi crude in the world’s largest consuming markets. But Saudi champion’s latest expansion move defies, or perhaps, changes that logic, as Aramco returns to Europe. And not just any part of Europe, but Eastern Europe – an area of the world dominated by Russia – as Saudi Aramco acquires downstream assets from Poland’s PKN Orlen and signs quite a significant crude supply deal. How is this important? Let us examine.
First, the deal itself and its history. As part of the current Polish government’s plan to strengthen its national ‘crown jewels’ in line with its more nationalistic stance, state energy firm PKN Orlen announced plans to purchase its fellow Polish rival (and also state-owned) Grupa Lotos. The outright purchase fell afoul of EU anti-competition rules, which meant that PKN Orlen had to divest some Lotos assets in order to win approval of the deal. Some of the Lotos assets – including 417 fuel stations – are being sold to Hungary’s MOL, which will also sign a long-term fuel supply agreement with PKN Orlen for the newly-acquired sites, while PKN Orlen will gain fuel retail assets in Hungary and Slovakia as part of the deal. But, more interestingly, PKN Orlen has chosen to sell a 30% stake in the Lotos Gdansk refinery in Poland (with a crude processing capacity of 210,000 bd) to Saudi Aramco, alongside a stake in a fuel logistic subsidiary and jet fuel joint venture supply arrangement between Lotos and BP. In return, PKN Orlen will also sign a long-term contract to purchase between 200,000-337,000 b/d of crude from Aramco, which is an addition to the current contract for 100,000 b/d of Saudi crude that already exists. At a maximum, that figure will cover more than half of Poland’s crude oil requirements, but PKN Orlen has also said that it plans to direct some of that new supply to several of its other refineries elsewhere in Lithuania and the Czech Republic.
For Saudi Aramco, this is very interesting. While Aramco has always been a presence in Europe as a major crude supplier, its expansion plans over the past decade have been focused elsewhere. In the US, where it acquired full ownership of the Motiva joint venture from Shell in 2017. In doing so, it acquired control of Port Arthur, the largest refinery in North America, and has been on a petrochemicals-focused expansion since. In Asia, where Aramco has been busy creating significant nodes for its crude – in China, in India and in Malaysia (to serve the Southeast Asia and facilitate trade). And at home, where the focus has on expanding refining and petrochemical capacity, and strengthen its natural gas position. So this expansion in Europe – a mature market with a low ceiling for growth, even in Eastern Europe, is interesting. Why Poland, and not East or southern Africa? The answer seems fairly obvious: Russia.
The current era of relatively peaceful cooperation between Saudi Arabia and Russia in the oil sphere is recent. Very recent. It was not too long ago that Saudi Arabia and Russia were locked in a crude price war, which had devastating consequences, and ultimately led to the détente through OPEC+ that presaged an unprecedented supply control deal. That was through necessity, as the world faced the far ranging impact of the Covid-19 pandemic. But remove that lens of cooperation, and Saudi Arabia and Russia are actual rivals. With the current supply easing strategy through OPEC+ gradually coming to an end, this could remove the need for the that club (by say 2H 2022). And with Russia not being part of OPEC itself – where Saudi Arabia is the kingpin – cooperation is no longer necessary once the world returns to normality.
So the Polish deal is canny. In a statement, Aramco stated that ‘the investments will widen (our) presence in the European downstream sector and further expand (our) crude imports into Poland, which aligns with PKN Orlen’s strategy of diversifying its energy supplies’. Which hints at the other geopolitical aspect in play. Europe’s major reliance on Russia for its crude and natural gas has been a minefield – see the recent price chaos in the European natural gas markets – and countries that were formally under the Soviet sphere of influence have been trying to wean themselves off reliance from a politically unpredictable neighbour. Poland’s current disillusion with EU membership (at least from the ruling party) are well-documented, but its entanglement with Russia is existential. The Cold War is not more than 30 years gone.
For Saudi Aramco, the move aligns with its desire to optimise export sales from its Red Sea-facing terminals Yanbu, Jeddah, Shuqaiq and Rabigh, which have closer access to Europe through the Suez Canal. It is for the same reason that Aramco’s trading subsidiary ATC recently signed a deal with German refiner/trader Klesch Group for a 3-year supply of 110,000 b/d crude. It would seem that Saudi Arabia is anticipating an eventual end to the OPEC+ era of cooperative and a return to rivalry. And in a rivalry, that means having to make power moves. The PKN Orlen deal is a power move, since it brings Aramco squarely in Russia’s backyard, directly displacing Russian market share. Not just in Poland, but in other markets as well. And with a geopolitical situation that is fragile – see the recent tensions about Russian military build-up at the Ukrainian borders – that plays into Aramco’s hands. European sales make up only a fraction of the daily flotilla of Saudi crude to enters international markets, but even though European consumption is in structural decline, there are still volumes required.
How will Russia react? Politically, it is on the backfoot, but its entrenched positions in Europe allows it to hold plenty of sway. European reservations about the Putin administration and climate change goals do not detract from commercial reality that Europe needs energy now. The debate of the Nord Stream 2 pipeline is proof of that. Russian crude freed up from being directed to Eastern Europe means a surplus to sell elsewhere. Which means that Russia will be looking at deals with other countries and refiners, possibly in markets with Aramco is dominant. That level of tension won’t be seen for a while – these deals takes months and years to complete – but we can certainly expect that agitation to be reflected in upcoming OPEC+ discussions. The club recently endorsed another expected 400,000 b/d of supply easing for January. Reading the tea leaves – of which the PKN Orlen is one – makes it sound like there will not be much more cooperation beyond April, once the supply deal is anticipated to end.
End of Article
- Crude price trading range: Brent – US$86-88/b, WTI – US$84-86/b
- Crude oil benchmarks globally continue their gain streak for a fifth week, as the market bounces back from the lows seen in early December as the threat of the Omicron virus variant fades and signs point to tightening balances on strong consumption
- This could set the stage for US$100/b oil by midyear – as predicted by several key analysts – as consumption rebounds ahead of summer travel and OPEC+ remains locked into its gradual consumption easing schedule
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