Yedlin: Profanity brings Encana pressures to the fore by Deborah Yedlin, February 16, 2013, Calgary Herald
If Encana didn’t already have enough to deal with, more was added to its woes on Thursday. One of the 20 executives gathered to participate in a conference call with reporters, investors and financial analysts discussing the company’s fourth-quarter financial results was heard to call one of the analysts a “f—ing a-hole” in response to a question. Phil Skolnick, an analyst with Canaccord Genuity, had asked whether the newly passed federal legislation governing foreign ownership would have any impact on the possibility of Encana being sold. It was a fair and benign question to which interim chief executive Clayton Woitas simply answered “no.” It certainly didn’t deserve the snide profanity uttered by an unidentified male voice of one of the 20 executives, given that rumours of a potential sale of Encana have been floating around for a while. It’s perfectly legitimate for an analyst to try to understand what the universe of buyers might look like.
This unexpected – and completely uncalled for – exhibition has exposed a couple of issues that should be of concern to all Encana’s stakeholders – shareholders, partners and employees. … One can’t help but think the inappropriate outburst is a manifestation of the amount of stress that the Encana management team is dealing with. Not only was its CEO shown the door in January, the market remains dissatisfied with the company’s performance. On Thursday, the numbers showed a drop in cash flow and Encana said it had dialed back its plans for liquids production in 2013. All this was enough to send the stock down 6.6 per cent to a 10-month low of $18.20.
But, as the author Ernest Hemingway wrote in a letter to F. Scott Fitzgerald, courage is grace under pressure. In other words, it’s the ability to hold it together even when things are not going so well. That’s what separates the winning teams from the losing teams. The second, and perhaps more important issue, is that it exposes an apparent lack of discipline on the company’s front line.
And while some might say, get over it; the language of the oilpatch has always tended to the salty side, in this case it’s not quite so simple. An analyst conference call isn’t a football field, hockey arena or soccer pitch. This is about reputational risk. It took no time for the 19-second clip to go viral around Calgary and beyond; one can only imagine the life it has had among Encana joint venture partners and shareholders over the last 36 hours. Parents always warn their children that it can take years to build a reputation and only seconds to destroy it. In Encana’s case, that would be 19 seconds. Encana did issue an apology late Thursday – but the damage was already done.
It’s bad enough there is a cloud lingering over the company as a result of the U.S. Department of Justice investigation into whether the company had colluded with Chesapeake Energy when bidding for assets. Questions were also raised over the apparent lack of a succession plan when Eresman was shown the door; that lack of preparedness on the part of the board of directors arguably put the company in the penalty box even though an accomplished and respected oilpatch veteran was named interim CEO.
The point is, Encana was already suffering from a measure of reputational damage – Thursday’s incident added to its woes, not to mention the impact on employee morale. One might even go so far as to suggest Encana is now reputa-tionally immuno-suppressed; it’s going to take some very strong medicine to change the situation. If you go to the Encana website, you’ll find a page that states “Integrity is the foundation of everything we do.” It directs anyone with concerns to contact the company through its Integrity Hotline. Mr. Skolnick might want to make the first call and see where it goes. [Emphasis added]