David Dyck
Photograph John Gaucher When Penn West Petroleum hired David Dyck to tackle its sea of debt, it was fighting hard to keep its head above water. He cleaned up the balance sheet, not only through the standard survival practice of cutting costs and selling non-core assets, but also through innovative and creative financing. He brought the company back from the brink of insolvency to profitability—a “financial resurrection” as one Calgary energy lawyer called it.
“You have to own the problem. The banks have an interest in helping you, but it’s your problem.”
Dyck didn’t just sell non-core assets, he innovated with them first. “On specific lands, we added a burden to those properties of 8.5 percent royalties and sold them to a buyer,” he says. “The buyer pays for this up front and then receives the royalties going forward.” This was a balancing act; using lands that are economically attractive already, but the royalties burden couldn’t be so high that it impeded future development such as drilling. “So it pays 8.5 percent to the new royalties owner while we keep a working interest,” Dyck says. “It was a unique and important solution to helping solve our debt problems and raise additional capital.”
His mandate was to fix the company’s finances and Penn West was fortunate to have a large non-core asset base. So over the past 2.5 years, it used its proceeds to slash debt from $3 billion to less than $500 million, while increasing the firm’s financial flexibility and decreasing its interest payments. “It really changed the production profile,” Dyck says.
With the properties, Penn West also sold a lot of non-producing wells and their reclamation obligations. “This impacted the purchase price but we lost a liability and improved our liability management ratio (LMR), which we’ll talk about at year-end,” Dyck says. So at one stroke, Penn West not only focused on its balance sheet—abandoned wells show up as present value—but on its future liabilities too. It costs the company between $110,000 and $120,000 to abandon a well. By selling over 28,000 well bores with the properties, Penn West removed about $3 billion in future liabilities, Dyck says.
Another key initiative was to look at everything on a cash basis, cutting operating costs and general and administrative expenses. “We did a masterful job at both,” he says. “We had to own the problem, so we looked for efficiencies in Calgary and in our field offices, trimming the number of people for the size of the company we would become post-sales. We had to become leaner. We had to do what we had to do to survive.”
Dyck has helped to place Penn West in a pole position for the oil price upswing, focussing on three core, profitable areas: Viking (Alberta), Cardium and Peace River that have growth upside. “We have a capital expenditure plan that is internally funded and aim for double-digit growth in 2017,” he says.
Dyck says a key factor he brings to the company is experience. “Experience is a critical part of anyone’s skill set. I’ve been fortunate to have a lot of experience, mostly strategic, financial and restructuring. It allows you to do what you’ve been called to do. You need bits and pieces of all those diverse experiences to be successful. The best people have diversity of experience.”
Dyck’s advice to other CFOs when it comes to working with banks during a crisis is to “be prepared,” he says. “The banks are in crisis mode too. You need to know what your credit line will allow you to do and what it will not allow you to do. You have to own the problem. The banks have an interest in helping you, but it’s your problem. You need a very good understanding, legally, of the key terms in contracts and to have a game plan. You need to stop the banks from controlling you as they will try to do this.”
Getting Personal With David Dyck
CFO of Penn West Petroleum
What is the most important quality that a senior executive can have?
Be measured. Don’t panic—be calm. And build a good team.
What is the least important quality that a senior executive can have?
Self- importance—not working as a team player.
What is your greatest fear?
Disappointing a family member or my staff.
Which living person do you admire most?
My wife, Coralea—mother of three and grandmother of eight.
What is your greatest extravagance?
My shop. Fully equipped for light mechanical, metal working and wood working.
If you could change one thing about yourself, what would it be?
To be more tactful when trying to persuade.
What is your greatest fear?
Disappointing a family member or my staff.
What do you consider your greatest achievement?
Being successful as a husband and father, while meeting the demands of work.
https://www.albertaoilmagazine.com/2017/01/cfo-year-david-dyck/