David H. Welch

Summary Points from Meet the CEO Series meeting held on October 4, 2010

The October gathering of COBA faculty for the Meet the CEO Series featured Dr David H. Welch, President and CEO of Stone Energy.  Stone Energy Corp. is an independent oil and natural gas exploration and production company headquartered in Lafayette, with additional offices in Houston and West Virginia.  Dr Welch has an engineering degree from Louisiana State University and a doctorate degree in economics from Tulane University.  Prior to joining Stone Energy in 2004, Welch worked for BP Amoco or its predecessors for 26 years, where his final role was Senior VP at BP America.

Welch discussed a number of interesting and timely topics related to the oil and gas industry locally, in the US and on a global level:

    The long-time business model for small independents in the oil and gas exploration business (buy what the majors don’t want to explore any longer and extract the remaining value from the lease) has played out and will no longer work.  Companies are seeking new business models to remain profitable and deliver value back to shareholders.  Welch added that the independents own 70% of the oil and gas leases in the Gulf of Mexico (GOM) and these companies are good partners in production and exploration efforts with the major oil and gas companies.
    Commenting on the current federal government moratorium on issuing permits for oil and gas exploration in the GOM, Welch said he thought the moratorium may be lifted early and perhaps as soon as the end of October.  The negative economic impact of the moratorium is huge for those with rigs in the GOM that have been shut down.  Welch said it costs roughly $1 million/day to operate a well.  The moratorium means that $33 million/day in costs are being incurred by the operators of deep water wells that have been shut down.
    Welch discussed the potential impact of the proposed new federal government regulations on the oil and gas industry as a result of the BP oil spill in April 2010.  New regulations are expected relative to safety, insurance, permitting and financial requirements.  The US Senate is the focus now and no new legislation will be passed until next year after the November elections.  Welch said he believes that waiting will result in better legislation when more deliberate thought can be exercised before drafting the new laws.
    When asked about the future of the industry, Welch commented that lots of the natural gas developments in US today were unknown 20 years ago.  He suggested that there needs to be more emphasis on the use of natural gas for power generation and less use of coal.  One suggestion was to convert 18-wheeler trucks to compressed natural gas which would lower the amount of oil needed into the future for diesel fuel and crude oil.
    When asked about his leadership style, Welch commented that he always seeks to access the “big brains” in the company and engage these people in dialogue before making decisions.  Welch emphasized the importance of taking his “A” people and making them an “A” team.  He said that leaders need to have confidence and the experience to lead a group and that you cannot run a company by consensus.
    The final question in the session was about how UL might do a better job in preparing students for the workplace.  Welch discussed the importance of having students grounded in the fundamentals and to develop more opportunities for students to interact on a regular basis with people in various levels of business.

Submitted by:  Dr Lise Anne Slatten, Department of Management