A big-time oil executive who has delivered shareholders bountiful returns of 10 to 20 times on their investment in less than five years could be excused for resting on his laurels.

But Keith MacPhail refuses to take his eye off the ball.

The CEO of Bonavista Petroleum, a company that has grown from a $15-million market cap to a $1.25-billion company since he assumed the reins in 1997, postpones an afternoon interview scheduled at his office.

Like a high-strung professional athlete on game day, MacPhail is afraid of losing his focus for a key staff meeting concerning his company’s reorganization into two entities, an income trust and a junior exploration company.

To MacPhail, the company and its people take precedence and you’d be hard-pressed to find any shareholders who would argue with his single-minded focus.

Larry MacDougal photos, Business Edge
Keith MacPhail is helping oversee his company’s shift into an income trust.

When we finally meet, away from Bonavista’s office after business hours, a dapper MacPhail is sporting a tailored dark blue suit, flashy tie and an easy smile.

The 46-year-old Medicine Hat native is surprisingly calm and modest, belying the edgy man on the phone in the hotseat of one of the oilpatch’s most stunning success stories. 1. What was your dream career growing up in Medicine Hat?

“It’s funny. I loved animals, so I wanted to be a veterinarian. Probably, at the end of the day, I wasn’t quite smart enough to make it or maybe I didn’t have the academic skills at that point. I learned fairly quickly after high school that it wasn’t what I was going to pursue, although my love for animals still remains.”

2. What sparked your interest in the oilpatch?

“My first summer job in the oilpatch was with Merland Exploration, and that’s where I acquired an interest in the field. What intrigued me about it was that it (oil) was below the surface and you couldn’t really see it, so you really had to use your imagination about what was going on down the hole. I had the good fortune of working with some great people and being exposed to one of the downhole projects, and that was really intriguing to me. I liked the creative part of the business, the entrepreneurial part, and the risk- taking aspect of it where you never really knew the prize until you penetrated the zone and tested it.”

3. Who have been your mentors during your career?

“There were two key people in the early days when I was with Merland Exploration. One of them was Al Markin (current chairman of Canadian Natural Resources), with whom I had the good fortune to work at Merland, Poco Petroleum and Canadian Natural Resources. I worked with him for about 15 or 16 years. One of the attributes that stood out to me was Al’s ability to work with people and get the most out of them. Another mentor was Clayton Woitas (former Renaissance Energy president and MacPhail’s colleague at Merland Exploration), who went into Renaissance at a very early stage and grew it into a senior producer and now he’s having great success with Profico Energy Management. Clayton is on our board.”



4. What was the catalyst for you to leave a nine-year career with Canadian Natural Resources in 1997, at a time when you were being groomed for the CEO role?

“From the time that I was at SAIT and Montana College, I had a vision of being the president one day and running a company. I just thought the timing was right for me at that time. It was coming down to a situation where I had to make a choice between being the CEO of Canadian Natural, a multibillion-dollar oil and gas company, or going out and starting small again. I obviously chose the latter. It was a difficult decision leaving the people I hired, a lot of whom are still there today, and Al (Markin) and Murray (Edwards, a major shareholder). At the end of the day, though, I don’t think any of those guys could begrudge me for what I did because they’re risk-takers and entrepreneurial as well. They’d sort of ‘been there and done that’ as well.”

5. What’s the key to the Bonavista success story?

“Like any business, it’s people. We’ve been able to assemble a team that is, in my mind, second to none. It’s a multi-disciplinary team with the people bringing different strengths to the table. People are genuinely interested in creating value for shareholders, and all I need to do is keep steering them in the right direction.”

6. To what do you attribute the success you and longtime sidekick Ronald Poelzer, your CFO, have had working together?

“I think it’s partly due to the fact that I come from an engineering background and he comes from a financial background. He trusts what I do, engineering-wise and operationally, and I trust what he does financially. We also both come from farming backgrounds and both have a very strong work ethic. I think we both feel that we’re both pulling an equal load in the company.”

7. How has your farming background served you in the oilpatch?

“Our family had a farm just outside of Medicine Hat and I think it has taught me to work hard. Obviously, that’s something we had to do on the farm, getting up early in the morning and working long hours. Working around equipment has also helped me mechanically.”

8. Was it a gut-wrenching decision for you to reorganize Bonavista into an income trust?

“Yeah, it was. It took a long time to come to that conclusion, but the bottom line was that we, as owners of the company as opposed to just managers, were always seeking ways to enhance shareholder value. And I guess one can argue that, in the past couple of years, the share appreciation has been a little bit slow. So we felt that this was an excellent way to continue enhancing shareholder value. Obviously, the tax effectiveness also comes into play here as well as the valuation metrics that are being afforded the trusts right now as well as the junior producers. And, we essentially created one of each (income trust and junior producer).”

9. How do you see the trend toward conversions to oil and gas income trusts affecting the industry?

“I think with the taxability that has come into the industry in the last few years, there will be a continuation of trust conversions. But I do think that, ultimately, there will be a situation where there will probably be too many trusts and there will be some consolidation at some point in time. What triggers that consolidation will likely be a correction in commodity prices, and no doubt there will be a correction at some point in time.”

10. How does being an income trust alter your strategy?

“Our approach, in terms of the way we manage our assets and the way we look at investing in the business, really won’t change. We still want to reach the same economic (milestones) as we have in the past and the same discipline with respect to our capital and such things as operating costs. All of those traits that have made Bonavista successful over the past 51/2 years will continue to be employed with the Bonavista Energy Trust.”

11. Describe your management style?

“I’ve always believed that having more people around the table offering their opinions and working as a team ultimately allows you to reach a better decision. My managerial style is to try to get the right people involved in making a decision and reaching a decision by consensus. From experience in the business, I’ve realized that it’s not one individual who makes it happen. Especially in our business, it takes an integrated team approach to really succeed, be it drilling a successful well or completing a successful transaction. When I was younger, I was probably a little insecure about my abilities. I think that I’ve sort of grown out of that. I would, quite frankly, hire someone who is way smarter than me and let them run it.”

12. Aside from the success in building Bonavista, has it also been an enjoyable experience?

“It’s fun most days. But I don’t want to lie to you. I mean, there are days when it’s pretty stressful. When you end up drilling a couple of dry holes in the same day, you kind of wonder whether the business is all worth it. Yet, most of the time, the stimulation of the business and the ability to work with a bunch of great people makes it enjoyable.

“And the gambling aspect of the business is so intriguing and exciting. But they’re not just risks, they’re calculated risks. It’s not just throwing money on the table.”

13. How do you deal with stress?

“I like to work at trying to stay in shape, which isn’t always that easy to do. I really enjoy being with the family, whether it’s watching my son play hockey or watching my daughters dance. Family activity is a big stress reliever and we have a place out at a lake that we love to go to frequently to get away from the hustle and bustle of the city.”

14. Have you been able to balance family and business life?

“If you asked my wife (Kathryn), she’d probably say no. I don’t do too bad of a job, in my mind. I do probably work more than I should, but I think I’m always there for the family for important things.”

15. How do you measure success?

“Right now, I’m measuring success on how well the company does, how we can continue to create value and how we can continue to develop our people into what they ultimately want to be, from a financial and career standpoint. It’s not all about money at this stage. It’s about developing a company that people look back to some day and say: ‘That was a great company.’ ”

16. How do you see the reorganization affecting your role in the future?

“I’m going to be the CEO and president of the trust (Bonavista Energy Trust) for now, and chairman of both companies (the trust and NuVista exploration company). I still love the business and I love the stimulation of coming downtown and talking to different people. I think that, for the time being, I’ll stay heavily involved in the business and we’ll just see how different people in the organization develop and move up in the organization. At some time, I’ll probably relinquish one or two of my handles.”

17. Does the prospect of early retirement appeal to you?

“I kind of look forward to the day when I have a little more freedom, but I can’t see myself retiring. I’m not into golf to the point where I could do it every day, and I don’t have a bunch of hobbies that I could fall back on. No, I don’t really look forward to that.”

18. What are your goals beyond your business?

“An important goal for me is to be able to give back to a community that has given a lot to me. We’ve set up a charitable foundation and we’re working with different groups right now to start giving something back.”

19. Do you envision the exploration company, NuVista, as the next Bonavista Petroleum?

“You know, it would be really nice if we could create another Bonavista, but the economic conditions are different today than they were 51/2 years ago. I think there’s a desire to duplicate or repeat what we’ve done, but can we say it’s the next Bonavista? I can tell you that we’ll employ the same kinds of strategies and we’ll have the same group of people working the company that has made Bonavista successful, so I think it’s got a pretty good chance of being the next Bonavista, but that remains to be seen.”

20. Will you be able to rest easy if NuVista doesn’t achieve what Bonavista has?

“Absolutely. Even if Bonavista wasn’t successful, I could have rested easily. I think the worst thing that a person can do is not try to do something that you want to do. At least if you try and you fail, then when you’re sitting around in your rocking chair when you’re 70 years old, you can say: ‘Well, at least I tried.’ Obviously, if NuVista doesn’t succeed, I’ll be a little disappointed. But it’s not life or death.”

THE COMPANY: Bonavista Petroleum
* Brass: Keith MacPhail, chairman/president/CEO; Ronald Poelzer, executive vice-president/chief financial officer.
* Profile: Since Bonavista was refinanced and restructured in 1997, the oil and gas company has grown a $15-million (market cap) company to a $1.25-billion company from its operations in Western Canada.
* Home-run stock: When rumours broke in 1997 that MacPhail and Poelzer would be assuming the reins at Bonavista, the company shares were trading at $1.10. Since then, the shares have escalated 3,432%.
* Double play: Bonavista is in the process of reorganizing into an income trust, Bonavista Energy Trust, which will encompass about 90 per cent of the company’s existing producing assets, and a publicly traded, natural gas-weighted exploration company, NuVista.
* Recent Stock Price (BNP-TSX): $37.75 (52-week range, $25.50-$38.45).
* Website: Under construction.
* Contact Info: #1100, 321 - 6th Ave. S.W., Calgary, T2P 3H3; Phone/Fax 403-213-4300/403-262-5184.

IN PROFILE: Keith MacPhail
* Born/raised/age: Medicine Hat, 46.
* Title: Chairman/president/CEO, Bonavista Petroleum. MacPhail’s personal stake in Bonavista is about 11 per cent of the company.
* Education: Medicine Hat College, university transfer engineering program; SAIT, diploma of technology/geology (honours); Montana College of Mineral Science, bachelor of science, petroleum
engineering (honours).
* Family: Wife Kathryn, three children.
* Career: Prior to assuming the reins of Bonavista in 1997, MacPhail was executive vice-president and chief operating officer with Canadian Natural Resources. He worked for that company for nine years. He has also been production manager with Poco Petroleum, production technologist with Concept Resources and an operator with Merland Exploration.
* Moonlighting: MacPhail is a director with Canadian Natural Resources and also sits on the board of the Canadian Association of Petroleum Producers. He is adviser to Norrep Mutual Funds and the Energy One Private Equity Fund.
* Accolades: He was recognized in 1997 as one of Canada’s Top 40 business people under 40.
* Passions: Boating, water skiing, skiing, hockey.