For the past few years, everything has been coming up roses for Norm Holton.
Holton’s company, Tusk Energy Inc., is firing on all cylinders and shareholders are in champagne-popping spirits as Tusk begins a new life with its recent conversion to an oil and gas income trust.
But it hasn’t always been roses and champagne for Holton, who has assumed the reins of the new entity, Tusk Energy Trust, while also being chairman of Tusk Energy Corp., the exploration company that was spun off in the restructuring.
The Saskatchewan product has persevered through some lean times during a 32-year career in the peaks and valleys of the oilpatch.
|Larry MacDougal, Business Edge|
|Norm Holton remembers the humbling experience of being over-extended when oil prices crashed in 1986.|
1. Are you from an entrepreneurial family?
“Actually, my dad (Lyle) was a grocery store manager and my mom (Jean) stayed at home and tried, I think mostly successfully, to keep my older sister and I in line. Dad was my role model. He always had an entrepreneurial kind of bent. He bought a farm and tried to make a go of it.
He grew Christmas trees, had a bull for a while and invested in a mushroom farm at one time. My mom is still alive and is very much a stoical kind of a person. If she was getting beaten up emotionally when we were kids, she’d hide it and be strong for her kids all the time. She always told me, ‘You play the hand you’re dealt.’ Frankly, that comes to mind very often. I just grew up feeling very fortunate that I was born in Canada and I had a belief instilled in me by my parents that anything was possible. And I think they were right.”
2. What do you remember about the Calgary oilpatch of 1972 when you started work as a geologist for Deminex Oil & Gas?
“It was just a great learning experience. I learned the value of friendships and the importance of relationships with other people.”
3. Where were you and how did you survive when the oil prices crashed in the 1980s?
“I was the vice-president of exploration and production with a small company called Morgan Hydrocarbons. We were doing pretty well. We were basically in a horse race with Morrison Petroleum at the time and we could see the tail lights of Poco Petroleum and Renaissance Energy, and we were trying to catch them. As it turned out, we were probably trying a little too hard because we ended up over-extended as we went into 1986. Then, the oil prices crashed and we found that we had already committed our cash flow in the first six weeks of the year. By that time, the company had grown to about 30 people and 12 of us went out the door one day. We were one of the first rounds of cuts in that downturn.”
4. What was that experience like for you?
“It was very humbling. In a company, you want your employees to buy into the company so the company becomes part of who they are. If you do get to that stage, and the company is part of who you are, it’s great because, as an employee, it is no longer work. And that’s the way we were at Morgan. On Saturday afternoon, there was likely 10 or 12 of us in the office and it wasn’t really a feeling we had to be there. But you wanted to be where the action was. So I think that getting laid off from a job like that where you’ve bought into things is sort of like a death in the family. There’s definitely a grieving process that goes on. I felt like I was on top of the world at Morgan, but I went from soaring to a crash-landing very quickly. That was a bit of a reality check. But you pick yourself up, dust yourself off and go on.”
5. So where did you go on from there?
“I did a number of things in the late 1980s. I bought and sold some (oil and gas) production (futures). That was quite a successful venture. Then, I got involved in financing other companies and one of them was Tusk Minerals (which would later become Tusk Energy).”
6. How did Tusk get started?
“It started as a junior capital pool in 1987 by myself and two others. It came on the market at 10 cents a share and then it went to 35 cents. It took us a few years to learn that we didn’t know very much about the mineral exploration business. Tusk effectively became a shell company and then we consolidated and turned it into Tusk Energy. We raised some cash in 1995, about $5.6 million, and purchased an oil-producing property north of Grande Prairie in an area called Cecil. That turned out to be a very poor investment, but we were able to sell it a year later for a little over $3 million. Then, we took that company and bought a good base of properties that gave us some pretty solid production for the rest of the decade. The shares of Tusk Energy started at 35 cents and those are now worth $17.50.”
7. What’s the secret to your success in building Tusk?
“I would summarize the secrets to success in three words – people, prospects and perseverance. We’ve often used that saying around here. I think I found it in a fortune cookie once, that perseverance is the mother of good fortune. I believe that’s partly true. Certainly, it’s hard to succeed without some tenacity and perseverance, but you need some other things. We’ve been very fortunate. We have some very good technical people who came on board about four years ago and that helped us make a very good acquisition that gave us lots of lower-risk drilling opportunities that have turned out very well for us. Those are the building blocks of our success.”
8. Have you had to pay a price personally for your success with Tusk?
“Sure, there’s a personal price.
You just don’t have much time to spend with your family. My wife often asks what interests I have outside of business. I guess she really thinks I don’t have any. She says I have no life outside of business, but I would like to develop one. We’ll have to see how that goes. During the really hard times of building this company, my kids were in school and stuff. Now, we’ve been successful and my kids are in their twenties. Perhaps I can spend more time with my grandson than I did with my kids.”
9. Do you regret that you didn’t have a better balance in your life?
“Sure, I have regrets. I’d like to have spent more time with my kids and done more things with them. On the other hand, I guess you never know which path takes you where, and we were able to persevere and make this thing work out OK. I don’t know if that would have happened otherwise or not.”
10. You call in sick tomorrow. How do you spend the day?
“I never call in sick, but I guess if I had a whole bunch of extra time, I’d like to travel. That’s certainly something I’d like to do more of. We’ve also just bought a condo on the West Coast and I’d like to do some sailing.”
“But right now my main focus is make the new Tusk trust and the new company (Tusk Energy Corp.)
11. What’s the most gratifying part of your job?
“One obvious one is that you become more financially secure, which is great. But the most satisfying personal aspect is seeing the personal growth and success of some of the people that have worked for us. I enjoy seeing how they’ve progressed with their lives. We gave some opportunities to people, some of whom probably would have had a difficult time finding that opportunity. And they’ve risen to the occasion. I’m thrilled by that.”
12. How difficult was it determining whether Tusk was the right fit for a conversion to an income trust?
“We certainly wrestled with it for a period of time. Because there have been so many companies converting to trusts, it’s something that is relatively high in your consciousness. What really catalysed it for us is that we ended up with what we feel is a potentially significant discovery in the high-risk, high-reward category last winter. So we felt we probably weren’t really being properly valued in the marketplace. We thought we could get the best value for shareholders by severing the low-risk, moderate-growth stuff from the high- growth potential properties. The market seems to have borne that out.”
13. Why do you think you weren’t getting a fair shake from the market?
“It just seems to me that you get a better lift in a company when you split these things apart. So, in this case, we will have a pure exploration company (Tusk Energy Corp.) that is relatively small. Yet, we have the potential exploration upside that once existed in a 5,000 barrel-a-day company. The impact can be very large.”
14. How does your management style change as head of the Tusk Energy Trust side?
“I don’t know if the style changes that much. Certainly, in managing the trust we need to focus more on fiscal responsibility and fiscal restraint, living within our means. Naturally, you need to be a little bit more conservative as a trust manager because you’re distributing so much of your cash flow to your shareholders. That doesn’t leave you with much wiggle room.”
15. Did you consider heading the exploration side of the conversion?
“Yes, I did. But I’ll still be actively involved with Tusk Energy Corp. (as chairman). We felt that 92 per cent of the assets were going into the trust and we thought it was important to have defined leadership for that part of the equation. Our exploration vice-president will be the president and CEO of Tusk Energy Corp. and I’m sure he’ll do a great job. The exploration company will be focused on more high-risk type of drilling initially but as it gets going, there will be similarities to the way we built Tusk in terms of strategic acquisitions and things like that.”
16. What’s the key to successfully managing risk in this business?
“There’s a saying, ‘Trust in Allah but tie your camel.’ You have to recognize that we’re in a very high-risk kind of business so you need to be very prudent with how you spend your money. You do that by spreading your risk. You don’t want to put all your eggs in one basket. You need to hire good people, listen to them and make sure that you’re well capitalized and are able to drill a number of potential opportunities. That way you’ll maximize your potential to get lucky.”
17. Are you a little nervous about these high oil prices?
“If you’d asked me that question a couple of days ago, I probably would have said yes. But I was at a conference yesterday where an economist was saying that $50 (US per barrel) oil looked pretty firm for the next year. I think the outlook on commodity prices is pretty bullish, but it is a time to be cautious. The time you become worried is when everybody starts acting like they’re not worried.
When there’s a mentality that prices are great and are going to stay high, it tends to make us more cautious and cover our tail a little bit. We’ve already done something to that end for the trust, purchasing puts (option contracts) a couple weeks ago that give us a $40 US floor for the West Texas Intermediate price for the 2005 fiscal year. Five years out, I believe commodity prices will be excellent. The price for oil, I believe, will stay very strong. All signs seem to point to oil prices staying very relatively strong and I think (natural) gas should stay strong, too. We have limited commodity supplies and growing economies. What we have to worry about in terms of our business is the possibility of a recession. If there’s a strong decrease in industrial demand in the United States, then the prices would fall back.”
18. What do you think you’d be doing today if you weren’t in the oil and gas business?
“I’d be doing something similar in another business. I didn’t really go to university to become a geologist. I really went to university to get an education to provide me with a mechanism and an entry point into a business. Even in those days, I always thought in terms of being a manager, running something and building something.”
19. When you step back and reflect on your career, do you have any regrets?
“I’m probably disappointed it took so long to get things going. People tell me, ‘Norm, you’ve done really well and your company’s doing wonderfully.’ I say, ‘Yeah, we’ve had quite a bit of practice.’ My personal observation is that more memorable lessons are learned from adversity than from good fortune.”
20. It’s 2010. Are you sipping a cocktail on a beach or still running an oil company?
“I’ll be 60 years old in 2010 and I suspect that I’ll be spending a fair bit of time sipping cocktails. I’ll still be actively involved in a business, but not as the guy running the company, probably as a director and investor.”
IN PROFILE: Norm Holton
* Title: CEO, Tusk Energy Trust; chairman, Tusk Energy Corp.
* Born/raised/age: Nipawin, Sask./ Saskatoon/54.
* Education: University of Saskatchewan, geology degree.
* Family: Wife Marcie, two children.
* Career: Holton was CEO of Tusk Energy Inc. before it was converted into Tusk Energy Trust with a spinoff of an exploration company, Tusk Energy Corp. He was a founder of Tusk Minerals in 1988 and instrumental in that company being transformed into Tusk Energy. Prior to that, Holton was vice-president of exploration and production with Morgan Hydrocarbons (1982-86). He has also worked as a geologist with Oakwood Petroleum (1978-81), Getty Oil (1977) and Deminex (1972-77).
* Pastime: Sailing, travelling.
THE COMPANY: Tusk Energy Trust
* Brass: Norm Holton, CEO; Gord Case, chief financial officer.
* Profile: Tusk Energy Trust was recently created from a restructuring of Tusk Energy Inc.
The company has a portfolio of oil- and gas-producing properties in Western Canada. The conversion of Tusk Energy also included a spinoff of a separate exploration company, Tusk Energy Corp (TSX:TKE).
* Track Record: Prior to the Nov. 5 finalization of Tusk Energy Inc.’s conversion into a trust, the company had delivered a four-year return of 900 per cent to shareholders with the stock rising from 60 cents to $6.
* Initial Monthly Distribution (as of Jan./05): 12 cents per unit.
* Recent Stock Price (TSX:TKE.UN): $9.84.
* Website: www.tusk-energy.com
* Head Office: Suite 1950, 700 4 Ave. S.W. , Calgary, AB T2P 3J4.
* Phone/Fax: 403-264-8875/ 263-4247.
(Gyle Konotopetz can be reached at firstname.lastname@example.org)