Stumbling CNOOC Replaces Chief Executive 中海油换将李凡荣接棒CEO
Just months after losing its top executive to a rival in one of the period shuffles at the top of China’s major state-run industries, CNOOC (HKEx: 883; NYSE: CEO) is replacing its CEO after two major setbacks that have proven not only embarrassing but also hurt the company’s bottom line. The shuffle, which will see executive director Li Fanrong take over from Yang Hua (English article), comes just a half year after CNOOC saw its former top executive Fu Chengyu, leave the company to take over at the top of Sinopec (HKEx: 386; NYSE: SNP), another of China’s top 3 energy producers. (previous article) This latest move does seem to indicate that top executives at China’s biggest state-run firms, while all clearly appointed by the Communist Party, are being held more accountable for their performance, regardless of their credentials as loyal party members and seasoned bureaucrats. No explanation was given for the change, but industry observers will note that it comes after CNOOC has seen 2 major setbacks in the last few months that have undermined its stock, which is down nearly 30 percent since early June. The first of those, which has been widely reported in the Chinese media, has been a recurrent series of leaks at an oil drilling operation owned by CNOOC and US firm ConocoPhillips (NYSE: COP) in north China’s Bohai Bay, which forced several halts to production and will likely result in a costly clean-up, not to mention huge negative publicity. (previous post) The second more recent setback saw the collapse of CNOOC’s deal to purchase a major asset in Argentina from BP (London: BP) as part of Beijing’s directive for its oil companies to purchase overseas assets to help fuel China’s hungry economy. (English article) I don’t know enough about the people involved in this new shuffle at the top of CNOOC, but the move looks like punishment for Yang for failing to strongly execute corporate strategy, costing the state, as CNOOC’s largest shareholder, lots of money as the company lost nearly a third of its value. Perhaps this move marks the beginning of a more active role by Beijing in switching top executives at the top of its less well-performing state-run giants — a change in approach that would also undoubtedly be welcome by minority shareholders.
Bottom line: A change of CEO at the top of CNOOC may be in response to recent stumbles at the company, and could signal a more activist approach by Beijing in the future.
◙ Bohai Spill: A Slippery Mess for CNOOC 中海油的漏油危机
◙ CNOOC’s Latest M&A: A Shaky Oil Sand Castle 中海油收购加国油砂生产商或招来更多麻烦
◙ China’s Oil Shuffle: Not So Fast, Naysayers 石油巨头高管轮换：先别急着唱衰
