Want to know how the oil industry can burnish its reputation? Step into Dave O’Reilly’s office for a friendly chat.
Here’s the first clue that Dave O’Reilly is a different sort of energy company CEO — most of whom are notoriously sparing in their interaction with the media: When I ask for an interview, he invites me into his office.
That clue turns out to be the first of many. During our meeting, O’Reilly, the 56-year-old CEO of ChevronTexaco, reaches delightedly into a bag of toys and hands over Hank Hot Rod — a screecher of a street machine — and Summer Scoop, a tune-playing ice-cream truck. They are children’s toys and symbols of ChevronTexaco’s gas stations, done up with clever touches (the ice-cream truck has eyes instead of headlights). Needless to say, toys are not among the usual Fortune 50 CEO’s bric-a-brac.
But the moment is quintessential O’Reilly. He’s an executive with the personal touch, and though the gift seems lighthearted, it also makes a point about his company’s focus on gasoline sales. “These models keep me closer to our customer,” he says in his soft Irish brogue, eyes twinkling. “They remind me why we are in business. And,” he adds, grinning broadly, “We sell them, too. They do quite well for us.”
The Dublin-born O’Reilly has the Irish gift of connecting with people naturally and easily. And O’Reilly makes the most of every minute. He gives a gift, makes personal chitchat, and emphasizes the importance of ChevronTexaco’s gas stations, all in a few minutes. When he takes a meeting, it’s because he wants to communicate specific points — and he’ll pack a tremendous amount of fact and friendly persuasion into that conversation.
My afternoon with O’Reilly is no different. Before the conversation closes, he will make sizable points, some of them surprising, about a medley of issues facing his industry, and, by extension, every company and every person who depends on an abundant supply of well-priced energy (that means you).
The issues O’Reilly faces at his own company are largely an extension of the two-year-old, $39 billion takeover of Texaco. Since then, the company has cut costs by $2.2 billion, and its 2003 profits are hefty, but investors so far aren’t impressed. Second-quarter earnings quadrupled over the previous year, to $1.6 billion from $407 million in 2002, but its stock price lags. Undeterred, O’Reilly still says he wants the company to deliver the highest shareholder return in the industry. In August, the company announced it would sell $6 billion in assets over the next several years, in a bid to boost profits by $500 million by 2005 — and deliver that promised return. “We are transforming to a leaner, more efficient business,” O’Reilly told the press at the time.
O’Reilly clearly is not afraid to make big promises. Nor is he afraid to upbraid his own industry for media phobia and performance problems, nor to entreat energy consumers to face reality: “There are no silver bullets where energy is concerned.”
But this is always done with a kind of Dublin smoothness, a self-deprecating humor, and unrehearsed sincerity. It’s an approach that has served him well, not just within the company, but as he has made the rounds of institutional investors and Wall Street firms. One of his primary chores since climbing into the ChevronTexaco CEO seat has been to reassure the investment community that the company is on the right path and that he is the right man for the job. He seems to be succeeding, says Sunny Harris, principal with Doyen Capital Management. “O’Reilly is one of the guys; he’s willing to work hard,” Harris says. “He’s the kind of leader who can make a big difference with a company.”
Dave O’Reilly is “thoroughly American, totally, completely,” as an associate of his puts it. But O’Reilly — who became a U.S. citizen in 1973 — knows that he is forever colored by his Irish youth. To him, that is a very good thing indeed for the CEO of a company that operates in 180 nations.
“Growing up in a small country — it was three million people when I was a boy — you had to look outside [the nation’s borders],” O’Reilly says. “I remember when I was in high school there was the Cuban missile crisis. There were two big countries getting ready to duke it out, and I was sitting in a very small country. You become conscious of what’s going on outside. In that respect, I think I had a tremendous advantage growing up in a small country. You have to think globally.”
Curiously, while his father was succeeding in the Dublin retail sector (he eventually became manager of Arnotts, Dublin’s biggest department store), he told his son Dave to steer clear of “the rag trade.” Dave listened, and found himself drawn instead to the global dramatics of the oil industry, a business that plays on a stage as big as any. He joined Chevron in San Francisco as a newly graduated chemical engineer from University College Dublin. (“Chevron recruited in Ireland in 1968,” recalls O’Reilly, “because the Irish economy was depressed, talent was plentiful and priced right, too.”) From that moment he seemed determined to march ever higher in the company. But unlike other fast-track oil executives, O’Reilly never logged a stint in a foreign posting. “I think they figured I had spent my first 21 years in a foreign post,” he chuckles. “They wanted me to understand this part of the world.”
And understand it he must have. He moved up the ranks — from his post as a San Francisco researcher, he jumped to supervisor in Perth Amboy, New Jersey, and eventually he was named manager of the company’s Salt Lake City refinery. In 1991 he was summoned back to the Northern California headquarters, where he took on the job of vice president for strategic planning and quality. A few ladder rungs later, he was voted CEO of Chevron, and in 2001, upon the merger with Texaco, he became CEO of the combined company.
It’s a rise that, on the one hand, is breathtaking. Step by step, this son of a Dublin department store manager climbed ever higher. On the other hand, the ascension seems almost ho-hum, because O’Reilly sets goals, and then makes achieving them look easy.
Ask the former Joan Gariepy. One day in 1969, the Vermont native arrived at San Francisco’s airport with plans to move in with her sister and pursue a career in nursing. One of O’Reilly’s roommates was dating the sister, O’Reilly tagged along on the airport road trip, and his eyes jumped from his head when he saw Joan. Within a month they were dating, in another month they were engaged, and 32 years later they remain happily married — proof that even in his personal life, Dave O’Reilly is one goal-oriented guy.
O’Reilly is the kind of CEO who has always wowed onlookers with his smarts — he admits to getting irritated when folks don’t keep up — but, big as his brain is, perhaps his own silver bullet is his determination to reach out to people. He works hard at it. When I sit down in his office, he asks me, “Do you have family? Where else have you worked?” Among CEOs, especially of massive companies like the $92 billion ChevronTexaco, personal curiosity is rare. But for O’Reilly, it’s genuine. He honestly wants to know about the people around him because, well, it’s something he’s done throughout his 35-year career.
And that determination to foster communication has served him well. Seventeen years ago, when he was manager of Chevron’s huge El Segundo, California, refinery, its management was mostly male. The management-staff divide was rigid, and it showed in the simplest of fashions. Bosses wore neckties, everybody else didn’t. But not long after taking the job in 1986, O’Reilly reckoned that neckties were creating barriers — those without ties just didn’t open up with the ties, and vice versa. So he snipped the ties. No more neckties for managers, he decreed. That one move helped make the atmosphere there friendlier and more cooperative.
Visit with O’Reilly at his office today, and odds are high that he will be tie-less. And he’ll still be reaching out to communicate with everybody around him — from the line worker right on up.
O’Reilly’s colleagues often tell this story. In 1980 he took over as manager of Chevron’s agricultural chemicals plant in Richmond, California. When O’Reilly showed up for his first day on the job, the unit was hip deep in a strike, and picketers marched around the entrance. Rather than driving on through, O’Reilly parked, got out of his car, and walked up to introduce himself to the strikers. He asked them their names, their jobs, their concerns — and asked what he could do about them.
At the time, O’Reilly was a kid, just 32 years old, and this probably was a make-or-break assignment in his budding career. But regardless of the risks, he did what came naturally. He reached out, pressed the flesh, and connected. It didn’t directly resolve the strike, but showed how O’Reilly pooh-poohs class barriers. And that he doesn’t hold back. Confronted with a problem, he plunges in.
FOUR R’s IN E-N-E-R-G-Y
Part of his secret, with unions and otherwise, is that O’Reilly is remarkably plain-spoken. In an era of media-trained CEOs who often speak in well-crafted sound bites, O’Reilly speaks his mind. Lately, he has had more than usual worrying him. Call it O’Reilly’s Four R’s — Reputation, Risk, Responsibility, and Reliability. Push those buttons, and O’Reilly lights up with crisp, insightful, oftentimes surprising commentary.
For instance, the oil industry’s rep has been terrible for at least 30 years, since the so-called Arab Oil Embargo in 1973 when pump prices for gasoline shot up and consumers heaped blame on the oil giants. But even so, when senior industry executives are asked the big, troubling question — Why is the oil industry’s reputation so rotten? — they typically deny or dodge.
Not O’Reilly. He jumps right into it, because he believes the industry’s future hinges on buffing its reputation. “We share the blame for our reputation,” he says. “The first place we as an industry need to look is in the mirror.
“Would the best young people want to join an oil company today?” he asks. “It will be hard to attract good people if we’re not perceived as a valuable contributor to society. We have had 100 years of negative press. We have to turn that around.
“When a tanker goes on the rocks, it’s a black eye for everyone. We need to have high standards of performance. It isn’t enough just to talk about it. We need to do it.”
How? O’Reilly is unflinching. The industry needs to sharpen its performance until it is impeccable, and then its executives have to do what — for many of them — has been unthinkable. Sit down with the press. “We need to work to turn around the bad press so we get a better balance,” says O’Reilly. “We have to get our message out.”
In the same vein, O’Reilly is convinced that the excitement — even danger — that envelops the energy industry every day isn’t well understood. He very much wants consumers to see what he sees. “If you don’t have the stomach for risk, this is not a business you want to be in,” he says, delivering his second “R.” “Doing business in difficult places is in our DNA.”
Drilling for new oil deep in the Gulf of Mexico, offshore from Nigeria, or in Ka-zakhstan is expensive. Billions of dollars are invested to bring a new well online. Sometimes test wells are busts, and the companies involved walk away with empty pockets. But O’Reilly emphasizes that this risk cycle has always been the way of the oil industry. And, he implies, the industry’s rewards are warranted by those huge risks.
“Let me tell you the history of our company,” he says. “We found the oil in Saudi Arabia. We grew the business there, and then, suddenly, in the late 1970s we lost three million barrels a day of production because the industry was nationalized. We found oil in Venezuela; we got nationalized. We found oil in Indonesia, and before we could even start to recover it, the Japanese invaded during World War II and took over the operation. Those are dramatic, tectonic shifts. So, yeah, the world appears risky today. But I would not say there is greater risk today.”
Which brings us to Responsibility. Again, he has a somewhat contrarian view. He believes there’s a shared responsibility to upgrade lifestyles globally. “There is an enormous need for energy in the developing world,” he says. “About one billion people live on less than a dollar a day. The most conservative projection of population growth — and almost all the growth will be in the developing world — is about three billion over the next 50 years. One of the world’s biggest challenges is how to make a world where those three billion people experience an acceptable lifestyle. Energy is part of that.”
Exactly how will big oil help bring prosperity to many millions of people globally? By twisting a few arms. “We have a responsibility to encourage our government partners to ensure that the economic benefits we bring are being invested for the good of the country and its citizens,” he says. This is a paradigm-shattering thought. Oil companies aren’t always picky about their governmental partners. O’Reilly says enough is enough. “This is a difficult message to deliver,” he sighs. “Some people think we only take. But,” he pauses as he frames his thought, “we should be open about communicating our concerns. We can be a voice for good.”
That said, there arises the question of the fourth O’Reilly “R” — reliability. A reliable energy supply is a mandatory building block for prosperity. When lights flicker, when factory lines are dark, when cars are parked because there is no fuel, that economy stalls. What’s the cure? In O’Reilly’s eyes, the only truly reliable sources of energy are the old standbys, oil and natural gas in particular. He well knows that some politicians, even some energy companies, tout alternative energy sources such as solar and hydrogen power, but, he says, these new-wave resources don’t add up to reliability, at least not in the near future.
“There’s a lot of fluff about alternatives,” he says. “I’m not saying they aren’t important. We should be exploring them. But I don’t see them [making a difference] in the short-term. Our basic supplies of energy are oil, natural gas, coal, nuclear, and hydroelectric. That will be true for some time to come.”
And now, O’Reilly has done his part. Time’s up. The conversation is over. Except there is one more rare O’Reilly moment. On the way out I notice two small children literally bouncing across this powerful CEO’s computer screen. Surprised, I ask, “Are those children on your screen saver?” Again O’Reilly flashes his smile. He grabs a framed portrait from a shelf to offer me a better look. “They’re my grandchildren,” he says. “Isn’t the screen saver wonderful?”
“Och,” he adds, in an intimate flash of his core Irishness. “They come to visit and they play with Chevron cars on my floor.” He points to the immense expanse of carpet that covers his office. “It’s grand. It really is.” AW
ROBER McGARVEY, a freelance writer based in Tucson, holds Irish citizenship and admits to daydreaming about buying a home in Belfast. His work has recently appeared in magazines ranging from Harvard Business Review to The American Legion.
THOMAS BROENING, a San Francisco-based photographer, started shooting professionally at age 17. He took these images with an 8x10 camera that he thinks was made in the 1940s. His work has appeared in ESPN, Fortune, and Time magazines.
“O’Reilly is the kind of leader who can make a big difference with a company.”
— Sunny Harris, principal, Doyen Capital Management