By LOUISE S. DURHAM
EXPLORER Correspondent

Plans Aim to Attract, Retain the Best

Incentives: Catch and Keep Ideas

NEWS ITEM: Geoscientists are included among the top 25 jobs for 2005, according to Fast Company, which draws on the work of the Bureau of Labor Statistics and an innovative expert to tap the top jobs. Salary prospects are rated “above average.”

Industry newcomers will find the welcome mat in place at the door to many oil and gas companies. In fact, some of the more aggressive firms are going to unusual lengths not just to attract new hires but to hold on to the current crop of valued employees -- while simultaneously growing the value of the business.

To accomplish this, they are coming up with some creative incentives -- some of which venture a little more out of the mainstream than others.

Perhaps none is more unusual than the 2005 Employee Volvo Challenge announced by ATP Oil & Gas Corp. via a press release late last year.

The program itself is pretty straightforward: Hit specified reserves replacement and production targets, and all 50 or so employees -- that’s right, every one -- will receive a 2006 Volvo S60.

As if the car isn’t enough, there’s an added carrot: Each employee will accept vehicle delivery in Sweden under the Volvo Overseas Delivery Plan, provided measurable group goals relating to performance of the U.S. arm of the company and its U.K. and Netherlands subsidiaries are attained.

Not surprisingly, the powers-that-be have defined some formidable targets:

• Complete a number of projects in the North Sea and the Gulf of Mexico’s OCS and Mississippi Canyon.
• Acquisition of reserves to replace production by 200 percent.
• Achieve (despite well decline rates) a 2005 overall company production “exit rate” of 160 MMcf per day – about double 2004 numbers.

“The goals are ambitious, but they are achievable, and all the employees recognize this,” said Paul Bulmahn, chairman and president of ATP. “There’s great morale and a lot of energy and enthusiasm inside the company for meeting these targets, and we’re on track at this point.

“If we meet the targets, we will have doubled our company’s production -- production it took 14 years to build,” Bulmahn said. “That’s huge, and that’s where we expect to be in the spring of 2006.

“Our company will have been transformed, and I wanted every employee to personally realize something they could bite, something they could taste -- I wanted everyone to feel a part of that big jump.”

Stock Motivations

Apache Corp. is another devotee of employee incentives/initiatives. The company has been rewarding its employees for growth of the company’s stock via a plan set in place about 10 years ago.

The rewards are in the form of stock grants, making each employee a part-owner of the company.

The program kicked off in 1996 with a “60 by ‘99” program, according to Tony Lentini, vice president of public and international affairs at Apache. Then trading at $30, the goal at the time was to elevate the stock price to $60 by 1999.

They missed it by a tad when the shares failed to hit $60 until early in 2000, but all was not lost. Although the executives received nothing, Lentini noted middle managers and their subordinates received options ranging from 450 shares to several thousands of shares.

The company next launched a three-pronged “120 by 2004” program in 2000. When adjusted for stock dividends and a 2-for-1 stock split, the three target stock prices broke out to $43.29, $51.95 and $77.92 -- the deal was the shares had to trade at the target level for 10 out of 30 consecutive market days.

The first target was reached in April 2004, with 90 percent of the awards going out to non-executive employees. Upon reaching the second target in October, executives received 3x their salary, the second tier 1.5x salary and the third tier 3/4x salary.

Lentini noted the program doubled Apache’s market capitalization, which soared to $18 billion, up from $9 billion. Shareholders will vote on the newest proposed plan -- “108 by 2008” -- during the upcoming annual company meeting this month (May).

Lentini is in sync with Bulmahn with the notion that it’s important that every employee realizes he or she is part of the team, and it’s the team that performs.

“If a job isn’t important enough to incentivize, you shouldn’t have that job,” Lentini said. “Every job is important to the overall mix, and if everyone pulls together you can accomplish big things.

“You can walk around the company any day and ask any employee what the stock price is and they know -- it’s in alignment with shareholders, and that’s the big thing.”

Besides the incentives, Apache has had an internship program in place for several years, which includes a mentoring program.

“It has benefits both attracting and keeping young people,” Lentini said, “and also teaching us how to better delegate, which is always good. This program in combination with the incentives is really good not just as a retention tool, but they’re both motivational tools.”

Where Are the Students?

While incentives and motivational programs can go far to retain current employees and attract newcomers, i.e., the student fresh out of academia armed with a brand new degree, they can’t attract what’s not there -- and the numbers in the geosciences are not encouraging.

For instance, the Louisiana State University (LSU) geology department -- where companies used to scramble to be first in line to interview hordes of graduating students -- doesn’t have a host of new students knocking on the entry door.

“We see a slight increase in undergraduate enrollment, and the graduate level has held steady over the last few years,” said Laurie Anderson, geology department chairman. “A pattern we have seen at the graduate level is an increase in the quality of applicants.”

Meanwhile, the department has put some initiatives in place to work at recruitment of more students into the geosciences, both undergraduate and graduate level.

One of these is the Opportunity to Enhance Diversity in Geosciences, sponsored by the National Science Foundation.

“We have a consortium with nine schools in the region that are minority-serving institutions,” Anderson said. “We’re trying to tap the student population there where there are some very good science programs, and we’re working to introduce students to geosciences through a junior level summer course that’s partially a field experience.

“That’s coupled with the opportunity to spend time in their college senior year working either with LSU folks or faculty at their home institutions on a geology-related senior project,” Anderson said. “And we have some money for stipends for some masters and Ph.D students.

“We try to recruit at the undergrad level in order for them to complete degrees at their home institutions and recruit them into graduate programs in geology.”

Another effort currently under way in the LSU department is the Applied Depositional Geosystems, which is targeted toward M.S. degree candidates.

The participating students are in a regular M.S. program, but they take a concentrated curriculum and conduct a thesis research effort focused on the oil and gas industry. Funding for the program currently originates from Unocal, Dominion, Shell, ChevronTexaco and LSU alumnus Clarence Cazelot, according to Anderson.

The funding provides fellowships for highly qualified M.S. students. It also provides funds for program development, including short courses, travel support and research support for students in the program.

Work also has started to develop a third program more focused at the Ph.D level, looking at alluvial deltaic systems.

“We’re trying to take advantage of what we’re seeing in the demographics to try to get more students into the geosciences,” Anderson said. “Ultimately, it benefits both us and future employers.”

Efforts to attract new geoscience majors also are in place at the Jackson School of Geosciences at the University of Texas, where enrollment has remained fairly steady over the last several years, according to Clark Wilson, chairman of the geological sciences department.

A new program called Geoforce -- with company sponsorship -- is designed to attract prospective majors. It’s structured to reach them early on, targeting middle school students at the eighth grade level.

“We bring them in for a summer camp type experience for a week,” Wilson said. “We’ll follow this group for three-four years through high school, each summer having a different earth science experience with field trips and other things.”

Wilson noted they will focus their immediate concern about raising the number of majors by looking at students already enrolled at UT. “We want to make sure they’re aware of what the opportunities are,” he said.

Endowed Chairs, which are occupied by noted experts, are a powerful tool to attract top students.

LSU recently received private donations toward establishing two new endowed Chairs in addition to the existing McCord Chair, which is petroleum geology.

“We’ll likely try to concentrate these chairs in an area where we can build strength in a core area,” Anderson said. “For LSU, that’s been in a soft rock kind of applied area -- petroleum related.”