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Mesa's Style Is Lean and Unorthodox : Despite Takeovers, Boone Pickens' Firm Keeps Its Eye on Oil

April 22, 1985|DEBRA WHITEFIELD | Times Staff Writer

AMARILLO, Tex. — T. Boone Pickens Jr. was shaving one morning when he was struck with a realization as plain as the Amarillo landscape: "The cattle game was over."

That was February, 1974. Mesa Petroleum Co. was losing $2 million on its cattle business at that point, and the company's cattle specialists were distraught when Pickens told them that day that he wanted to sell out when the business was still in the red. He left the matter open.

Four months later, the industry was in such trouble that Mesa couldn't give away the business. It took a $20-million loss.

"It was my fault," Pickens said in a recent interview. "We stayed with it too long."

The story is instructive about the way the 21-year-old oil and gas exploration and production company is run:

It has made mistakes but adjusts quickly when it does. It has gained respect in its own industry for running ahead of the pack in spotting problems and trends but sometimes it hesitates too long before taking action. Pickens calls the shots but encourages differing opinions and seriously considers them.

Mesa, with $4 billion in assets, is much in the news these days for its seemingly insatiable appetite for much bigger oil and gas companies and for its chairman's view that energy companies are generally uncreative and poorly managed. "This is an industry with a lot of money and a limited number of ideas," he likes to say.

Ever since Mesa's first foray into the takeover arena--the 1982 turnabout play for its would-be acquirer Cities Service--Pickens has been portrayed by his many critics as a corporate predator out to make a fast buck and as a glib deal maker who can't run his own company, much less the mighty corporations that are his prey--Cities Service, Gulf, Phillips and now Unocal.

"It's clear they are distracted by all their battles," said a longtime energy analyst who, like many of Pickens' critics, asked not to be identified. "They're running a caretaker operation."

Constant Flurry of Activity

Certainly, Pickens and his circle of closest advisers do devote an inordinate amount of time to stalking prey, sniffing out oil and gas on Wall Street, wooing friends in high-finance circles and keeping on top of gambits in the ever-changing, sophisticated takeover game.

In the bank of executive offices on the Mesa headquarters building's fifth floor last week, there was a constant flurry of activity--virtually all of it related to the bid for Unocal: calls from big-time financiers, major Unocal shareholders and big-city reporters; visits from Unocal supporters seeking to change Pickens' mind about a takeover; meetings to plot takeover strategy; sessions with Unocal shareholders; constant monitoring of news of the fight and Wall Street's reaction.

But Mesa executives say there is strict attention to the oil and gas business, too. Pickens, who recently took over the responsibility for Mesa's exploration operations, checks in with his operations staff at least once a day, even when he is out of town or embroiled in a takeover fight.

Mesa, it could be said, was born in the back seat of a station wagon. That office on wheels and a few hundred dollars were all Pickens had in 1955 after he quit his job as a geologist at Phillips Petroleum and struck out on his own.

He made his first wildcatting deal in just 10 days, pocketing $2,500. With that cash and a $100,000 line of credit, he and a partner formed Mesa's predecessor, Petroleum Exploration, the following year. A second company, Altair Oil & Gas, was hatched to explore and drill for oil and gas in western Canada.

During those early years, Pickens says, "I was probably broke three times but I was too dumb to realize it."

The consolidation of the two companies in 1964 created Mesa. Back then, it employed 18 and had 234 stockholders, $1.5 million in revenue, $435,300 in net income and assets of $4.1 million. Two decades later, Mesa employs 649, had about 16,900 stockholders as of the end of 1984 and reported 1984 revenue of $413 million, assets of $4 billion and net income of $270 million.

Mesa's oil and gas operations have shown steady sales gains for the past 16 years--although the rate of growth has declined sharply since 1982, reflecting the company's philosophy that domestic drilling currently is too expensive to justify escalation. Likewise, it continues to report an operating profit, although the income has been flat for three years.

With the exception of 1976, Mesa has finished every year with at least as many oil and gas reserves as it began the year--either through prospecting or acquisition--a record few companies match. This is called reserve replacement and is among the most important measures of performance for oil and gas producers.

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