In a move that surprised analysts for its timing but not its content, Chevron Corp. Chairman and Chief Executive David J. O'Reilly will step down, to be replaced by Vice Chairman John S. Watson.
O'Reilly, 62, is retiring effective Dec. 31 from the San Ramon, Calif., company after 41 years, including 10 years as chairman and CEO.
"I am truly honored to follow Dave as chairman and CEO of Chevron and to lead one of the strongest management teams in our industry," Watson said in a statement.
George L. Kirkland, 59, will replace Watson as vice chairman. Kirkland currently serves as executive vice president of global upstream and gas.
Analysts said the only surprise was the timing, because some believed that O'Reilly was at least a few months away from announcing that he was leaving both posts. But there was no surprise in the choice, analysts said; it has been clear for at least 10 years that Watson was being groomed for this moment.
Watson has been with Chevron for 29 years. He joined the company in 1980 as a financial analyst, but "you could always tell that he was on the fast track," said Fadel Gheit, senior energy analyst for Oppenheimer & Co. "At the tender age of 41, he was put in charge of overseeing the combination of Chevron and Texaco. Two years later he was the chief financial officer."
Watson takes over during a lull in the volatility that has characterized oil prices since early 2008. Crude oil futures have hovered in the range of $65 to $75 a barrel since August. In 2008, they hit an all-time trading-day high of $147.27 a barrel on the New York Mercantile Exchange in July before plummeting below $35 a barrel in December.
Because those times called for an experienced hand at the helm, those rough days would not have been the right time for a transition, said Phil Weiss, senior equity analyst for Argus Research's energy sector. But now, he said, Watson will be well received on Wall Street and by Chevron investors.
"He's got a good track record, and he takes over a company with a very good pipeline of projects," Weiss said. "I like guys with a strong financial background like his. Hopefully, he'll keep up the same level of financial discipline."
Of his successor, O'Reilly said, "John has played a pivotal role in many of our most significant achievements. Not only has John established himself as a proven leader, but his unique mix of corporate and operational experience combined with his strategic vision makes him ideally suited to be our next chairman and CEO."
In 2005 Watson was named president of Chevron international exploration and production, with responsibility for the company's exploration and production activities outside North America.
In 2008 Watson became executive vice president for strategy and development. He is also a director of the American Petroleum Institute.
Watson was named vice chairman of the corporation April 1, a post in which he oversaw strategic planning, business development; policy, government and public affairs, capital projects support; procurement; and corporate compliance.
Watson is known to Wall Street analysts as an executive who can maintain a grueling pace, traveling as many as 200 days a year, learning every aspect of the business, Gheit said.
"They wanted him to have a flavor of everything in the company, so he is very well-rounded. It's been a very orderly, extremely well-planned succession," Gheit said.
Chevron is the nation's No. 2 oil company, behind Exxon Mobil Corp. Its net income in the most recent quarter, which ended June 30, was $1.75 billion, or 87 cents a share. It employs about 62,000 people worldwide.