James Day: Industry has globalized, consolidated, but cyclical ups, downs will always remain
By Linda Hsieh, managing editor
“Interest is to receive and not to pay” is an important piece of cautionary advice that James C Day, retired chairman and CEO of Noble Corporation, learned at a young age from his father. “He didn’t believe in borrowing,” recalled Mr Day, who took the admonition to heart. Especially if you make your career in a cyclical and oftentimes volatile industry such as ours, he found that “keeping a clean balance sheet is absolutely critical to your success.”
This is as true today as it was 30, 40 or 50 years ago. “Unless you can predict what’s going to happen with oil and natural gas prices, you’d better maintain financial responsibility,” he warned.
At Noble, where Mr Day was elected CEO and president in 1984 and chairman in 1992, restraint was continuously emphasized in the company’s fiscal management. He believes it’s what kept Noble out of trouble during the industry’s many ups and downs through the ’80s and ’90s. It also allowed the company to aggressively acquire companies that had gotten into financial trouble. By the time Mr Day retired in 2007, he had taken the company from a primarily US-based land drilling contractor that was spun out of its parent company with a market equity value of approximately $30 million, to a major international drilling company with nearly 60 offshore rigs in its worldwide fleet.
“You’ll always have the speculators who think they will be the one to outguess the market. But I think the key players in this industry, the successful ones, keep their balance sheets in good shape so they can respond to the cyclical nature of the business,” Mr Day said.
WE HAVE CHANGED
The 1980s and ’90s were marked by aggressive consolidation, and companies that weren’t careful were wiped out – including old-line companies as old as Noble, which was founded in Oklahoma in 1921. Mr Day recalls serving as chairman of IADC in 1990, when he traveled around the country talking to chapters and members. “It was a sobering time. We saw a lot of fear. People didn’t know what the market was going to do.”
The industry has also grown more global over the years. Areas such as Asia, Latin America and Africa are now bustling with drilling activity, and many non-US companies have emerged and joined the competition. “Get ready for more (globalization),” Mr Day warned. “We have a finite amount of drilling we can do here. Drilling is going to be overseas. That’s why we were aggressive going to India and West Africa and buying companies overseas,” he said. Noble now has operations in 14 countries.
Hiring and training practices have also improved substantially, Mr Day said, but that doesn’t mean it’s enough. He urges the industry to continue making improvements on this front, because our safety performance will depend on it.
“Noble used to have a worldwide conference call every Monday morning to listen to every division manager report on events operationally and financially. The first report we asked for was always what was happening in safety, not financially… Management wanted to know if there were any incidents. If there were, what were we doing about it? And I wanted everybody to hear about it worldwide. If you’re going to learn your lessons, prompt dissemination is critical… It’s the tone at the top that gets results.”
The Macondo blowout and spill has put a negative spotlight on the industry in recent months, but it doesn’t discount the great strides that have been made in safety; it just means we have to redouble our efforts. “The events in the Gulf shouldn’t change what successful companies are doing today. Successful companies should have already been focused on safety and operational integrity – the basic elements that assure success,” Mr Day said.
What industry must work on is making sure that new regulations won’t elevate form over substance. He commented: “IADC needs to be right in the middle of the promulgations of the rules and make sure there’s substantive regulations and not regulations with just form.”
THE NEXT GENERATION
As the older generation retires over the next several years, there will be plenty of opportunities for younger people to move up, simply because the industry didn’t hire anyone for nearly a decade.
“If you get in and work hard, you will have a lot of opportunities. I was young when I started running Noble,” Mr Day recalled. “Kids are going to have a great time. If you look at Noble today, the young people coming out of college, there are many that are in very good positions, making great decisions and contributing.”