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BALDWIN: “Bob Simpson [chairman and founder], Keith Hutton [CEO], Vaughn Vennerberg [president] and I have worked together for more than 20 years. That has allowed us to take a long-term, team-based approach.”
Year Named CFO: 1991
2008 Earnings: $1.9 billion
Number of Employees: 3,100
Compensation: $1.7 million
Stock Options: $4.9 million
BALDWIN: Bob Simpson [chairman and founder], Keith Hutton [CEO], Vaughn Vennerberg [president] and I have worked together for more than 20 years. That has allowed us to take a long-term, team-based approach.
ONE VOTER: Louis Baldwin does an excellent job of making sure that XTO has the appropriate financial structure to enable the company to pursue aggressive growth.
Fluctuating prices are a nemesis for all financial executives. For Louis Baldwin, the CFO of XTO Energy, the problem is particularly acute. He needed to keep the Fort Worth, Texasbased oil and gas company operating smoothly last year amid unprecedented swings in the prices of its chief commodities. Gas, which makes up the bulk of its business, touched a high of $13.577 per thousand cubic feet last July before plummeting $3.67 early this month; West Texas intermediate crude oil tumbled from a high of $145.29 a barrel in July to $33.87 at year-end before recovering to just above $50 late last month.
In the oil and gas business, we are used to volatility with commodity prices, but this is as volatile as Ive seen it, says Baldwin, a 35-year industry veteran.
XTO managed to thrive despite the turmoil thanks to some smart acquisitions and foresighted hedging of the prices of oil and gas. The company purchased family-owned Hunt Petroleum Corp. of Dallas last June for nearly $4.2 billion in cash and stock, adding profitable oil and gas wells to its portfolio without overly extending debt. Baldwin financed the deal by issuing $1.6 billion in equity to the seller and by making a secondary offering of $1.435 billion of common stock on the open market; in August the CFO also arranged a $2.25 billion offering of notes and bonds, the bulk of them with maturities of ten to 30 years, to extend the duration of the companys debt.
In addition, Baldwin was astute enough to use the futures market to lock in prices of $120 a barrel for its oil production through the end of 2010, and more than $10 per thousand cubic feet for its natural gas. Even though prices have fallen, we were well positioned, so the company should have higher cash flow in 2009, he says. The CFO did an early settlement and reset of those hedges in December and January to generate $1.7 billion in aftertax proceeds, which the company used to pay down debt. The new hedges lock in oil and gas prices of $62.86 and $6.56, respectively, for 2009.
As other exploration and production companies worry about financing their drilling programs, XTO has been reducing debt while growing production through the drill bit, says one admiring money manager.
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To read the main article, click on America's Best CFOs Get Tough in Crisis
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