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Alberta’s oil sector courts CFOs

Acute shortage of financial professionals

Tim Hamilton
The National Post
October 26, 2005

With Alberta in the midst of an energy boom, the shortfall in construction trades, oil field workers, and technical staff have been duly noted. However, from a headhunter’s perspective, the shortage of financial executives and accountants is every bit as acute and the requirements are more immediate.

The demand for everything from chief financial officers, controllers, internal auditors, tax managers, risk managers, compliance officers, to production accountants has never been greater.

A myriad of factors have contributed to this “perfect storm” as virtually every corporation in Alberta clamours for assistance.

Like the rest of North America, the fallout from Enron, WorldCom and, more recently, Refco, has had huge implications on Alberta-based corporations. The requirements of Sarbanes Oxley Bill 198, and various regulatory authorities, along with the enhanced diligence and nervousness of audit committees and boards, has created a virtual industry to support organizations in their quest to comply in law and in spirit.

Companies have raided one another and public accounting firms to enhance their internal audit, reporting and compliance functions. Accounting firms are draining resources from across Canada to meet demand for audit and compliance consulting. Even public sector organizations are building teams in these areas.

As the province with the second largest number of head offices in Canada during a period of unprecedented growth, it is not surprising these increased responsibilities have a disproportionate impact on the accounting community.

The incredible levels of investment in the sector generally, and the oilsands project specifically, have put great strains on firms to manage these investments effectively. Depending on whose numbers you rely on, oilsands investments from 2000 to 2020 will be $85-billion to $100-billion.

In earlier days, a $1-billion investment would have been viewed as a major project.

Now, there are several projects where that represents the cost overrun. Effective financial leadership and solid engineering and project management expertise will be vital in bringing these projects in on time and on budget. Not to mention that raising this amount of capital will be no small feat.

Another, less-exciting part of growth and success is unavoidable. Higher taxes. We now have several Calgary-based companies paying more than $1-billion a year to the Federal tax coffers. Indeed, when several covetous politicians suggested Albertans should share their wealth, they were quietly presented with a CERI survey that estimates total government revenues at $123-billion as a result of development in the oil sands during a 20-year period. Interestingly, the biggest recipient of this tax revenue will be the federal government, with 41% of the pie, followed by Alberta with 36%.

This not only quieted those politicians, but it clearly demonstrates the need for hiring effective tax managers and planners.

The increased demand for financial executives begins at the top. A larger number of chief financial officers than usual have left their roles recently. This search firm has conducted nine chief financial officer searches in the past year in Calgary alone.

This turnover is, in part, because a number of CFOs are retiring younger as a result of the value of their stock options, or they get involved with a startup opportunity and there is increased demand for their services on boards of directors as financial experts. Some simply tired of the increased regulation and bureaucracy while others, with the growth and success of income and royalty trusts, have stepped into the CEO’s chair at these financially and tax-driven vehicles.

A CFO of a large Calgary-based oil exploration and production company recently joked that he and his colleagues are struggling with all the newfound attention.

“I receive three or four calls a month from headhunters. In university, I was a dorky commerce student. My phone never rang. My early career I was a production accountant. My phone never rang. As a controller, I was never popular with the operations folks. Now I am the belle of the ball. I now know what the star quarterback feels like. It is pretty good,” he says.

Belle of the ball indeed. The energy industry, which has a reputation for being somewhat inward looking, is increasingly opening its arms (and its wallet) to financial executives from across Canada and beyond.

In our experience, the skills developed in other sectors are very transferable to the oil patch.

The suggestion of “go west young man” should be broadened to men and women, old and young with a financial designation, a proven track record and a desire to build a province that is quickly becoming the economic engine of Canada.