Statoil Picks Acting CEO as Permanent Boss After Lund

Statoil ASA, Norway’s biggest energy company, unexpectedly appointed acting Chief Executive Officer Eldar Saetre to permanently succeed Helge Lund.

Saetre, who has run the state-controlled company since Lund left in October to lead the U.K.’s BG Group Plc, initially said he wasn’t a candidate for the job on a permanent basis. The 58-year-old has worked for Statoil for 35 years and served as both chief financial officer and head of the company’s marketing, processing and renewable energy unit.

“Eldar Saetre was our first choice,” Svein Rennemo, chairman of Stavanger-based Statoil’s board, said Wednesday in a statement. “The industry and company are facing demanding challenges. Eldar stands out with his long experience and ability to create change.”

Saetre takes charge as Statoil and the rest of the oil industry are suffering from the biggest fall in crude prices since 2008. One of his main challenges will be to advance a sweeping efficiency program initiated by Lund, 52, who ran the company for 10 years and oversaw the transformation of Statoil from a mainly domestic-focused company to one of the biggest international oil and gas producers.

Saetre changed his mind during Christmas break after being asked by the board to reconsider whether he was a candidate for the CEO post, he said at a news conference in Oslo.

“The job gave me a lot of inspiration, joy, and not least energy -- in many ways more energy than I spent on the job,” Saetre said.

Cuts, Dividend

Statoil’s strategy will remain largely unchanged, he said, renewing vows to maintain spending cuts initiated last year to protect shareholder returns amid rising costs. The company’s dividend policy remains firm, he said, declining to provide more details ahead of a Feb. 6 presentation of a strategy update in London.

“Oil prices could fall lower than the current level and what we’ve seen recently,” Saetre said in an interview. “At some point the oil price will rise more fundamentally. But I’m fundamentally uncertain about when that will happen. So as a CEO, I have to prepare us for this being a situation that can last over a long period.”

Statoil shares fell 3 percent to 137.20 kroner in Oslo trading, trimming gains this year to 4.6 percent.

First Insider

Saetre, the first CEO recruited from inside the company since it was founded in 1972, is a “very safe choice,” said Andre Baustad Benonisen, an analyst at Danske Bank A/S.

“This reduces uncertainty around the company’s future strategy as there will likely not be many changes,” he said by e-mail. “The company is in a difficult situation where dividend and/or capital expenditure will have to be reduced significantly.”

Other challenges the board wants Saetre to tackle include the increased macroeconomic uncertainty and stronger pressure on industry margins as well as accelerating the company’s “transition toward a low-carbon society,” Rennemo said.

Statoil will keep its main focus on Norwegian operations while continuing to pursue opportunities at home and abroad, Saetre said. By expanding into the U.S. and Brazil under Lund, Statoil produces about 40 percent from its oil and gas outside Norway.

IPO Role

The new CEO played a key role in Statoil’s initial public offering in 2001 and its merger with Norsk Hydro ASA’s oil and gas operations in 2007, one of Lund’s main achievements as head of the company and a move that reinforced control of Norway’s petroleum industry. Statoil is now the operator of more than 70 percent of the nation’s oil and gas production.

Norway’s Petroleum and Energy Minister Tord Lien, who oversees the government’s 67 percent stake in Statoil, described Saetre as a “competent industry executive with broad experience from the company.”

“I’m fully confident that the board, through a thorough process, has found the best candidate for the company, the employees and the shareholders,” he said in an e-mail.

Statoil’s board conducted a “comprehensive” search for its new CEO, considering Norwegian and international candidates, Rennemo said. The chairman said after Lund’s resignation that his successor would need to be a person who understands Norway’s society. Rennemo also said in October that one of the board’s challenges would be to strike a balance between competitive remuneration and Norwegian expectations for salary moderation.

Saetre’s annual fixed salary will be 7.7 million kroner ($1.02 million), of which 5.7 million kroner will be pensionable income, Statoil said. He will also participate in Statoil’s programs for annual variable pay, which is capped at 50 percent of fixed remuneration, and long-term incentives, the company said.

Pay Deal

Lund’s 2013 base pay was 7.6 million kroner with 2.1 million kroner of long-term incentives, according to a report on the company’s website. Variable pay brought his total remuneration to 13.8 million kroner.

Lund, who will take up his position as CEO of BG next month, was initially offered a record pay deal that would have made him potentially Europe’s best-paid oil executive with as much as 14 million pounds ($21.3 million) including salary, pension and bonuses. That remuneration was watered down in December following a backlash from shareholders.

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