Petro-Canada - Alf Peneycad

Taking Care Of Business At Canada's Gas Station

Petro-Canada's Business Plan envisages major growth of its asset base. To fund this growth, the company has announced that it is selling off most of its oil assets in Western Canada. Other large oil and gas companies such as Imperial Oil and Shell are also doing the same, and leaving western-based exploration to medium-sized companies. Petro-Canada is the largest Canadian-owned "integrated" petroleum company in the country. The industry typically divides its business into "upstream" for exploration and extraction, and "downstream" covering businesses ranging from refining to consumer and business sales.

W.A.N. (Alf) Peneycad has directed his legal services team and outside counsel through large projects in recent years. The most noteworthy have been the Hibernia and Terra Nova projects on the Grand Banks. At times, Petro-Canada collaborates with Mobil, Imperial Oil, Chevron and Shell for such capital ventures. In cases such as Terra Nova, the company also operates the project for the other participants. A quick review of Canadian mega-projects and the company's growing activity internationally, reveals that the law department's domestic and international trans-national legal work shows no signs of slowing down.

Petro-Canada likes to call itself "Canada's Gas Station" and is committed to continual growth combined with efficiency improvements. As one of only three retailers that are national, the others being Shell and Imperial Oil, Petro-Canada in large part has grown by acquisition. Initially promising negotiations with Ultramar and Suncor, however, did not prove successful over the course of the last two years. Nevertheless, the company's new image stations in urban markets have delivered financial results significantly in excess of industry averages. The combination of large capital projects and retail activity requires a mastery of the full range of legal services that Alf Peneycad and his team have successfully provided to the company.

Title: Vice-President and General Counsel

Age: 54

The company: Privatized in 1991, Petro-Canada has revenues ranging from $5 billion to $6 billion, depending on the year. Capital investments were in the range of $1 billion for 1999, with one-quarter in the natural gas portfolio in Western Canada, and 40 per cent to develop and explore offshore Newfoundland. The Syncrude oil sands investments, and interests in Algeria, Norway and Tunisia are also significant components of the portfolio.

Principal Outside Counsel: The company uses formal strategic alliances with Fraser Milner (Calgary), Miller Thomson LLP (Toronto), Patterson Palmer Hunt Murphy (downstream in Atlantic Canada), and a combination of Chalker, Green & Rowe (now McInnes Cooper) and Stewart McKelvey Sterling Scales for the upstream work involving Hibernia.

Principal Outside Counsel: The company uses formal strategic alliances with Fraser Milner (Calgary), Miller Thomson LLP (Toronto), Patterson Palmer Hunt Murphy (downstream in Atlantic Canada), and a combination of Chalker, Green & Rowe (now McInnes Cooper) and Stewart McKelvey Sterling Scales for the upstream work involving Hibernia.

The Law Department: The department has 16 lawyers, 9 paralegals and 11 other support employees. The majority are in Calgary, but there are two department members in Montreal and two based at the Oakville facilities. Because acquisitions (including Petrofina, BP, Gulf and Amerda Hess Canada) and growth over the years, the law department has a broad range of experience. Outside counsel are used for particular expertise such as tax, competition or labour law, when volumes of legal work suddenly increase, or when there are geographic considerations such as environmental or real estate work, which make it more cost effective to use local counsel.

The Calgary members of the law department work from a central location, but are responsible for specific business units. The department is well regarded by its internal corporate clients and is well-positioned within the company.

Litigation: Most of the company's litigation concerns real estate and environmental matters, and for that reason, emanates from the downstream half of the company. Matters will often be co-counseled with much of the preparatory work handled by members of the law department. Pleadings will often be referred to outside counsel. Petro-Canada is a charter member of the Canadian Foundation for Dispute Resolution.

Transaction: The company's business plan calls for several large transactions each year. The oil sands, divestiture of low yield western oil properties, and growth in Canada's offshore and in Algeria, Tunisia and Norway have been prime examples.

Management Challenge: With the unit costs of external legal services growing by at least 10 per cent each year, the greatest challenge is to introduce successful cost control mechanisms, while still encouraging strategic alliances with outside counsel.

Corporate Objectives: Alignment with Petro-Canada's goals is straightforward because the department's lawyers are responsible for specific business units. Last year, 140 of the law department's internal "clients" were asked to submit anonymous evaluations. The response rate was over 95 per cent. Alignment is the number one objective, to the point where a substantial portion of the lawyer's discretionary compensation depends on the success of their business unit and the corporation.

Improving Outside Counsel: An important concern is that major firms are not sufficiently aggressive in their use of technology to become more cost effective. The relationships should be pushed forward. Firms could do much more to introduce best practices in law departments. U.S. firms likely have more exposure to hi-tech clients, fuelling the firm's progress along the technology continuum.

Style: Alf is acknowledged as being results-oriented. His department members and clients would say that "he is not like other lawyers" as he is prepared to step out of the norm where necessary. He is credited with building a strong law department and enduring relationships with law firms.

Career: After 7 years in private practice in Toronto, Peneycad joined BP Canada in 1979 as head of the Real Estate and Business Development department and Marketing solicitor for Ontario. He was promoted to General Counsel in 1981. Petro-Canada acquired BP in 1983 and Alf moved to Calgary in 1985 to become Assistant General Counsel responsible for the downstream company. By 1996 he was General Counsel, and became Vice President in 1997. Today, he celebrates more than 20 years of working in-house for the oil and gas industry.

Family: Married to Fiona, and has two daughters, Andrea and Ashlyn

Currently reading: The History of Leaside, one of Canada's first planned communities; The Creature from Jekyll Island: A Second Look at the Federal Reserve, and The Soul of Golf.

Relaxing: Alf takes 4-5 day mini golf trips. He is now planning a serious golf excursion in Ireland.

Richard G. Stock, M.A., FCIS, C.ADM., CMC, is a partner with Catalyst Consulting, a firm with offices in Montréal, Toronto and Vancouver. Catalyst Consulting has been designated the Preferred Supplier for Legal Services Consulting by both the CBA and the Canadian Corporate Counsel Association.