Ex-Soros Fund Manager Gathers Retired Oil CEO’s to Boost Returns

(Bloomberg) -- Where do oilfield service company executives go when they retire? For several high-profile CEOs, they head to Charles Leykum’s investment firm.

Leykum, a former fund manager for billionaire George Soros, has drawn Andrew Gould and Dave Lesar, the former leaders at Schlumberger Ltd. and Halliburton Co., the world’s two biggest oilfield servicers, onto his team at CSL Capital Management LP. The goal: Lean on their experience and connections to help drive future investments.

Leykum this week said two executives who worked with Gould at Schlumberger are now also in the fold, set to run a new venture aimed at boosting technology in the oilfield. While the CSL Energy Opportunities Fund III will invest broadly across the sector, a ventures unit within it will target early stage and technology-focused investments, Leykum said.

"The service businesses have to be able to deliver more value than just having equipment on location," Leykum said in a telephone interview. “There has to be specific influences around data science, job recommendations, a consulting angle, and a build up of data libraries."

Imran Kizilbash, a former vice president who ran Schlumberger’s venture fund, and Vasu Guruswamy, who spent more than three decades at the world’s biggest oil services provider, will run the newly formed CSL Ventures fund.

Gould, who served as Schlumberger’s chief executive officer from 2003 to 2011, said he saw CSL’s focus on oilfield services and equipment manufacturing as a perfect fit. One key advantage he and the other former CEOs bring to the job, he said in an interview, is the connections built up over years working in the sector.

What "we can do, which is quite advantageous in this market, is sort through the candidates who apply for jobs, because we seem to know most of them," Gould said in an interview.

The new focus on technology comes at a time when oil servicers are being asked by their exploration and production customers to do more with less, particularly as investors press for greater returns. And it’s also a time when smaller service companies are looking for technology to help differentiate them from the larger players.

Leykum believes tapping CEOs who ran companies worth a combined $100 billion as investors and partners gives CSL an edge as it prepares for a potential wave of bankruptcies and mergers ahead.

"The next two years will continue to be more of a consolidation-restructuring period" for oil service companies, Leykum said. "This is a much more demanding and challenging period for investors and also for management teams."

CSL has raised more than $1.7 billion since its inception, and is targeting a 20% net return for its limited partners, Leykum said. Along with the former CEOs, including Pete Miller, who led National Oilwell Varco Inc., the firm has invested heavily over the past two years to recruit top executives with a software or digital background in hopes of helping some of its smaller businesses to compete with the big dogs.

"We are one of the few dedicated, exclusively focused funds on energy services and equipment," Leykum said. "We felt it’s been most beneficial to do a deep dive and develop unparalleled expertise in a given subsector as opposed to spreading across all the different segments of energy."

CSL will be watching and waiting to pounce on commoditized service assets, particularly artificial lift and production chemicals, according to Gould. "At the moment, the price is not yet right," he said. "But it might well become right sometime over the next 18 months."

Leykum, who previously worked at Goldman Sachs Group Inc. and Soros Fund Management LLC, created CSL in 2008. Since oil prices first began to fall from $100 a barrel five years ago, Leykum has acquired a frack business from Baker Hughes, a labs business from Weatherford International Plc, and sold a frack-sand mine to Schlumberger.

Ranger, PetroStar

Leykum declined to disclose how many total companies CSL is invested in. But they also include Ranger Energy Services Inc., where Miller serves as chairman, and PetroStar Services LLC, where Lesar is chairman and Jim Brown, who ran Halliburton’s Western Hemisphere business, is the CEO.

The uncertainty of today’s oil-services market means investors may be forced to hold on to their assets for a while longer, said Osmar Abib, chairman of global energy at Credit Suisse Group AG.

"People need to be patient investors to go in materially at this time," he said. "But valuations are certainly lower than they’ve been on a historical basis."

To be sure, CSL has had a couple of stumbles along the way. It failed to close a deal announced in October for a pipelines-services company that would have been led by Gould and Krishna Shivram, the former treasurer of Schlumberger and interim CEO at Weatherford. And BJ Services, the frack company spun from Baker Hughes, had to pull back on plans for an initial public offering.

"It’s getting tougher every day," Gould said. "I will also say for private equity, eventually tough circumstances will bring opportunities."

James Wicklund, an investment banker at Stephens Inc. in Dallas who’s worked in the industry for more than four decades, said the stumbles should be chalked up to a challenging market environment for oil services and not an indictment on CSL itself.

"He’s got a who’s who of former CEOs," Wicklund said. "Nobody has attracted the level of senior-management investor that Charlie did."

To contact the reporters on this story: David Wethe in Houston at dwethe@bloomberg.net;Kiel Porter in Chicago at kporter17@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Reg Gale, Joe Carroll

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