Commentary: A remarkable journey for LyondellBasell and CEO Jim Gallogly

It’s been a remarkable journey for LyondellBasell so far with CEO Jim Gallogly at the helm. Gallogly’s achievements were highlighted by his acceptance of the ICIS Kavaler Award, sponsored by The Chemists’ Club, and in association with The Valence Group at a special event at the Metropolitan Club of New York on 30 September 2014.

Gallogly had announced his planned retirement for early 2015, a day before the event – a move that came a surprise to many in the industry and investment community, as the company has been posting record financial results, and the stock price hovering near record highs. Yet Gallogly expressed high confidence in the current management team and a potential successor from the group.

Charlie Grosso Photography “When I took the job, everyone thought I had lost my mind”

Gallogly joined LyondellBasell as CEO in May 2009 as it was going through the Chapter 11 bankruptcy process after a “failed merger” between US-based Lyondell and Netherlands-based Basell, which loaded the petrochemical company with over $20bn in debt.

Coming from what he called a “dream job” heading up oil and gas major ConocoPhillips’ exploration and production (E&P) business, Gallogly was intrigued by the opportunity. “When I took the job, everyone thought I had lost my mind,” he said in his acceptance speech at the event. “And at my first day at work, I was convinced I had made an enormous mistake.”

INSPIRATION DURING DARK TIMES

The company was in dire straits, he recalled, with creditors ready to take the European assets into receivership and people streaming out the door.

How do you engineer a turnaround from the depths? It’s hard to get people excited about simply emerging from bankruptcy. The vision has to be more compelling.

On Gallogly’s first call with management, he told them: “I didn’t come to help you exit bankruptcy – I came to help you build the greatest petrochemical company in the world.”

After exit from bankruptcy in April 2010, shares of LyondellBasell closed at $22 on the first day of trading on 28 April 2010. They would drift lower to close at a low of $16.57 about a month later on 25 May 2010.

So what do you do with a commodity business just out of bankruptcy and with a history of underperformance? Gallogly focused on a “back to basics” strategy of running assets optimally with a focus on safety and cost effectiveness, while maintaining a strong balance sheet.

“We also put together a top-flight team. We wanted people who ran to a fire to put it out – not run from a fire in fear,” Gallogly said.

“It’s all in the chemistry – for a reaction, you need heat. And I provided a lot that. You also need pressure, plus a catalyst,” he noted. That catalyst was inspiration – to be the “greatest petrochemical company of all time”.

FINDING A DIFFERENT PATH

Of course, the US shale gas boom gave a positive jolt to the entire US petrochemical industry, including LyondellBasell. Yet the company has taken a very different approach than many of its competitors and has outperformed.

Rather than undertake huge new capital projects, the company embarked on a series of debottlenecks and expansions at existing sites to come early to market and ahead of the competition. This includes expansions of ethylene capacity at Channelview, La Porte and Corpus Christi, Texas, US; the restart of an idled methanol facility at Channelview, and an expansion of butadiene capacity at Wesseling, Germany.

LyondellBasell’s stock price closed at a record high of $114.35 on 29 August 2014. It closed at $105.00 on 1 October following a recent overall market downdraft.

While acknowledging the exceptional performance of the company, Gallogly stressed the importance of focusing on the future. “Yesterday is irrelevant. People invest in us for tomorrow. Let’s continue to amaze.”