The Woodlands-based Anardarko Petroleum Corp. is one the largest energy producers in North America. Yesterday, the company announced that says it plans to sell oil and natural-gas properties valued at about $2.5 billion and redirect its focus to overseas efforts.
Anadarko will be selling interests in producing oil and gas fields in Oklahoma, Texas and Canada, and then plans on managing its remaining North American assets as a source of capital for high-risk, high-reward exploration projects in Qatar, Algeria and the deepwater Gulf of Mexico. In addition, the company will use proceeds of the asset sales to pay down debt by $1.4 billion and fund at least a $1.1 billion stock repurchase plan.
Although the sales when completed will cut Anadarko’s production by 25% and proved reserves by 15%, the theory behind the plan is for the company to imporve its growth rate. Anadarko’s new CEO, James T. Hackett, said the plan is similar to “pruning the tree to make it healthier.”
Anadarko’s plan is a fairly typical response of energy companies that rely heavily on declining North American oil and natural-gas production. Such large independent producers eventually are forced to make a choice between riskier international and deepwater exploration or boosting profits on their declining reserves by hacking costs and improving efficiency. Anadarko’s plan is announcing to the market that the company prefers to play rather than clip coupons.
This plan comes after a period of upheaval at Anardarko, with management changes and a failed sale bid. The above-described plan is new CEO Mr. Hackett’s first step in charting the company’s future course.

Shares of Houston-based Landry’s Restaurants fell about 7% during Monday trading after the company announced on this past Friday that Chief Financial Officer Paul S. West had resigned “to pursue other interests.” Shares of Landry’s stock closed Monday at $27.66 per share, down $2.04.
Mr. West’s departure follows by a month Landry’s dismissal of Ernst & Young LLP as its outside auditors, for undisclosed reasons. Landry’s named Grant Thornton LLP to succeed Ernst & Young.
The Houston Chronicle story on Mr. West’s resignation is here. Incredibly, the Chronicle article neglects to mention that Landry’s had replaced its auditor last month.
Needless to say, keep a wary eye on Landry’s.

This Seattle Weekly article provides an instructive overview of the problems that Microsoft confronts in maintaining its position in the constantly changing world of computing. The article notes the fundamental problem:

The Web?s phenomenal growth has driven a number of fundamental changes. . . Microsoft seems to have overlooked the most important of those trends. It made a series of missteps, and it?s not clear if it has learned from them. In protecting Windows and Office revenues, Microsoft has innovated less quickly than it could have. The company relies on the same strategy that helped it years ago come to dominate the personal-computer market with the Windows operating system, despite mounting evidence that its customers are looking for a new approach. Competitors such as Linux and Google are gaining, and Microsoft seems unprepared for the road ahead.

Read the entire article, and then consider whether the constant deluge of viruses, adware, hijackers, bots and related plagues are really worth being tied to Microsoft products. Personally, I have just bought my first Mac and my sense is that it will not be my last.

This Holman Jenkins, Jr. WSJ ($) Business World column examines New York attorney general Eliot Spitzer’s latest propoganda campaign . er, I mean, lawsuit in which he seeks to recover a substantial portion of the rather large $200 million in compensation, pension and related benefits that the New York Stock Exchange Board of Directors bestowed on Richard Grasso, the former president of the Exchange. The entire column is good reading, and here are a few tidbits to pique your interest:

The board was chock full of the country’s leading business people, folks like Goldman Sachs Chief Henry Paulson, Bear Stearns’ James Cayne and former New York Comptroller Carl McCall. They voted unanimously to approve Mr. Grasso’s pay knowing full well its magnitude, Mr. Spitzer’s subsequent attempt to lay down a smokescreen for their benefit notwithstanding. Mr. Spitzer lauded himself Monday for taking on the national problem of overpaid CEOs. By leaving the board out of his suit, though, he’s given directors everywhere an all-purpose defense. To wit, I was too dumb, lazy, clueless, indifferent, gullible etc. to know what I was doing.

Mr. Jenkins then examines the nature of the NYSE, the reason that its members paid Mr. Grasso so well, and why they turned on him quicker than a New York minute:

The NYSE is owned by seat holders who show up on the premises every business day. Their livelihood depends on the place. They elect its board. They know what a telephone is for. They have every means and incentive to wield their collective clout to make sure their interests are being served.
Now some NYSE “specialist” firms will tell you they were afraid of Mr. Grasso; they didn’t really know what was going on. If pressed on why they bungled a matter so close to their own interests, they shrug their shoulders like an errant teenager and say they aren’t sure why they didn’t keep a closer check on things.
So we’ll answer for them: They stood back because Mr. Grasso was serving their needs marvelously. Consider the years 1995 through 2000, when the handful of small, little-known businesses that control floor trading pocketed profits of $2.12 billion. The average yearly return on their invested capital: a princely 21.35%. Mr. Grasso’s retirement payoff after 35 years at the exchange may have been gross and unsightly, but it was a small fraction of the riches he helped to preserve for the New York Stock Exchange’s most privileged constituents.
It’s also perfectly obvious why they turned on Mr. Grasso in his moment of political mugging. Anything that brings scrutiny on the inner workings of the exchange, willy nilly, is an invitation to powerful customers who’ve been fighting to eliminate the specialists in favor of a cheaper, more transparent electronic trading system.

Finally, Mr. Jenkins then turns to the motivation of Mr. Spitzer, who has made quite a name for himself extracting “settlements” from various businesses:

New York’s Attorney General, heir to a local real estate fortune, has specialized in presenting his wealthy business targets with both a problem and a solution, the latter involving writing a big check with their firm’s money. He may not exactly provoke gratitude (except among CEOs more than usually afflicted with Stockholm Syndrome) but he’s seen as someone with whom business can be done.
His political ambition is zeppelin-like, lurching over Manhattan in unmoored, alarming fashion. He was obviously eager here to limit his political risk by portraying the NYSE’s famous board as victims rather than culprits in the Grasso pay scandal. But no judge or jury will fail to understand that he’s giving them a pass for his own political interests.
Mr. Grasso understands this too, and has semaphored that he will drag them into court, forcing them to choose between pleading gullibility, inattention and incompetence or undermining Mr. Spitzer’s case. True, even a court victory might not get Mr. Grasso his good name back, but more than a few would applaud his show of resistance to a budding demagogue.

Spitzer’s case against Grasso is beyond absurd. No one held a gun to the head of the NYSE Board or its compensation committee when it approved Mr. Grasso’s compensation and related benefits. The NYSE is not bankrupt, so its creditor interests are not in a position to challege the Board’s decisions regarding management compensation. Perhaps the Board members made a bad, lazy or incompetent decision in compensating Grasso to such a liberal extent, but that’s a reason to replace Board members, not to persecute Grasso.
Spitzer’s purge on Wall Street has become so misguided that Mark Haines of CNBC joked the other evening that “the government might as well throw all of Wall Street in prison and release anyone they find innocent.” Mr. Jenkins hits the nail on the head in pointing out that the real purpose of this lawsuit is the promotion of a demagogue’s agenda rather than the protection of any public interest.
Finally, the always insightful Professor Bainbridge comments on this foolishness here. Professor Ribstein’s equally interesting observations about this mess are here.

Shell reduces reserve estimates again. Here is the WSJ ($) article on the latest reduction.
Here are the previous posts on the Shell reduction of reserve controversy.

William J. Holstein is the editor of Chief Executive magazine and, in this NY Times piece, interviews Donald J. Gogel, the chief executive of Clayton, Dubilier & Rice, one of the oldest private-equity firms in the world. The entire interview is interesting, but particularly insightful are the following observations that Mr. Gogel makes regarding the disincentives of investing in public companies:

Q. This suggests that a lot is happening away from public scrutiny because these companies do not have to worry about regulatory compliance.
A. The public glare has a number of difficult or challenging aspects. One is the focus on quarterly earnings. It’s hard for many publicly traded companies to make strategic investments that have long-term paybacks. It’s hard to penalize what may be two or three quarterly earnings reports. The markets won’t tolerate that. There is also the fact that compliance can be distracting.
Q. Are you saying a private-equity firm can do a better job cleaning up an underperforming asset than a public company can?
A. The private-equity teams that come in, when they’re successful, can create a new culture and introduce new leaders. They can create a sense that this is a new team and a fresh start. There’s a definite cultural transformation. Incentives and executive compensation can change. We can recruit people because the compensation systems can be skewed toward long-term results. We can attract people because they don’t want to be in public companies.
Q. Why don’t they want to be in public companies?
A. I think the Sarbanes-Oxley Act and other requirements of the public arena inevitably have a cost. I wouldn’t overstate the cost. It’s one of several factors. But we are able to recruit some C.E.O.’s and other executives to run our companies because they say to themselves, “Boy, if I could do this in private, it would be a lot better. My own performance would be better and the company would be better.”
Q. But, again, from a public policy point of view, how can we know that privately held companies are being governed well?
A. Our investors know as much, if not more, about our investments and returns than do public companies’ investors. We have a more limited audience, so it’s easier to communicate with them. A firm like ours might have 75 or 80 investors. That’s a target audience that’s easier to communicate with.
There’s a lot of continuity because many investors have been with us for a long time. But a public company’s shareholding base could change literally in the fraction of a second. We have the advantage.

From purely my anecdotal experience, virtually all business executives who I know would much rather work for a company funded with private, rather than public, equity.

This Washington Post article reports that “the law of good, but not well thought out, governmental intentions” is again vetoed by the practicality of horse trough politics:

NEW YORK — Six months after the Sept. 11, 2001, terrorist attacks, Congress approved an $8 billion program to repair this city’s damaged office towers, build apartment buildings and finance the rebirth of the financial district.
But two years later, city records show that much of the money, dubbed Liberty Bonds, has gone to developers of prime real estate in midtown Manhattan and Brooklyn and to builders of luxury housing.

And who received this governmental perk? Yes, the businesspeople who needed it the least:

Local and state officials — over the objections of their own downtown development chief — gave one developer $650 million from the Liberty Bonds to erect an office tower for the Bank of America near Times Square, miles from the shattered precincts of Ground Zero. According to city records, another developer got $113 million to build a tower for Bank of New York in Brooklyn. One of the few projects downtown has gone to actor and sometime developer Robert De Niro, who picked up nearly $39 million from the bonds in November to build a boutique hotel in Tribeca, directly north of Ground Zero.

Congress designated $1.6 billion of the Liberty Bonds for rental housing for the tens of thousands of moderate-income residents who live in Lower Manhattan. Who got that money?:

Nearly all the money from those bonds has gone to prominent developers to build luxury apartment towers in the neighborhoods around Ground Zero, accelerating its transformation into one of New York’s richest neighborhoods, the city records show.

And what is the bureaucratic response to allegations of political favortism over the doling out of this financial largesse?:

State housing officials said that political favoritism played no part in their decisions and that loans were handed out “on a first-come, first-served basis.” Litwin, they say, had projects in the works and simply got in line when the Liberty Bonds came available.

To which Professor Sauer responds insightfully: “That’s it folks — projects already “in the works” get millions of subsidies. What good are the subsidies then?”