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Cluff Natural Resources CFO unfazed by market volatility

Sarah McLeod, finance chief of the AIM-listed North Sea gas explorer, reveals in an interview why she is hooked on a sector renowned for volatile swings in commodity prices

The energy sector is “in the blood” of Sarah McLeod. “I have a passion for this industry, which has a day to day impact on economies and society,” says the  CFO of Cluff Natural Resources, a firm devoted to discovering gas in the North Sea.

Given the dramatic ups and downs of the industry – on the day we speak a 20 percent fall in the global oil price combined with coronavirus fears provoked one of the biggest ever market crashes- she is unfazed.

Having grown up near Aberdeen, the Scottish city that has thrived on decades of offshore oil and gas finds, she studied accounting and finance at the city’s Robert Gordon University.

After graduating, Mcleod joined Deloitte’s local office working on clients that included some of the world’s biggest energy firms. She described the experience as “fundamental for understanding how businesses operate across different sizes and international backgrounds”.

After six years at Deloitte, a fork in the road presented itself- either continue at the Big Four firm towards partnership or join the oil and gas industry. McLeod opted for the latter, as she “wanted to be part of something, to make a difference”, and joined the Financial Planning & Analysis (FP&A) team of Maersk Oil- the Danish conglomerate’s UK energy business.

“At the time, Maersk Oil were new entrants to the UK market. They had recently purchased Kerr-McGee assets, so for me it was an interesting time to join the company, of a size that for a first role in industry I could understand the big picture and everything that was going on,” says Mcleod.

The big league

After spending a couple of years at Maersk, McLeod realised she wanted to build our her skillset. Still based in Aberdeen, she joined US energy giant ConoccoPhillips, on of the so-called Majors. “It was about joining a company where I could get a breadth of finance experience. In the 10 years I was there I did eight different positions.

“It was very much about getting up to speed, making a difference and then moving onto the next role so that I could have a variety of different experiences there. That really built up my range of skills,” she informs.

Over that decade McLeod was made planning controller, senior economist and finance manager, positions which all helped forge an all-round understanding of how finance works in a large energy group, that encouraged its people to take on numerous roles. “It was very much about developing people that had leadership potential right across the business, working with all the different departments, to get a deep understanding of the company and the strategy,” says Mcleod.

But the position that would have the biggest impact on the rest of her career was her last at ConocoPhillips, as an asset manager in the strategy and commercial team. The cross-functional development role involved devising the long-term value and strategy of the Major’s gas fields in the east Irish Sea.

“That role to date had always been for people of a STEM background i.e. engineers, process engineers, operational people, and I was the first and only finance person to date to hold one of those roles, an extremely competitive role to secure,” she reveals.

“I learned so much in that role, the soft skills, in terms of leading a cross functional team of technical experts. I also undertook a process engineering course to be able to give myself a reasonable level of understanding of the key issues.

McLeod has plenty of positives to say about being a finance person embedded in the business. “It’s all about adaptability and having a reasonable understanding of how the different elements, functions and business units actually work together, and that has been fundamental in me taking that big step to becoming a CFO,” she says.

She says it’s fundamental in a financial leadership role to be able to understand how a business operates, to understand where the value is, the risks, the uncertainties. “They all come together to form the business strategy,” she says.

“In recent times, the CFO role has expanded and evolved to be more than pure finance, what we see now is the CFO role also often includes Investor Relations (IR), Procurement, HR, so the CFOs are arguably becoming more generalist C-suite leaders in an organisation. So, having that breadth and diversity within the different roles I did at ConocoPhillips, stood me in very good stead for a role such as the CFO of Cluff,” she explains.

A stand-out from her time at ConocoPhillips says Mcleod was a collaborationist culture that ensured individuals combined effectively to create value for the group. “Having the right mindset to be able to do that largely comes down to being able to collaborate and work with different people across the business, and the different functions as well. As you move through the different areas of finance you find you’re working with different parts of the business,” she says.

Independent thinking

After notching up 10 years at ConocoPhillips, McLeod made a bold move to head in a different direction. “I recognised round about the downturn of around 2014 that some of the Majors were beginning to exit the North Sea, I could see there was an opportunity as the market started to change, to be more focused around opportunities for smaller companies,” she says.

McLeod upped sticks from Aberdeen to London, joining Africa-based explorer New Age as financial controller, partly to “close the loop” on her skillset by refreshing some core finance skills. “There had been a number of years that I haven’t been doing true accounting and finance, but more planning, strategy and commercial areas,” she adds.

Late last year the opportunity to become CFO in an energy firm came at Cluff Natural Resources, came up and she joined in January. “The role came at the right time, when I had 18 months of financial controller experience under my belt,” she says.

Cluff, that takes its name from founder Algy Cluff, a legendary figure in North Sea exploration who retired last year, drills for gas in fields that have been passed on by larger operators. Cluff is currently operating two such ‘farm-outs’ from Shell, that it is looking to drill shortly.

“Cluff has an interesting background,” says Mcleod. “During the downturn the Majors were really focusing on survival during a period of oil and gas prices, that provided an opportunity in terms of exploration licences in the North Sea, that the Majors were moving away from.

“It was working through to identify the licences that would have the highest value and the highest impact. That means finding licences that are close to good North Sea infrastructure, which keeps the cost of supply down and makes them competitive. The company was established in 2012 and the licences began to be purchased in the downturn, which was a couple of years after that,” she says.

Like many CFOs, Mcleod says her role is much broader than pure finance, as it also encompasses IR, HR and IT. “As I’m seven weeks into the job, the first element is building relationships and understanding the relationships both internally and externally with institutional and retail shareholders, and developing some of the functions.

“The absolute priority is creating value, by looking at our assets, the licences we currently have, and working through our other licences that we have, to repeat that process,” she adds.

McLeod is excited by the prospects of the group, which has a number of key milestones in the months ahead in terms of drilling in its exploration portfolio covering 4.3 trillion cubic feet of gas. “The intention is to drill some of these wells this year. If one of these wells comes in, you’re talking about a £20m market cap company becoming worth a several figure factor of that scale. The potential here is enormous,” she says.

Cluff could start drilling as early as the end of this year. “A lot can happen in the next 12 months, that could re-rate the company, that would be transformational,” says McLeod.

 External factors

In the meantime, the energy sector must address the challenge of climate change, says McLeod. “We know that climate change is real and we know it is caused by greenhouse gas emissions. The target the UK government has set for net zero emissions by 2050 is urgent for the industry and is an ambitious target,” she says.

“The interesting point for the industry is that the Committee on Climate Change report includes about 70 percent of our gas requirements required to meet the net zero emissions by 2050. At the moment the UK imports about 50 percent of its gas, which isn’t good for UK jobs, the UK’s balance of payments or emissions.

“Concentrating on domestic production would mean less transportation, would be more cost effective, and be better for our economy overall. That’s where companies like Cluff play into this- they can be part of the energy transition with low cost, competitive, domestic supply of fuel,” says McLeod.

On diversity and inclusion, McLeod says: “Diversity is an issue for the sector and for society as a whole. It’s good to see recognition in the first place to then be able to make a change and drive things forward, from my own personal perspective. In finance the real diversity question is as you go up the leadership channel, it becomes a bigger challenge.

“When you can break down one barrier of diversity, the whole issue of diversity is then broken down, creating the right climate, the right environment, for all backgrounds to thrive. Its fundamental to create a wide angle on decision-making, with different mindsets driving business innovation, a fundamental in the oil and gas sector,” she adds.

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