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Chevron's Watson to step down

Andrew Harrer/Bloomberg

Michael Wirth seen as most likely successor to seven-year CEO. Chevron spokesman declines comment on leadership change

By Joe Carroll

Petroleumworld 08 23

John Watson, who has led Chevron Corp. since 2010, is planning to step down as the oil major seeks a new chief executive officer, the Wall Street Journal said, citing people familiar with the matter.

While the San Ramon, California-based producer has not made a final decision on a successor, Michael Wirth, a 56-year-old Chevron lifer whose elevation was telegraphed in January when the company announced his promotion to vice chairman, has been seen as a leading candidate. An announcement will likely be made next month, the Journal said.

Kent Robertson, a Chevron spokesman, declined to comment on the report.

Watson, 60, was named CEO after he oversaw the integration of Texaco Inc. and Unocal Corp. into Chevron. They were purchased by his acquisitive predecessor and mentor, David O'Reilly. Since the global oil rout began in earnest in 2014, though, Watson has struggled to protect dividend payouts from the ravages of tumbling crude prices and shrinking cash flow.

Watson has resorted to job cuts, project cancellations and billions of dollars in asset sales to cope with an industry downturn that erased $50 billion from Chevron's market value. In 2016, Chevron posted its first annual loss in at least 37 years.

One of Wirth's crowning achievements was the restructuring of Chevron's sprawling refining business by selling off billions of dollars in assets from Africa to Europe.

Under his leadership, the company quit processing crude in Western Europe as that market matured and growth slowed, and sharpened its focus on expanding demand centers in East Asia and Latin America.

Watson later expanded Wirth's portfolio-trimming template to Chevron's worldwide oil and natural gas unit.

Watson was an unlikely oil executive, having majored in agricultural economics at the University of California-Davis, before obtaining his MBA from the University of Chicago.  Chevron's mandatory retirement age for employee directors like Watson is 65.

The CEO could depart with an exit package worth as much as $119.3 million, according to data compiled by Bloomberg. That includes pension benefits worth $45.4 million and $13.4 million in accumulated deferred compensation, both as of Dec. 31, according to regulatory filings. The remaining $60.3 million comes from previously awarded equity grants. The awards were valued as of Monday's close in New York.

His severance agreement provides that all of his options and restricted stock will vest so long as he's held them for at least one year. If Watson leaves prior to Jan. 25, 2018, he'll forfeit options and restricted stock currently valued at $3.46 million that were granted in January.

As part of his retirement package, Chevron will also provide him an office and administrative support at approximately $200,000 per year.

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