Lesar, David J. 1954–
David J. Lesar
Chairman of the board, president, and chief executive officer, Halliburton Company
Education: University of Wisconsin, BS, 1975, MBA, 1978.
Career: Arthur Andersen Company, 1978–1993, commercial group director and partner; Halliburton Energy Services, 1993–1995, executive vice president of finance and administration; Halliburton Company, 1995–1996, executive vice president and chief financial officer; Brown and Root, 1996–1997, president and chief executive officer; Halliburton Company, 1997–2000, president and chief operating officer; 2000–, chairman of the board, president, and chief executive officer.
■ Lesar joined Houston-based Halliburton, the world's largest diversified energy services, engineering, and construction company, in 1993. In August 2000 he was named chairman of the board of directors, president, and chief executive officer. Lesar succeeded Richard B. Cheney, who left when he accepted the Republican presidential candidate George W. Bush's offer to become his vice presidential running mate. Cheney stated in a PR Newswire article, "Having worked closely with Dave Lesar and the Halliburton management team over the past five years, I have great confidence for the future success of Halliburton" (July 25, 2000).
Halliburton operates in over one hundred countries, with more than 83,000 employees working worldwide in diverse areas, such as deepwater drilling, remotely operated vehicle operations, and railroad construction. It also provides products, services, maintenance, and engineering to the energy, construction, and government sectors. It receives about 70 percent of its revenues outside the United States, with 70 to 75 percent of its business being related to energy.
The company, with about $16.2 billion in total sales in 2003, conducts business through its two main groups: Halli-burton Energy Services Group and Halliburton Kellogg Brown and Root (KBR Engineering and Construction). In March 2002 Lesar separated these two groups into two wholly owned operating subsidiaries. The Energy Services Group (with about 55 percent of Halliburton's revenues and more than 80 percent of its operating income) provides a wide diversity of products and services to gas and oil customers worldwide, such as pressure pumping services, drill-bit and other down-hole and completion tool manufacturing, undersea engineering, oil and gas equipment, production enhancement, and logging and testing. Halliburton KBR works on both energy-related and civil infrastructure facilities, such refining and processing plants, liquefied natural gas plants, pipelines, and production facilities, both offshore and onshore. Its nonenergy business provides the engineering and construction needs of government and civil infrastructure customers. KBR supplies operations and maintenance for a wide variety of facilities, such as prisons, highways, and stadiums, and offers planning and management support for the U.S. military.
ADVANCING WITHIN HALLIBURTON
After 16 years of employment at Arthur Andersen in Dallas, Texas, last serving as a commercial group director and partner in charge of the oil and gas, manufacturing, telecommunications, and retail sectors, Lesar joined Halliburton. For two years (from 1993 to 1995) he was executive vice president of finance and administration of Halliburton Energy, and the next year he served as executive vice president and chief financial officer of Halliburton Energy Services, a Halliburton business unit. From June 1996 through June 1997 he was president and chief executive officer of Brown & Root, the Halliburton business unit that provides engineering and construction services in the petroleum, forest products, civil, environmental, manufacturing, maintenance, and government markets. From June 1997 to August 2000 Lesar was president and chief operating officer of Halliburton. In August 2000 Lesar assumed the position of chairman, president, and CEO of Halliburton.
IMPACT ON COMPANY STRATEGY
Halliburton's strategy essentially did not change when Lesar took over from Cheney. For several years Lesar had already been actively running the company, with Cheney responsible for interacting with customers. In fact, during the years before becoming chief executive officer, Lesar was critical in the company's transition from market-share mining (which involved concentrating solely in mining) to a more diversified position involving the entire spectrum of oil and gas products and services. Lesar helped Halliburton executives recognize that the industry was preparing to outsource more technologies to service companies—services that Lesar wanted Halli-burton to be able to provide throughout the industry.
As a result of the outsourcing trend, Lesar led Halliburton in a series of acquisitions, which allowed the company to obtain the skills and tools it needed to offer services in such areas as directional logging, liquefied gas products, drilling, and reservoir integration. He found that Halliburton was able to provide these services to a wide range of companies, from large integrated oil companies to small independent companies. In addition, Lesar played an important part in developing Halliburton's investment in research and development, which reduced costs, increased safety, and decreased environmental impacts. From 1997 to 2001 Lesar oversaw Halliburton's billion-dollar investment in developing technologies. These technologies created products that solved problems, enhanced assets, and delivered long-term value for customers and shareholders. By 2001, 20 percent of Halliburton's total revenues were in new technology accounts.
REVERSING LOSING PROJECTS
In the first few years of the 2000s Halliburton lost money on several large international engineering, procurement, installation, and construction (EPIC) projects. The EPIC projects were formerly run as lump-sum payments—single payments made at the beginning of a contract, and in which Halliburton paid all unexpected costs during the contract period; however, since actual costs were often higher than estimates, losses occurred. Lesar saw, for instance, that in 2002 Halliburton lost $119 million on a joint venture to develop 55 deepwater oil wells off Brazil's coast, and another $33 million on an offshore Philippine oil platform project. As a result, KBR's operating profit margins were only 2.1 percent in 2002, below its predicted 3.0 percent. Lesar declared that Halliburton would no longer bid for lump-sum payments on international EPIC projects.
By 2004 the U.S. military relied greatly on private military companies (PMCs) to support its operations in many countries, such as Iraq. In fact, civilian contractors handled as much as 20 to 30 percent of critical military support services in Iraq. Lesar made sure that KBR was the best-equipped service company to assume those jobs. In the early 2000s the company housed, fed, and maintained (with such functions as mail delivery, laundry facilities and operations, and heavy equipment use) American fighting troops in some of the world's most remote and dangerous locations. Based partly on KBR's past performance in supporting U.S. forces, Lesar secured, in December 2001, a 10-year project from the U.S. Pentagon known as the Logistics Civil Augmentation Program (LOGCAP)—a U.S. Army plan that hires civilian contractors to support U.S. forces in Department of Defense missions. The cost-plus contract, a pricing system that calculates the price of a product by adding a specified percentage as profit to the contract—thus guaranteeing the company a small profit—was open-ended and thus gave KBR the budgetary freedom to send its employees anywhere in the world to run military operations.
Lesar secured KBR's first LOGCAP contract in June 2002, during the "war on terrorism." It was awarded a $22 million contract to operate support services at Camp Stronghold Freedom, which is located at the Khanabad Air Base in central Uzbekistan. KBR supplied products and services to Khanabad—one of the primary U.S. bases in the Afghanistan war that housed approximately one thousand U.S. soldiers. Later, in November 2002, Lesar secured a one-year contract, estimated at $42.5 million, to make available laundry services, showers, mess halls, and heating equipment services for troops at bases in Bagram and Khandahar, in Afghanistan. KBR also received contracts to help run Incirlik Air Base and other U.S. military facilities in Turkey.
Lesar pursued Internet-type electronic ventures (eventures) in order to integrate other leading companies into one group. One of Lesar's initiatives was his 2000 agreement to partially acquire Petroleum Place, a leading Internet company that focuses on improving how procedures are conducted with respect to buying and selling within the global oil and gas market. In partnership with Halliburton's wholly owned subsidiary Landmark Graphics Corporation, Petroleum Place offers online access to Landmark software for use with buying and selling of company products and services. In addition, in 2004 the alliance was planning to develop software for evauating prospective oil and gas fields and other such properties.
Lesar stated that such a project would enable Halliburton to better assist oil companies with the management of their oil and gas reservoirs. Though acquisitions and divestitures are generally inefficient in discovering new properties and evaluating existing properties, Lesar believed that the Petroleum Place alliance, with its use of Internet-based data analysis, would reduce the time needed for analysis reviews and lower costs of materials and labor.
Halliburton and its subsidiaries were widely condemned in the early 2000s for their contracts in various countries where environmental problems and human rights violations are widespread (including Algeria, Bolivia, Bosnia, Brazil, Haiti, Iran, Iraq, Libya, Somalia, and Indonesia). The company's associations with past and present U.S. administrations, including its relationship with Vice President Dick Cheney, who served as Halliburton's chief executive officer between 1995 and 2000, were also problematic.
Lesar and Halliburton were criticized about accounting procedures as well. In the late 1990s Halliburton transferred from cost-plus contracts to more fixed-price contracts. The new contracts required the company to finish jobs for a fixed fee and then to attempt to negotiate payments of cost overruns and changes in orders. Although resolving such disputes can take months or even years, Halliburton financial officials decided it was "reasonable" to identify, for tax purposes, at least part of the revenue from the claims during the time they were in dispute. The U.S. Securities and Exchange Commission investigated whether this accounting practice was intended to defraud.
Lesar also contended with asbestos litigation, which was initiated when the company acquired Dressor Industries in 1998 for $7.7 billion. A Dressor subsidiary had once used a carcinogen in its pipe coatings and bricks. Lesar initiated a bold plan to settle asbestos-related lawsuits by instituting a "contained" bankruptcy of KBR, a plan that would keep most of Halliburton out of bankruptcy.
Lesar hoped that Halliburton would continue to be a leading—if not the leading—player in the multibillion-dollar rebuilding of postwar Iraq, particularly the rebuilding of the country's oil wells. But along with the increase of government contracts awarded to Halliburton came accusations that the company was receiving favoritism from politically prominent employees and former employees.
Lesar rejected such talk by pointing to the company's long history as a government contractor. He continued to insist that he was very proud of the Halliburton organization and especially of its support of the U.S. military and the savings it had provided to the military's overseas activities. In any case, the bottom line for Halliburton was that its future, especially with Lesar at the helm, looked promising and profitable.
See also entries on Arthur Andersen & Company, Société Coopérative, and Halliburton Company in International Directory of Company Histories.
sources for further information
"David Lesar, of Halliburton Company, Elected to Lyondell Board of Directors," PR Newswire, July 31, 2000, http://www.findarticles.com/cf_0/m4PRN/2000_July_31/63765363/p1/article.jhtml.
"Halliburton Company," Disinfopedia, http://www.disinfopedia.org/wiki.phtml?title=Halliburton.
"Lesar to Succeed Cheney as Halliburton Chairman and CEO," PR Newswire, July 25, 2000, http://www.findarticles.com/cf_0/m4PRN/2000_July_25/63671917/p1/article.jhtml.
—William Arthur Atkins