How to Thrive During an Economic Downturn

Pino Perone, TAG Oil's general counsel, offers five tactics for staying on top when the odds are stacked against you

Photo by Alex Guidi/TAG Oil

1. Have foresight and economic planning

It’s hard to predict the future, but it is vital to prepare for the worst if the economy begins to slowdown. After Giuseppe “Pino” Perone, general counsel and corporate secretary, worked only a year and a half in the public junior resource sector at TAG Oil—a Canadian-based corporation with production and exploration activities in the Taranaki Basin of New Zealand—a substantial economic downturn hit in 2008, and he witnessed firsthand the struggles of his peers.

“These struggles stemmed mainly from a lack of foresight and sound economic planning to withstand a down cycle,” Perone says. Companies that were overleveraged and not able to cover their expenses because of excessive costs and commitments were forced to significantly downsize and dilute their capital structure; some even went into bankruptcy.

Born in Richmond, BC, to parents who had immigrated to Canada in the 1970s from a small village in southern Italy, Perone grew up in a family-run business, which instilled in him a strong work ethic. Currently, Perone acts as TAG Oil’s general counsel and corporate secretary.

2. Prudently manage finances

Companies facing economic downturns need to remain in a strong financial position with sufficient working capital to fund operations and meet all commitments for the foreseeable future. During 2008, TAG Oil was in a solid financial position as a result of prudent management of finances, being debt-free, and remaining committed to only projects it could handle.

“Prudently managing financials has enabled TAG Oil to adapt its business plan accordingly and not compromise corporate growth in the process,” Perone says. In turn, TAG Oil could continue to pursue strategic acquisitions as well as exploration and development drilling opportunities. At the same time, it could keep focus on becoming a leading, profitable international oil-and-gas company while maintaining the highest standards in health, safety, and environmental compliance.

3. Establish a strong team approach

Dating back to the days when Perone worked at his parents’ restaurant, he learned that the success of any company, no matter what the size or the industry, is dependent on the strength of the team that is in place. “With TAG Oil, the people that I have had the opportunity to work with and learn from over the years have been exceptional,” he says.

4. Don’t overcommit

A lot of companies do not have the capital to withstand a down cycle. As Perone explains, these companies overleverage, and when the market turns down, they are not able to cover costs. “Our strategy has always been formulated on long-term sustainability by carefully building value on actual assets and documented potential, which has helped TAG Oil progress even during downturns,” Perone says.

5. Embrace change

During recessions, it takes leaders to inspire and encourage employees to be creative in dealing with new variables, especially if this overlaps with a change in the leaders themselves. TAG Oil recently underwent a change in executive leadership as part of its growth.

“This has brought about a shift in TAG Oil’s near-term focus towards low-expenditure in-field production-optimization opportunities that have been identified to increase production in order to maintain its long-term plan,” Perone says. “TAG Oil is also focused on reducing costs, farming out higher-risk prospective acreage, and entering joint ventures where appropriate.”

Perone’s role throughout this transition has been to assist with the implementation and execution of a number of initiatives: navigating legal matters in a fast-changing environment; ensuring the company follows the letter of the law as it makes the best decisions for its shareholders; understanding long-term operations; and ultimately becoming one of the sector and peer-group leaders in New Zealand once the market stabilizes.

“As a member of TAG Oil’s executive team, it is imperative to dot the i’s and cross the t’s in my respective domain, making sure to stay nimble, on point, and on strategy,” Perone says, “while being committed to operating with the highest standard of integrity.”