Not a White Knight but maybe the next best thing

Friday, January 30, 2009

Scotia connection gives Waterous an edge

Technical staff so large it could run a mid-sized firm

Claudia Cattaneo, Calgary Bureau Chief, Financial Post

Published: Friday, January 30, 2009

The world's financial system may be in disarray, but the only sleep Adam

Waterous is losing these days is jetting across Canada and beyond doing oil

and gas deals.

In fact, he sees more record-breaking activity levels, building on his bank's

strength as a Canadian-based global market leader, at a time competitors are

pulling back.

"We feel very good because smaller-end boutiques, generally speaking, are having more difficulty raising money for

their clients, while at the higher end, the big Wall Street firms ... have been the hardest hit by the credit crunch and

are, generally speaking, contracting their business," said Mr. Waterous, the president and head of Scotia Waterous

Inc. who last September was promoted to global head of investment banking at Scotia Capital Inc.

He expects three major oil and gas themes in 2009:

-more deals involving players under pressure to sell;

-more well-capitalized companies acquiring assets made affordable by the fall in oil and gas prices; -more

redeployment of investment to developed regions from the developing world, where foreign investors face difficult

conditions.

Last year, Scotia Waterous was ranked second globally by the value of oil and gas deals it was involved in as an

advisor (US$19.6-billion), and first globally by the number of deals (28). Some of 2008's home runs: advising

Husky Energy Inc. on its oil sands partnership with BP PLC, Penn West Energy Trust on its acquisition of Canetic

Resources Trust, Tanganyika Oil Co.' s sale to China Petrochemical Corp. (Sinopec), and Bois d'Arc Energy Inc.' s

sale to Stone Energy Corp.

A self-starter and dynamic entrepreneur, Mr. Waterous, 47, took an unusual path to Scotiabank's top.

The Harvard University graduate and former McKinsey & Co. consultant first built a Calgary-based oil and gas

investment bank with his brother, Jeff Waterous; expanded it to become a global player; then sold it to Scotiabank

Presented by

Lorraine Hjalte/Calgary Herald

three years ago while remaining in charge so he could offer his clients an even deeper array of services, particularly

access to credit.

Mr. Waterous attributes the success of the oil and gas practice to a series of major innovations: the first to conduct

auctions for oil and gas assets, the first to hire technical people to help provide the most specialized knowledge, the

first to recognize that the location of assets could affect their value, the first to globalize its business, the first to

partner with a full service bank. It was also the first investment bank -- in 1995 -- to list properties for sale on the

Internet.

Scotia Waterous' technical staff, with experts in areas like deepwater drilling and shale gas plays in offices in

Calgary, Houston, London and Singapore, is so large it could run a mid-sized oil and gas company of its own.

"To truly understand the underlying value of the assets, you need to be able to have geologists, engineers,

geophysicists," he said. "It's not a business that lends itself to multiples of cash flow. It doesn't really work. A lot of

the train wrecks out there have happened in deals because there hasn't been enough technical evaluation."

Mr. Waterous said fitting into Scotiabank was not difficult. The bank has an entrepreneurial culture that

appreciates new ideas, and in his new role, he remains involved in deals, a "fix" he needs to stay motivated.

He also remains close to the oil and gas unit, which he says has achieved the ideal mix of technical and investment

banking depth.

"It's kind of like working with John Lennon and Paul McCartney," he said. "Each one is super-talented. When they

are together, it's magic."