After 16 Years, a CFO Returns

It's an unusual career arc that brings a CFO back to a company for a second go-round, especially when the two tenures are separated widely in time. Such is the case with W. Anderson "Andy" Bishop, who first served as finance chief of Hallador Petroleum from 1990 to 1993, then returned to the post in September.

But although the job is the same, the company has changed — dramatically. The first time Bishop was CFO, Hallador was an oil and gas exploration and production company. Today it is primarily a coal-mining enterprise. Although both natural resources are used to generate energy, some aspects of oil and coal operations are very different from one another, such as the way costs are allocated.

Bishop, however, never completely disassociated himself from Hallador. Following his first stint with the company, he became CFO and one-third owner of the SEC Institute, a private firm that provides training on Securities and Exchange Commission filing and reporting requirements. For the ensuing 16 years, under contract, he continued to help Hallador make its regulatory filings.

Hallador, which knows with a fair degree of precision that its revenue this year will be about $115 million, is traded — thinly — on the OTC Bulletin Board. The stock recently traded at $7.50, giving the company a market capitalization of $208 million. But Bishop has his eye on a jump to the Nasdaq Stock Market, so that company insiders, who own more than 90% of the stock, will have a better market in which to sell their shares. Following is an edited version of CFO's interview with Bishop.

What was behind the change in Hallador's business?
We had an oil field in California, in Santa Barbara County. It was funny — when people heard that they always said, "Oh, it must be pretty there." It wasn't. The field was on the other side of the mountains in a desert-type area. Anyway, when oil prices started going up, people got interested in buying it. [The field was sold in October 2004, followed by most of Hallador's unproved oil and gas properties. The company still owns a 45% equity interest in Savoy Energy, an oil and gas company with operations in Michigan.]

Hallador's majority shareholder, a private-equity firm called Yorktown, asked the company to poke around and check out the coal business, especially in the Illinois Basin, which is actually in Indiana. So it got involved in Sunrise Coal, which currently operates one underground mine. By July 2008, Hallador owned 80% of Sunrise, and this September we bought the remaining 20%.

How's the business doing?
Last year coal prices shot up, and the company signed some long-term contracts with utilities at very good prices. We're making good money. We plan to sell about 2.7 million tons of coal a year, and our average price is about $40 per ton. That makes about $110 million. [Hallador's net income was $14.4 million for the three quarters ended September 30, up from $6.3 million in the first nine months of 2008.]

What was involved, from operational and finance perspectives, in switching from an oil-production operation to a coal-mining operation?
Oil is hard to find, but once you find it, it's very easy to produce. You don't need many employees. You hook it up to pipelines and it goes. On the other hand, coal is easy to find, but it's hard to produce. We have 300 employees producing coal and a $22 million payroll. It's a very labor-intensive business. The issues that went with that — involving human resources, health benefits, workmen's comp — were different for Hallador. The mine is basically a 24/7 operation. We've got three shifts running.

Did you know anything about the coal business before you rejoined Hallador?
Well, we still dabble some in oil and gas. But no — the Hallador management team in Denver, including me, is quickly catching up, but we were not all that familiar with the coal business. The team in Indiana is led by Brent Bisland, Sunrise's president. But those guys aren't familiar with being a public company, and [Hallador CEO Victor Stabio] and I are.

There is a separate CFO for Sunrise, Larry Martin. He's a former auditor, like me, but he has mostly dealt with private companies. A private company doesn't do [Management Discussion and Analysis sections of financial reports], it doesn't disclose its salaries to the world like a public company does, and it doesn't have onerous internal-controls audits. All of that is what we bring to the table in Denver.

Speaking of salaries, yours is $100,000, according to your filing. Is that low for the CFO of a $100 million company?
We're big believers in restricted stock units and not a whole lot of cash. I've done OK in my career, and I don't need the cash all that much. Pay us in stock. That gives us more incentive. We said in our September 8-K that we're going to give a certain number of RSUs to management. [Bishop currently owns 58,500 shares of Hallador stock, according to public filings.]

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