A slowdown in capital markets work in the energy sector due to slumping oil prices led to a 3 percent decline in gross revenue at Andrews Kurth Kenyon in 2017 and a 24.4 percent drop in net income.

“The energy capital markets really started off well, but pretty well shut down in March when oil prices fell again,” Robert Jewell, managing partner of the Houston-based firm, said about the volume of capital markets work in 2017.

Andrews Kurth Kenyon is officially merging with Hunton & Williams on April 2.

Jewell said the firm's financials in 2017 were also affected by some partner defections during the year. The firm had 147 partners on a full-time-equivalent basis in 2017, compared with 164 in 2016—a 10.4 percent decline. “There's distraction and it takes revenue out of the system,” he said.

In addition, he said Hurricane Harvey, a storm that dumped 51 inches of rain on Houston in late August and caused massive flooding, also affected financials because the Houston business community that sends work to firms was distracted by the storm.

Gross revenue at the firm was $280,232,000 in 2017, compared with $289,000,000 in 2016, and net income came in at $69,589,000 in 2017, compared with $92,000,000 the prior year.

Revenue per lawyer at Andrews Kurth was $931,000 in 2017, up 5.4 percent when compared with $883,000 in 2016, and profits per partner were $1,214,000, down 3.6 percent from $1,259,000 the prior year.

While energy capital markets work was uncharacteristically slow in 2017, Jewell said, litigation was steady, oil and gas was busy and some transactional areas including M&A were also busy during the year. Bankruptcy had a “nice activity level” in 2017 and intellectual property was about the same as in 2016, Jewell said. However, he said, financials were down because capital markets work affects a number of other practices.

The average crude oil spot price was $53.59 a barrel in January 2017 and it dipped to a low of $46.17 in June before improving to $61.19 by December, according to the World Bank commodity markets review. That mid-year dip in 2017 followed a rise that began in early 2016, when oil prices hit a low just below $30 a barrel.

With oil prices higher in 2018, Jewell said the firm's capital markets lawyers are again “really busy” with work in the energy sector.

The firm was hit by lateral partner defections in 2017, including four partners who moved to Jackson Walker offices in Texas, four real estate lawyers who moved to Greenberg Traurig's Dallas office, and four partners who moved to King & Spalding in Houston.

The firm lost a net of 17 partners in 2017 and had only 57 equity partners in 2017, compared with 73 the year before—a 21.9 percent decline. Jewell said the equity partner number was affected by some retirements, departures, and also by the firm's decision to make its equity partner qualification a little stricter in 2017, which pushed a few equity partners into nonequity status. He said the firm evaluates its equity partner qualification, which is based on what a partner brings into the firm, on a yearly basis.

With the merger pending, the partner defections have continued in 2018, with dozens in Texas leaving to join a number of firms.  Jewell said the flurry of departures is not surprising because that's a normal result of a big merger. “Hunton is getting the team they wanted…Not that they didn't want other people, but there's lots of competition out there,” he said.

In comparison to 2017, Andrews Kurth posted a 2.7 percent drop in gross revenue in 2016 but net income rose by 2.2 percent as the firm expanded in New York and Washington, D.C. with the addition of 53 lawyers from intellectual property boutique Kenyon & Kenyon.

Jewell said he is focused on closing the merger deal, but he said lawyers from Andrews Kurth and Hunton & Williams have already started to cross-sell and pitch new work together in anticipation of the union.

“Right now I'm trying to make sure we get it closed at the end of the month, but most importantly we are working on integration,” he said.

He said the mood at the firm is positive. “It's almost eerie. Now there's a tangible excitement and optimism,” he said.