American Oil and Gas Reporter - January 2020 - 21

Persistence And Patience
Help Oilman Ride The Cycles
For Oil And Gas Success
A recent Society of Petroleum Engineers Gulf Coast Section
lunch and learn in Houston, "Black Gold-One Man's Story of
Success in the Permian Basin," put on by the Permian Basin
Study Group and facilitated by James Rodgerson from Rodgerson
Completions, proved to be a great way to close 2019.
Mire & Associates petroleum investment consultant Kurt
Mire shared the story of "Dave," who went from logging
engineer to independent oilman. The session was particularly
compelling because it was essentially the sort of story one
might hear from a relative during a holiday dinner or celebration.
Mire's account was breezy and accessible, but also full of tips
and best practices for even the most inexperienced investor.
Dave's story began in 1975, right after he graduated with a
geophysics degree and took his first job with Schlumberger.
Schlumberger offered travel and experience until 1982, when
he took an office position in Paris to pursue computerized
analysis. Most of us know what happened next: After unparalleled
growth, the industry witnessed a massive oil price crash, and
activity slowed or was put on hold for more than a decade. For
Dave, this meant leaving Schlumberger and heading to Louisiana
to partner with some colleagues for a startup oil company that
focused on low resistivity pay. Things didn't quite work out as
planned, so Dave and his partners parted ways and he started a
small electric-line service company.
Dave's business was a success, and he became a regular
fixture among the area's operators, who helped him discover
his passion for the oil field. Among these was a Kerr-McGee
engineer who Dave got to know well. At a time in which a
barrel of oil fetched less than $20, the engineer left Louisiana
for Boston to join a power company, which also happened to be
seeking a way out of several million dollars' worth of investments
it had made in multiple drilling ventures. The engineer remembered
his old friend in South Louisiana who longed to be an oilman,
so he called Dave.
Dave was doing well, but he also was learning more about
how to make the leap from service provider to oilman. He had
latched onto a couple key concepts that set the tone for his next
few years. A big one was from Corita Jean Owen Smith's book
Let the Eagle Fly . . . Again!: Memoirs by James (Jimmie)
Owen, Wildcatter, which contained a key nugget of wisdom:
"Get some acreage and hold on to it." This struck Dave, and
shortly thereafter-with the endorsement of Dave's engineer
friend in Boston-the two went in together on a $200,000 deal.
Dave went, "all-in," liquidating his savings and even borrowing
some money to scrape up the cash he needed. Dave agreed that
after the payout, he would provide his partner 1/3 of the
properties. The deal included nonoperated working interest
properties in Texas' Limestone County, Galveston Bay and
Aransas Pass; Converse County, Wy.; and some Tuscaloosa gas
sand in Louisiana, as well as overriding royalty interest in more
than 40 Spraberry wells in Midland County, Tx.
Operating costs prompted Dave to immediately began
divesting the WI properties, but he kept the Midland properties

"Dave was doing well, but he also was
learning more about how to make the leap
from service provider to oilman. He had
latched onto a couple key concepts that set
the tone for his next few years.

and the flowing gas well in Louisiana. The estimated value of
the Midland properties was $30,000, and cash flow was about
$4,000 a year, so Dave reached payout in mid-1990, assigning
1/3 of the remaining properties to his friend, the former KerrMcGee engineer.
Fast-forward to 2015: Dave was approached by Pioneer
Natural Resources to drill three Wolfcamp wells near his
Spraberry wells. Pioneer gave Dave the option to take a farmout deal that would pay $54,500, plus an 0.0118 override or pay
his share of the costs to the tune of $1.76 million. Dave opted to
farm out half his interest to a colleague that believed in the
Wolfcamp's potential.
After receiving $70,000 for the farm-out on this half of his
interest and keeping an overriding royalty interest of 0.0059235%,
Dave then had to come up with $890,000 to pay for his share of
the three wells. Today, 12 wells have been drilled on the first
lease, and all have paid out. Now Dave is working on the
second lease and has two wells drilled, in each of which he
owns a 5% WI. In the first 30 days, each well averaged 2,500
barrels of oil and 1,500 Mcf of gas a day, compared with the
first lease which averaged 1,400 bbl/d and 1,300 Mcf/d.
For Dave, it is all about living through the oil and gas
industry's cycles. There is always an opportunity if we choose
to pursue it and stay in for the long haul. As Jimmie Owen was
so fond of saying, "Get some acreage and hold on to it."
❒

JEREMY VISCOMI is a strategic

marketing expert for the oil and
gas industry. Among his many
roles, he serves as the MidContinent regional lead for the
Petroleum Technology Transfer
Council, providing independent
operators with access to emerging technology aimed at reducing
risk and growing profits.
JANUARY 2020 21

American Oil and Gas Reporter - January 2020

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