Something New: The Timing Was Perfect
They say when one door closes, another door opens.
Four experienced managers at Burlington Resources didn’t hesitate when ConocoPhillips acquired their company in March 2006.
ConocoPhillips began to make a lot of changes, so they headed straight for the door marked Exit.
“We decided that was a good opportunity to go out and try our own thing,” said Dick Wilken.
Before the merger, Wilken was Burlington’s exploration manager-western U.S. unconventional resources.
Today, he’s the president of Marquette Exploration LLC in The Woodlands, Texas, an exploration start-up founded in partnership with ENCAP Investments last year.
Wilken and three of his co-workers put the company together to work Lower 48 unconventional gas plays.
“All of us have 17 to over 25 years’ experience. Individually and on teams, we’ve had quite a bit of success. We felt pretty strongly we could do it on our own,” he said.
Wilken, a geophysicist, earned a geology degree at the University of Iowa, then moved to the University of Oklahoma for graduate studies. He began his career with Conoco in 1990.
Other partners in the new venture are:
- Jerry Zieche, vice president of exploration. Zieche, an AAPG member and 27-year industry veteran, started his career with Precision Well Logging. He was Burlington’s exploration manager-eastern U.S. unconventional resources.
- Trey Shepherd III, vice president of land. Shepherd began his career 25 years ago in the land department of Atlantic Richfield Co. He was senior staff land adviser for Burlington’s Lower 48 Exploration group.
- Terry Huchton, vice president of operations. Huchton joined Superior Oil as a production engineer in 1982. He was a senior project reservoir engineer for Burlington.
One thing the company founders discovered right away: Money wasn’t going to be the problem.
“There’s a lot of money out there right now chasing experienced management teams,” Wilken said. “It real quickly went from ‘Can we do this?’ to ‘What kind of deal can we get?’ We got offers from everyone we talked to.”
Marquette aimed at exploration from the start. The company even took its name from an explorer, Father Jacques Marquette, the Jesuit missionary who discovered and explored the Mississippi River.
“As opposed to an acquire-and-exploit kind of start-up, we’re a pure exploration company. We’re actively leasing in several different plays we’ve identified,” Wilken said.
The company actually does have a little production, which it got “almost by accident” in a land acquisition, he explained.
With an emphasis solely on unconventional plays in the Lower 48 states, Marquette is “exclusively looking for gas -- we’re focused on looking for shale gas and tight sands,” Wilken said.
New companies today face a high-cost environment and shortages of everything from trained people to rig time.
There’s also a real battle for attractive leases, according to Wilken.
“Costs are up,” he said. “But more than costs, our biggest concern is that competition for leases is very intense. Being the size we are, we’re worried about some of the larger companies getting into our plays.”
When Marquette prepared to open its doors it was gifted in exploration talent but seriously lacking in business support.
But that turned out not to matter so much, either. Wilken said the company turned to outside providers for necessary services.
“We discovered as we went along that we were able to outsource basically everything, which has allowed us to almost have a virtual oil company,” he explained. “I think that’s a pretty good model for a start-up.”
That support includes just about anything an oil company might do in the field.
“We hired an operations company that does everything from staking a well to selling the gas, if we want them to, as much or as little of that as we want,” Wilken said.
“They have regulatory staff. They have marketing, petroleum engineers, completion engineers,” he added.
Drawing on the heft, capability and influence of a larger company also benefits Marquette, Wilken noted.
While a tiny independent might have trouble securing drilling-rig time and crews, the operations company drilled 150 wells last year and has good access to rigs.
“It gets back to what I was saying about a virtual oil company. It allows people like us to have ideas and capital, and to focus on developing those projects,” Wilken said.
“When you talk to the venture capitalists,” he said, “there’s a lot more money out there than there are ideas.”
People Who Need People
Not that outsourcing so much was a simple task.
“There’s no list anywhere” of support providers for an oil industry start-up, Wilken said. “I spent a lot more time on that than I thought I would.”
If the oil and gas industry today presents numerous challenges for a start-up company, it also provides opportunities for a nimble and skilled competitor.
As Wilken sees it, Marquette’s biggest advantages are “the speed at which we can move. And the fact that we have a very experienced landman, petroleum engineer, geologist, geophysicist.
“Plus,” he said, “we’ve hired another geologist.
“We’re all very experienced. A lot of companies don’t have enough personnel to pursue all the ideas they’d like to, so there’s some opportunity for us right now,” he said.
Despite the industry’s shortage of qualified professionals, Marquette had no problem in attracting interest from potential staff, according to Wilken.
“We hired people we used to work with and know,” he said. “It’s all about the people. We’re in a position where we have more people who’d like to come and work with us than we are able to add right now.”
After a year on their own, Wilken and his colleagues have successfully completed the initial steps in starting a new exploration company.
As a trailblazer -- “I get people calling me all the time who are thinking about doing this,” Wilken said -- he has a couple of pieces of advice.
First, “if you’re going the private equity route, talk to as many private equity companies as you can. Talk to people who’ve dealt with them before,” he advised.
“Are they going to be in your office every day? Are you going to be running the company, or are you going to be working for them?”
Second, build up a network of business support for those necessary tasks beyond your expertise.
“From our point of view, the outsourcing model is really working well, from a cost standpoint and for the efficient use of our time,” Wilken said.
Finally, recognize a basic fact: You aren’t just going exploring.
You’re going into business.
“The biggest surprise to us,” he said, “was the amount of non-oil-and-gas things that came up.”