Hart Energy’s A&D Achievement Award for 2012 went to Steve Herod and Floyd Wilson, the pair who in 2011 turned their 7-year-old indie energy company, Petrohawk, which had focused on massive acquisitions in the Haynesville, Eagle Ford and Permian Basin, into a $12 billion divestiture to BHP Billiton.
Herod, now president of Halcón Resources, accepted the award at Hart Energy’s A&D Conference in Dallas on Sept. 6 on behalf of himself and Wilson, now CEO at Halcón, who was absent.
Herod entered the oil and gas industry in 1981 as a financial analyst for Superior Oil, then the nation’s largest independent oil producer. In 1984 he went to work for the much smaller Conquest Exploration, “doing a lot of different things, including the A&D side,” he said during a Q&A session.
A&D turned out to be a good fit, he said, adding that he liked “seeing the beginning and the end of a transaction, dealing with all the people, and figuring out how to make a deal happen that worked for all sides. That’s important. You can’t make a one-sided deal or you won’t get very many done.”
Herod compared his early deals with the ones done today, pointing out that deals in the past were more modest. When he started out, deals were more likely to be production-centered, involving proved undeveloped reserves or wells with a good return history. And deals tended to be one-offs ranging from $5 to $15 million.
“It seems like the Dark Ages,” he said as he took a look back.
Now, it’s all about acreage and drilling.
“In today’s oil and gas environment and resource plays the amount of capital it takes is so much different than in the old days when people put together 300 or 400 acres and that was a prospect, and then you built a well and went on,” he said. “And now people are trying to get 10,000 acres across a big area. You’ve got to pay up-front for it, then you’ve got to drill all of your wells. The resource plays are awesome because they’re so consistent and because you get such good returns, but at the same time it takes a lot of wells to develop the asset. All those wells cost $6- or $7- or $8- or $9 million apiece, and you have to pay all that before the revenue hits.”