Leslie Haines congratulates Guma Aguiar on his 2007 Excellence Award. Photo by Gary Barchfield.

Guma Aguiar, 30, says he and his family are the beneficiaries of God’s blessings and they recognize that God played the lead role in this story. How else to explain the unexpected turn of events that has turned his life upside down?

In 2003, he and his uncle, Tom Kaplan, started a company, Leor Energy, with $100,000. They succeeded beyond their dreams, finding an estimated 1.3- to 1.8 trillion cubic feet of recoverable gas reserves in East Texas, and sold Leor to EnCana Corp. recently for $2.55 billion.

Aguiar is as surprised, and grateful, as could be, for he is not a geologist, petroleum engineer or landman. He’s not even a college graduate—despite having a tennis scholarship at Clemson University, he left after a couple of years to teach tennis professionally.

But Aguiar has the right people skills and a flair for business, and is entrepreneurial with a capital E. He concluded a string of financings on Wall Street with big names, such as Goldman Sachs, Merrill Lynch and JP Morgan to ramp up the company’s drilling pace, never once employing an investment banker.

He says Leor is not really an overnight success story. It was more complicated than that. As vice chairman and chief executive, he negotiated all of the deals throughout the company’s history. He even picked up leases himself at times. He negotiated with institutional investors, went to find the company’s first rig, and even negotiated with service providers.

Eventually the company had about 40 full-time employees. Ten- and 12-hour days were the norm.

It had to be divine intervention that one of the first people he met at the Houston Log Library—where he went to teach himself about the oil business—was John Amoruso, a noted past president of the American Association of Petroleum Geologists. Amoruso, a partner in Legends Exploration, had an intriguing geological concept in Robertson County, Texas, and the rest is history.

Today, Amoruso Field is producing close to 250 million cubic feet of gas per day and EnCana. estimates it will be producing at least 315 million a day by year-end 2008. Two of its wells are the greatest onshore producers in the U.S. in decades, coming in at 60- and 65 million a day, respectively, when first tested. (See “Deep, Tight Gas,” Oil and Gas Investor, January 2008, for more technical details.)

Aguiar has been named Oil and Gas Investor’s Executive of the Year for 2007 in the magazine’s fifth annual Excellence Awards program. Here’s his story.

Investor Congratulations. Few in this industry have hit the ball the way you have.

Aguiar To me, honestly, it is humbling. Something of this magnitude—wow. It makes you ask, what am I supposed to do with my life now? How could I possibly say this is a coincidence, or the stars were aligned? The truth is, God must have something great in store for us and it’s exciting to be a part of history. This is really the beginning of something huge. This company is the platform for something that will be big down the road.

Investor How does a person with no oil and gas experience end up running an E&P company in Texas?

Aguiar I used to teach tennis in South Florida, where I’m from, and also in Greenwich, Connecticut, but I knew I wouldn’t stay in tennis long term. One of my contacts at the club got me a job as a clerk on the floor of the Nymex in 1999 and I did that for two years. I didn’t like the volatility and decided to try to build a company through owning hard assets, rather than trying to build something through trading. I didn’t like the fact that you could be bullish on an asset and still lose money while trading.

I left to work with my uncle, Tom Kaplan. Tom is the chairman of Leor and was the founder of a company called Apex Silver Mines Ltd., which is traded on the American Stock Exchange, and the founder of a private gold company called Electrum. Even though Tom rarely came to Houston, and wasn’t involved in the day-to-day operations, he was always in the background guiding me in building the company. We talked every day—he was my mentor—but he gave me more autonomy as time went on. I had room to negotiate.

Investor What led to starting Leor?

Aguiar In 2001, Tom made some investments in a few start-up companies in metals and mining and one in oil and gas, Cadence Resources Corp., now called Aurora Oil & Gas Corp. It is in Michigan and has assets in the Antrim shale. I was charged by Tom to manage my family’s various investments, so I sat on Cadence’s board.

But after a while, Tom and I decided that, rather than making passive investments in other companies, we wanted to start a family-owned private company to invest directly in grassroots exploration.

Investor What was your first deal?

Aguiar We first bought some leases in North Louisiana in the Cotton Valley. Then, through contacts I had made in Houston, through Cadence, I met John Amoruso in the Houston Log Library. For sure, it was a divine appointment. I can’t stress enough that this whole thing was a blessing from God.

I had gone there to teach myself about the oil business. I didn’t even know what the symbols on the map were for an oil well.

Investor How did your interest in the Deep Bossier come about?

Aguiar John Amoruso and I were in the log library and we started talking about several different grassroots exploratory projects. The one that really caught my attention was the Deep Bossier. I asked him to explain it to me a hundred times before I was ready to present it to Tom for funding. I knew Tom would love it when he heard about it.

For the next two years, every time Tom and I would speak, he would ask me how much land we had acquired that day.

Basically, John’s theory was that the Deep Bossier sands would contain high-pressured, thick sands and be full of gas. It sounded like something my uncle would gravitate to. He had already found one of the largest open-pit silver and zinc mines in the world, in Bolivia, through grassroots exploration in the mid-1990s. He loved what he heard about the Bossier and told me to go after it and buy up as much land as I could. That was in 2003.

Most people thought we were crazy. My family spent about $25 million before anyone had put the words “deep” and “Bossier” in the same sentence.

Investor But you accessed other capital?

Aguiar Around mid-2004 we were getting ready to drill our first well and we heard that Burlington Resources was trying to lease in Robertson County. We had maybe put together 25,000 acres. Burlington called me to discuss them buying us out or drilling on our land to earn an interest. We met to compare notes and show each other our maps.

I had to smile—about three-fourths of the area blocked out that they said they wanted to buy, was already under our leases.

But Tom and I decided we didn’t want to farm-out to Burlington. We decided we would rather raise money from some hedge funds and stay private for a few years and build a team to operate the asset. We put together a management team consisting of experienced professionals and started a road show to raise $50 million so that we could test the concept. We figured we could drill four or five wells.

Investor How did EnCana come in?

Aguiar During the road show in May 2005, I got a call from Kenton Holliday, a land manager who was working at the time for EnCana. I told him I was sorry but that we were pursuing a capital raise as opposed to a standard industry deal. He convinced me to listen to what sort of benefits EnCana could bring to the relationship outside of just money. After negotiating with him for several weeks, we finally had a handshake. The deal closed in July 2005. (About nine months later, Kenton was hired at Leor as executive vice president of land, and was named president last summer.)

EnCana offered us a better deal. We formed an AMI (area of mutual interest) and arranged that they would drill and complete eight wells by year-end 2006 for a 30% interest in our acreage. The partnership not only brought money, but also important relationships with rigs and service providers. Rigs were very difficult to obtain in mid-2005.

Investor How did you assign value to something that wasn’t drilled?

Aguiar In early 2005, on a Burlington conference call, they did something no PR firm could have done for us. They unveiled their Deep Bossier asset, Savell Field, to the world. Their map showed their acreage and ours that was adjacent, and they were drilling 30-million-a-day wells.

By the time we sold the company to EnCana, our 50% stake in Amoruso Field was as big as the 100% position we originally owned, because the acreage position had grown dramatically. The production was nearly 300 million cubic feet a day. We accomplished that in less than two years!

Investor Tell us about all the financings.

Aguiar In July 2005, we struck our first deal, 30% of our assets, with EnCana. That fall, we did a deal with a Greenwich hedge fund, Amaranth (which later collapsed), for a $30-million mezzanine loan. The proceeds from the Amaranth deal were used to pay Tom back for his start-up capital. In January 2006 we did a preferred equity deal with Goldman Sachs for $45 million, for a 7% interest in the company. At this point, Leor had about $585 million in valuation. The proceeds were used to try to accelerate drilling—we were about to drill our second well and we had no production yet.

In June 2006, EnCana paid us $243 million, we extended our AMI and essentially swapped interests in each other’s blocks, so we ended up 50-50 partners in all the acreage.

Then in January 2007, we did an equity deal with Merrill Lynch for $150 million for 9% of Leor. That gave us an implied value of $1.65 billion. At about the same time, we did a $150-million credit facility with JP Morgan.

Even though I was on the front line, I always had Tom guiding me. He was a great teacher and I was a great student. I just had a talent to sell the story and negotiate. The investor community told us they were betting on not only the asset but also on Tom and me.

Investor Were you, Tom and John surprised at this huge growth in value?

Aguiar Definitely. Nobody anticipated this—how could you? Onshore in East Texas? There is no comparable asset there. John Amoruso is in his early 70s and has never seen this. This asset is in a league all by itself.

How do you explain that four of the five biggest gas wells producing in North America were in our field, when we had only drilled about 20 wells? It’s not like we had drilled hundreds, or thousands, of wells.

Shortly after we did the Merrill Lynch deal, we completed our biggest well, for 65 million cubic feet a day.

Investor Why did you sell Leor?

Aguiar Tom and I decided we shouldn’t have such a disproportionate share of our net worth tied up in one company. We had more than $2.5 billion all in one company so we decided to derisk our portfolio.

The sale to EnCana was the first and only time Tom got real involved on the front line. I was really happy to have it end this way. He met with Randy Eresman (EnCana’s CEO) to discuss the relationship, and after a few minutes, they ended up negotiating the sale of the company. Tom and I had discussed the possibility a bunch of times and agreed that, if both the price and the terms of the sale were attractive, we would sell the company

You can’t compare what we did at Leor with starting up some website like MySpace or winning the lottery. The oil business is so much more complicated—from the drilling and service contracts to the equity offerings, the credit facilities, farm-ins, reserve reports, dealing with shareholders, processing the gas, negotiating. It is so complex. The past few years, I have been running on adrenaline.

Investor What’s next for Leor?

Aguiar We kept a few key employees and have restructured the company so we can be opportunistic. Right now, Tom and I are just focusing on our own private interests. Leor will restructure because now we don’t have 250 million a day of production and 10 rigs running. We’re going to be opportunistic.

Investor What’s next for Guma?

Aguiar I’d like to decompress and spend time with my family. I have a son who is three years old and a five-month-old daughter. Once I get my equilibrium back, I’d like to diversify into different industries.

I’ve become involved with a number of different charities and want to be a good steward of the resources. I am in a position to really make a difference in this world through philanthropy. I know how much God blessed us. That’s not to say that we didn’t do a great job as well, but when something this unusual happens, it falls into the open miracle category.