It's not every day that a 30-year E&P veteran, no matter how well respected, gets $1 billion of private equity to spend. Denver-based Don Wolf is one of the fortunate few.
Armed with capital from Quantum Energy Partners, as well as additional money from management, he is the chief executive of Quantum Resources LP, which will be a year old this August. So far, the firm has deployed about $500 million of its initial capital, with the main acquisition being Jay Field near Pensacola, Fla., and having 40 million barrels of oil equivalent.
Quantum now has 2,000 wells making about 7,000 to 8,000 barrels of oil per day. "Our goal is to acquire and develop long-life, legacy assets of some size-of $250 million or better," he told Houston Producers' Forum members recently. "We aggressively hedge to insure our base-case returns for four to seven years."
Wolf grew Westport Resources Corp. from $100 million in value to more than $2 billion when it was sold to Kerr-McGee Corp. Now he is sharing the lessons he has learned from building that and several other E&P companies.
Having the right people is the first criteria. "We tried intentionally to gather senior executives with experience in different basins and business models, because that brings us a broader range of thinking," he said. Logan Magruder, formerly of Berry Petroleum Co., is president, and Lance Lauck, formerly in A&D for Anadarko Petroleum Corp., is head of business development.
Never burn bridges, Wolf advised. He found that, while due diligence was under way to obtain the capital from Quantum, all of his references were called. "It was amazing...I had guys who were on my board 10 and 15 years ago called, so it pays to think long term with your relationships."
Reputation is key. "It is hard to build and very easy to destroy with just one or two actions."
Positive returns are essential to business and relationship continuity. "Risk tolerance on the part of investors is lower than you think."
Momentum and urgency are important, he said. "There are a lot of difficult structures to work through and it can eat you up. The tides change and capital availability comes and goes. There is much competition and the capital may get deployed quickly before you can get to it. Be sure to move quickly and establish a closing date."
The back-room aspect of any company is important, "even though as operating guys, we sometimes think it is less important. With Sarbanes-Oxley and so on, you'd better be pristine, so keep a good, clean back office."
Finally, thoughtfulness is a good quality to have. "Little things matter, like remembering people who helped you years ago. Sending a fruit basket gets remembered. Success breeds confidence. Many of the investors in this deal are people who made money with Quantum or with me over the years. Many have become friends. Partners stay with winners and drop the losers."
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