Thomas C. Meneley of Dallas is a typical private exploration and production (E&P) company owner who sniffs out good deals through a wide array of contacts. He has bought, built and sold four times over the years, primarily in the Permian Basin.

He was born in San Antonio, grew up in the Greater Houston area, and obtained his bachelor’s degree in business administration from Stephen F. Austin University, with a minor in sociology. However, he took so many geology courses that at one point, he asked his adviser if he could change his major to geology. She advised him not to, as the industry was in a slump—which was why she was teaching and no longer in the oil and gas business herself.

Nevertheless, Meneley’s career path led him to oil and gas, which he had been fascinated by ever since high school, when he worked for his uncle’s workover rig business in the summers.

Meneley has served in several capacities in the industry, including vice president and general manager at McNair Energy Services Corp. in Houston (a trucking company that hauled drilling mud, cement and so on, owned by Bob McNair, now the billionaire owner of the Houston Texans), president of T.G.C. Operating Inc. and a director at Smith Production Inc.

Along the way he started buying small working interests in wells. Deciding it was time to be his own boss, he started the first Plantation Petroleum Holdings LLC in 2001 and since then, through Plantation IV, has generated more than $1.2 billion in acquisitions of assets and companies, including Maynard Oil in 2002, Zia Energy in 2003, Doyle Hartman Oil in 2005, LCS Production Co. in 2009, and other significant Permian Basin assets.

His most recent sale was of Plantation IV in 2011, to privately held Merit Energy in Dallas for $326.3 million.

Today Meneley is on the fifth iteration of his company as chairman and CEO of Plantation Petroleum Co. LLC in Houston. This is the fifth E&P under the Plantation name to be backed by EnCap Investments and Liberty Holdings (now known as Old Ironsides). It has 36 employees, about 100,000 Permian acres, and is in joint ventures with Occidental Petroleum, QEP Resources Inc. and Samson Resources, among others.

Although he prefers privately negotiated deals, at press time Meneley and his team were in yet another data room, hoping to win more assets.

Thomas C. Meneley

Investor: How has the entrepreneurship model changed?

Meneley: Obviously the various private-equity groups have precipitated this idea of buy, sell, buy, sell. It’s worked for us the past 10 years.

Investor: But has that A&D [acquisitions and divestitures] model changed?

Meneley: It really has. The idea of negotiating a deal has changed dramatically in the past four or five years. So many buyers now have educated themselves about the process, with these auction [A&D] houses like Richardson Barr helping them.

The biggest thing now going on is, land teams go into an area identified by their geologists, go straight to the mineral owners, leasing the land and drilling it right away.

Investor: Given the way things are going, is there really any exploration anymore?

Meneley: From our standpoint there is. One example is the Cline Shale play. I’m not convinced it’s a slam dunk, because it’s been eluding the explorationists. I know of a couple of teams that put together leases, drilled one good Cline well, and then the other ones aren’t good and it hasn’t worked out. But in the course of that activity they’ve found other opportunities such as in the Wolfcamp benches, so it’s not a complete loss. It’s give and take, which is why I call it exploration.

Investor: What was your first deal like?

Meneley: I lost it—it was the only deal I thought I had to have but didn’t get. At that time it was just me, I didn’t have a private-equity partner like EnCap or Liberty behind me yet, so it was tough. We were about to sign the purchase and sale agreement for assets out in the Permian when the seller pulled out.

But about two weeks later, the Maynard Oil deal came along when I called Jim Maynard and we got into that auction process; that time we succeeded. At that point I had no idea there would ever be a Plantation V.

Investor: Why the focus on the Permian?

Meneley: When we bought Maynard, most of the assets were there, although they had some South Texas gas which we drilled successfully; and a big property in Oklahoma that we sold to pay down debt. We have been almost all Permian since 2002, and we’ve gravitated over time to hire more geologists, landmen and engineers who are very familiar with the Permian. It’s been very good to us, even when we were almost 100% natural gas from the New Mexico side of the Permian.

In Plantation IV, when oil was about $55 a barrel, we bought LCS, which was almost all oil on the eastern shelf, because our gut feeling was, oil wouldn’t stay that low for long.

Investor: What’s your gut feeling about oil now?

Meneley: We have a couple of negotiated deals we’re working on now, so we are pressing on in spite of the price. I have no fear about oil prices totally collapsing. I think they’ll wiggle around between $65, $70, $75. It makes for an opportunity to acquire and hold, and we’ll pace ourselves on the drilling side.

Investor: What kind of breakeven oil price are you using?

Meneley: Ours is around $65 to $70. We’ve slowed down even now for the vertical wells and drilling for water sources. If it goes down to $60 we’ll hold tight, but if it gets back into the $70s, we’ll put rigs back to work in the first quarter of 2015. For horizontal projects it would have to be $75, but for our other work, $68 to $70 works.

Investor: On your fifth company, has the strategy changed?

Meneley: It’s changed some. We’re Plantation Petroleum Co. LLC now but we left off the V this time. We are set up to be able to sell portions of our assets without having to collapse our entity and start completely over; we can sell all or part and continue on as Plantation Petroleum Co.

The opportunity to drill horizontal wells is what’s really changed. Today you’re almost foolish not to drill horizontally in any area where it has worked or should work. But in our prior Plantations, we did not drill a single horizontal well; it was all verticals and waterfloods. We still think it is risky, so we try to sell down our interest whenever we have projects.

Investor: You had some serendipity in the Eagle Ford. How did that play out?

Meneley: We obtained a small Eagle Ford position in Gonzalez County through the first acquisition we did with this Plantation—it was mostly Permian oil, but there was some Eagle Ford property with it. [Long story short], after a year of doing nothing with it, we cleared the title and then we contacted EOG Resources, which was drilling nearby, and we pooled some acreage with them, but they operate it. So far, they’ve drilled two wells on it and each one came in at about 2,000 barrels per day and 1 million cubic feet of gas. We have 20 more locations to drill there. They pay out in six weeks! That was a big highlight for us, but it was not because we knew something in advance. We essentially got it for free in that oil package we bought.

Investor: What are some insights on business development tactics?

Meneley: I really like to help folks who are considering a startup in this industry, or any other industry. I learned an awful lot back in the early days from Bob McNair; we spent a lot of time together starting some companies. He taught me more than if I had gone to Harvard.

When I started the first Plantation, I knew I wanted partners who owned a share of it because then they’d work harder on it. Don’t be greedy in order to have total control.

The other thing is, when you form a management team, align yourself with hard workers who are like-minded and can stand the thought of losing their money. So many people can’t stand the thought of losing a dime, I guess because they’re used to being “protected” by their company. New teams have to be prepared to work 24/7. People have to be available to make decisions and handle things that need taking care of.

Another thing, never, never give up on a deal. We have closed three acquisitions over the years that have taken me as long as three years of constantly talking to the seller and keeping in touch before we actually got to putting a deal together. At Plantation we have to keep more than one deal in the hopper because one might close quickly while another might take you two years.

Investor: What are some of your negotiating tips?

Meneley: Some people take 'no' as a 'no' and give up. You can’t. Part of it is being able to sense that a good deal can be struck, that there is a reason for the owner to see it’d be better for them to take their money off the table.

I don’t really have any secrets. It’s just putting together the factors like asking, why would this person need to sell, and being willing to wait. You know, some owners build their company up from scratch over the years and it becomes like family to them. They know they need to sell, but they just can’t decide to do it. So you wait and you keep in contact.

Investor: How has A&D changed?

Meneley: It’s much harder to find a company or an individual to negotiate with. We’ve had to go to more data rooms and we find ourselves fighting with small-cap publics and the MLPs. And we find that the A&D advisers have gotten more aggressive in going out to find sellers.

We try to base our decisions on whether we believe we can buy some upside without overpaying for it. We’ll pay the strip price for PDPs and PDNPs [proved developed reserves and proved developed not producing], but not as much for PUDs [proved undeveloped reserves].