When James L. Payne entered the Colorado School of Mines in 1955 on a full scholarship, early on he saw a photo of a geophysicist with a good suntan; he decided then and there that looked like the good life to him. In 1959, he graduated with an engineering degree in geophysics and was awarded the Cecil H. Green Medal.

He began his career in Bakersfield, California, with Chevron. Fast forward to December 2012, when a private-equity-backed start-up, Shona Energy Co. LLC, which he and a partner formed in 2005, was sold to Canacol, a company based in Bogotá that drills in Colombia, Peru and Ecuador.

In between, he served Chevron for 23 years, about half domestically and half abroad. He joined Santa Fe Energy Resources in 1982 as senior vice president of exploration and became chairman and chief executive when it went public in 1990. Santa Fe progressed into an independent producer with major operations in the US, Indonesia, China and Argentina. This international exploration success allowed Santa Fe to spin out its California heavy oil operations to its shareholders in the form of Monterey Resources and in May 1999 to acquire Snyder Oil Corp.

In August 2000, Santa Fe Snyder merged into Devon Energy Corp., creating a top-five independent in terms of production with an enterprise value of $9 billion. Payne served as vice chairman of Devon briefly before becoming chief executive and chairman of Nuevo Energy Co., which was merged into Plains Exploration three years later.

When we caught up with Payne recently, he was rotating off the last of his many corporate board positions (at one time including BJ Services, Nabors Industries and Global Industries), and had just begun training for a climb up 12,000-foot Pagosa Peak in Colorado this summer with one of his grandsons who lives in Pagosa Springs.

Investor Where do you see the future of energy going?

Payne I spoke about this when I gave a commencement speech last year at Golden Gate University (where I got my MBA). A big part of it was telling them why I think the future of the US for the next 40 or 50 years is going to be as good as what we had in the last 50—and that was pretty good. One big reason is the energy landscape.

Investor How so?

Payne This surge in domestic oil and gas production is for real and it's not just about creating oilfield jobs, bettering the environment and reducing the balance of payments…it can change the whole infrastructure as you switch from diesel to liquefied natural gas (LNG) and concurrently begin to have gas exports. All the management skills, the accounting and tax, the legal and the engineering skills—all of it is going to have to change, and that will create a lot of opportunities for many, many people. It also provides the framework of a North America energy policy.

I think we ought to replace the diesel engines in most of the trucks in the US with LNG as a major first step. Between what's happening in the US and Canada, I believe North America can be energy independent, and hopefully all that will happen in due time.

Investor Given that you've headed a string of E&P companies and served on many boards, what do you think are the attributes of a good CEO?

Payne You should build a strong operational and technical group, and they should understand the goals—everyone should be on the same page. And you have to be a good allocator of capital. That's very important.

Investor What was your intent with Shona?

Payne After I retired from Nuevo Energy in 2005, I got a call from EnCap, which wanted to start an international venture. We formed Shona. We looked at different plays in Russia, Azerbaijan, Nigeria, but we found that for a smaller company, South America offered greater opportunities that we could afford to finance. We settled on Colombia and Peru…there was a big flavor of Santa Fe and Nuevo people who came back together at Shona.

Shona was a pure private-equity-raising deal, first in the US, then we incorporated in Alberta, did a reverse merger in British Columbia and went public on the Toronto Venture Exchange. It had a $150-million market cap at the time we merged with Canacol on the Toronto Exchange.

Investor What attracts you so much to the international side?

Payne I like it because the upside potential is so much bigger.

Investor What is the secret to building a company?

Payne I suspect that every CEO has a different approach, but I've found that you have to build a good staff that also understands capital and believes in the company.

I'm a big believer in the correct allocation of capital. You really do have to worry about how you spend your money and where you spend it, and what everybody's expectations are. We had EnCap as our main equity investor at Shona and they were highly supportive even during the hard times.

For any public entity, you need to meet the expectations of the shareholders and at the same time build something solid. Sometimes that's a delicate balance.

—Leslie Haines

For archives of interviews with industry legends, see OilandGasInvestor.com.