Among them, Forrest Hoglund, Charlie Stephenson and Ted Collins have green-or red-lighted hundreds of acquisitions and divestitures. Hoglund, who is now chairman and chief executive officer of SeaOne Maritime Corp., an LNG transportation company, was chairman of EOG Resources Inc. from 1987 to 1999, leading its spinout from Enron Corp. into an independent public company. More recently he was non-executive chairman of Forest Oil Corp. during its transition from an offshore-exploration to an onshore acquire-and-exploit stock.

Collins, a longtime West Texas wildcatter, is chairman and CEO of Patriot Resources Partners LLC and, from 1982 to 1988, preceding Hoglund, was president of Enron Oil & Gas Co., leaving to co-found Collins & Ware Inc., which grew in 12 years to more than 1 trillion cubic feet (Tcf) of proved reserves in the Permian Basin, South Texas and Rockies.

Stephenson is co-founder and chairman of independent Premier Natural Resources LLC today. In 1983, he founded Vintage Petroleum Inc., growing it from three people to more than 750 with operations in the U.S., Canada, South America and Yemen. It was acquired by Occidental Petroleum in 2006 for $4.3 billion.

At Hart Energy’s 10th annual A&D Strategies and Opportunities conference in Dallas recently, they talked about the deals they’ve won—and how they made them right.

SeaOne Maritime Corp. chairman and chief executive Forrest Hoglund’s best deal was the spin-off of EOG Resources, which he headed at the time, from Enron Corp. There were cries of “Free at last.”

Investor: Forrest, what was one of your best deals?

Hoglund: That would be the spin-off of EOG from Enron. All around the building, there were cries of “Free at last. Free at last.” I left the very day we got out. Mark Papa took it over then, and he’s done very well with it. I’m a smiling guy. It was completed in 1999 just two years before Enron went bankrupt.

Investor: I understand the workings of the IPO were heatedly debated internally.

Hoglund: Enron had negotiated a deal with another company and brought it to us. It was—and still is—one of the worst deals I’ve ever seen. They were treating the minority shareholders different from the majority shareholders. We entered a six-month staring contest.

Investor: How did you work it out?

Hoglund: We ended up giving them $600 million and our assets in India and China for their stock in EOG. These were very attractive assets, particularly in India.

Investor: Charlie, what about you? What was one of your best deals in your 50 years in the business?

Stephenson: Probably the most transforming deal was in 1995. We had the opportunity to buy a company in Argentina that was in severe straits at the time. They were a private company with some debt and thought they needed some financing. Well, what they needed was to be bought out and that’s what we did.

Investor: Vintage eventually came to have assets in Yemen and other foreign countries, but this was quite a leap at the time.

Stephenson: Our CFO was scared to death. I sent him down there. He said, “We shouldn’t do this.” I said, “You can’t come home until you get it done.”

Investor: What was the nature of the assets?

Stephenson: They owned 50% of 800,000 acres in the southern part of the San Jorge Basin. Within about three months, we bought the partner out, so we ended up owning 100%. The royalty was about an eighth and the tax regime was about 35%. Everything from a financial standpoint was good. We took care of the debt.

Investor: How did it turn out for Vintage?

Stephenson: The reserves we had, after three months, were 65 million BOE (barrels of oil equivalent) and we were producing about 5,000 BOE a day. By the time we sold the company, which was about 10 years later, we had produced more than 100 million BOE of reserves, we had 250 million of proved reserves and quite a few probable and possible, and we were producing about 38,000 BOE a day. We did all of this by making just two small acquisitions and conducting an aggressive drilling program.

Investor: How were you able to increase reserves and production?

Stephenson: We used 3-D seismic throughout the southern portion of that basin. We could see 15 to 20 producing zones from 2,000 to 10,000 feet. We located wells where we had multiple, stacked pays. We drilled more than 500 wells; our success rate was 96% and the wells cost about $750,000 each. They paid out quickly and our rate of return after tax was over 100%. That was a transforming event for the company.

Investor: Ted, what about you?

Collins: My best deal is a lot smaller than these. In late 1995, Amerada Hess was going to sell their West Texas portfolio. They were focusing more on their opportunities in the North Sea and elsewhere, and were denying budget to these Permian properties. They were turning down routine work. Goldman Sachs was handling it and the data room was in Houston. They only had an engineering report. One of our guys went to Hess’ Seminole, Texas, office and looked at all the well files. We were the high bidder at a little over $60 million and went to work on the properties, just blocking and tackling.

Investor: How did it turn out?

Collins: In 11 months, we got production up and PV-10 to about $166 million. We had also picked up their mineral package for about $20 million. There were a lot of hidden gems in these assets. We operated 29 fields and had interests in 147 wells out of this acquisition. It was just a case of a sleeping giant we stumbled into. With 3-D seismic, you find that a lot of these reservoirs had been missed. It’s like throwing rocks at a chain-link fence: The big rocks don’t get through.

Investor: Ted, on the other hand, have you done a deal you’d like to take back?

Collins: I sure have. We got a little too big for our britches after the Amerada Hess deal and I thought we were bulletproof. We were weighted to oil production then and I decided we needed to get balanced and get some gas in the mix.

Investor: That brought you to Union Pacific Resources Group.

Collins: Yes. UPR had a lot of South Texas gas properties and we entered that bidding fray for the Stratton-Agua Dulce Field. It had made 1.3 Tcf of gas by that time. It had about 23 shallow Frio pays all above 4,000 feet. They hadn’t all been perforated. We were feeling our oats that this property was valuable and we could borrow a lot of money. For $148 million, we were high bidder. Someone tried to tell me that we were overpaying for it, but I didn’t listen.

Investor: Financing it wasn’t simple.

Collins: We financed it just barely by the hair on our chin. We did a bunch of trick financing and did some sub-debt with Prudential Capital at a high rate. I just knew we could do with this what we did with the Amerada Hess package.

Investor: What brought it down?

Collins: Where we fouled up is that UPR owned its own gathering system and processing plant there and sold it to Duke Energy shortly after we closed. We started drilling these gas wells and Duke didn’t have a budget to add new compression. So, we’d bring on a new well and it would knock 10 offline. And, we made another cardinal sin: We hedged volumes we didn’t really have. We were in a tight spot and falling behind daily. It was pretty grim. We had a gas hedge at $1.95 and gas started going up in May 2000. It was $2.10. Anybody knows you can’t make a hedge up on volume if you’re paying $2.10 and selling it for $1.95.

Charlie Stephenson, cofounder and chairman of Premier Natural Resources LLC, did his most “transforming” deal when he was at Vintage Petroleum, buying a distressed company in Argentina and growing it via an aggressive drilling program.

Investor: How did you unwind it?

Collins: God bless Apache, the way they closed this deal in a hurry. We sold it to them for $330 million. That sounds like we made a lot of money, but for the way we financed it and the debt we had taken on. We lost $62 million on hedges and $50 million of our own equity. If it hadn’t been for (Apache president and chief corporate officer) Roger Plank—we didn’t even have a letter of intent signed yet, and he bought the hedges off.

As an example of how things were spinning out of control, if we’d have waited another week, the $62 million we lost would have been $70 million and, if we’d have waited another three weeks, it would have been $90 million.

Investor: That deal was closed in the middle of the night?

Collins: Roger stayed up past midnight to get this closed. We were fortunate to get out with our lives. We got everyone paid off and got to live another day. It was a case of getting a little too full of yourself that you have everything figured out, getting emotional in the bid process and overpaying.

Investor: Forrest and Charlie, do you regret any deals?

Hoglund: Obviously some small properties here and there. EOG wasn’t really an acquisition company. We made some mistakes, but on balance it was alright.

Stephenson: In more than 300 acquisitions, there was one. We bought into an area that didn’t have much production history. We had to use our best guess as to how the production decline was going to happen. We got it wrong. It became non-economic at the oil and gas price of that time. But the property had some good pay, so that overshadowed the loss we had, and then the oil and gas price came back. When you’re trying to forecast these reserves with less than a year’s worth of production history, you can get it wrong pretty easily.

Investor: Speaking of production history, is it too late to get into most of the shale plays now?

Hoglund: There is always room, but it’s more expensive now. We’ll keep finding new shale zones, so there will still be opportunities. When you have what is now a 10-year run on shale, it’s just more expensive.

Investor: Has it become too frothy?

Hoglund: There is going to be a tremendous amount of money that is going to be made. It depends on where you are. But, yes, it’s frothy in some areas.

Investor: Charlie, what are your thoughts on the shale plays?

Stephenson: I don’t think the potential stops at shale. I think all these reservoirs that exist in the different basins are candidates for newly evolving technology with horizontal drilling and fracing. I think we beat the curve with drilling horizontally, but we have a ways to go with the fracing technology that will open up more of the basins. You just have to be selective in where you want to get in. But, at Premier, from an acquisition-company standpoint, we’re not involved in acquiring acreage and drilling in the shales.

Investor: Are you focusing more on conventional plays?

Stephenson: Well, we’re focusing on good deals.

Investor: If you could put together 1 million acres today without competition, where would you want them?

Stephenson: We did well in Argentina, but it would probably be the Bakken and Marcellus that I’d be interested in today.

Investor: Forrest and Ted?

Hoglund: I would like to have gotten in the Eagle Ford or the Wolfcamp early. Those are my favorites.

Collins: I like the Permian. I also like the Bakken and Eagle Ford. In terms of the simplicity of townships and the 1,280-acre spacing, I’d probably take the 1 million acres in the Bakken and drill down the spacing.

Investor: In terms of buying opportunities coming up, what impact might the new E&P focus of the integrateds Marathon Oil Corp. and ConocoPhillips have on the asset market?

Stephenson: ConocoPhillips might not be a seller. The E&P company will have a peer group different than they’ve had before. The question is, “How are they going to grow their reserves and production?” It will be by a combination of exploration and acquisitions.

Hoglund: I think they’re also going to get a bit of a shock when they get out in the independent world and see what it really takes. I would guess that acquisitions are something they would try to do.

Investor: Ted and Charlie, what is a good deal? What are key criteria that have guided you and still do?

Collins: I see a lot of opportunity out there that you can still drill your way into. Certainly the acreage has gotten pricey. It would be hard to buy your way in now. At the time, you’re not sure it’s a good deal. It’s really hard to tell. On an acquisition, you can price it where you’re not going to lose your shirt. You can hedge nowadays.

Stephenson: What we have looked for in the past have been deals that have fairly long-life reserves where we can identify upside. You have to find enough upside to get a leg up to increase your bid; it’s just hard to be competitive if you’re looking only at PDPs. What we’ve generally found in acquisitions we’ve made is that we’ve probably added another 30% to our reserves and production above what we had when we made the acquisition. That’s just blocking and tackling, making these old fields produce more oil and gas.

Investor: Forrest, what about you?

Hoglund: I like the old story about the young business-school guy who asks the older guy, “What makes you successful?” The old guy says, “Good deals.” He asks then, “How do you know what’s a good deal?” The old guy says, “Bad deals.” It’s pretty simple.

Investor: Besides each other, who are some company-builders you admire?

Hoglund: Craig Clark and his team at Forest Oil. It’s a great A&D story. Before I joined the company, it was probably the worst-performing stock in the past 10 years, five years, one year, six months—it didn’t make much difference what time period you picked. It wasn’t a good mix of assets. There was short-life offshore Gulf of Mexico, there was Alaska, there were 36 international-exploration kinds of deals. What they were trying to do is fund all this exploration off short-life offshore oil, and that’s not a very good game plan.

Investor: How was it restructured?

Ted Collins, chairman and chief executive of Patriot Resources Partners LLC, recalls finding “hidden gems” in Amerada Hess’ West Texas portfolio, purchased for $60 million in late 1995. In 11 months, its PV-10 was some $166 million.

Hoglund: We changed the management so Craig came out of Apache to become president and CEO. We stopped the exploration programs and used the offshore cash flow to start making acquisitions. By 2008, we bought assets from Houston Exploration, Wiser Oil, Cordillera Energy, Chalker Energy, Maynard Oil, Peak Energy. And, we sold all the offshore to Mariner Energy. Forest ended up with a strong core of properties—East Texas, Arkansas, South Texas, the Granite Wash play in the Texas Panhandle. They completely remade the company. They’ve also gone from being one of the highest-cost companies out there to being one of the lowest-cost. Craig Clark and the team have done a good job.

Investor: Ted, what about you? Who is a company-builder you admire?

Collins: Floyd Wilson, obviously, for what he’s just done with Petrohawk. But you have to take your hat off to Aubrey McClendon at Chesapeake too. It might take a bird dog and a compass to figure out their financials and what all is in that company; it’s massive. And, I’d say Harold Hamm at Continental Resources too. He has built something huge.

Investor: Charlie?

Stephenson: I’d say another Okie: Larry Nichols at Devon. I met him in 1972 when we were bidding on different segments of a gas field in California. He has put together a fantastic company in Oklahoma City.

Investor: And, Ted, for the future company-builders out there, how would you complete this sentence: “If you’re not having fun in the oil business, the problem is…?”

Collins: You’re new to the business and haven’t seen the bad times yet or you’re just too picky.

Investor: And, Charlie?

Stephenson: How could you be in this business and not have fun? If you’re not having fun, you’ve got the wrong game plan.