LYNN BERGMAN: THE ACCIDENTAL OIL MAN
This article is a must read for anyone unsure of the expected extent of the ongoing oil boom in North Dakota. It is available on line at:
In 1999, EOG Resources, Inc. (EOG), formerly Enron Oil & Gas Company, adopted a new name and declared its independence from Enron Corp. Simultaneously, chairman and Chief Executive Officer Forrest E. Hoglund retired, Mark G. Papa was elected Chairman and Chief Executive Officer and Edmund P. Segner was named President and Chief of Staff of EOG.
Reading history has given Papa not only a better grasp of reality but important lessons in management. He says. “If you have somebody who is an extremely strong personality and who is talented but yet isn’t a team player, probably the best thing to do is help that person to exit the stage.
Mark Papa doesn’t subscribe to the near-religious view, in some prominent quarters, that green energy is the solution to half the country’s problems, if not more. Papa says “the world will continue to be a fossil-fuel economy for at least the next 40 or 50 years, and all the talk about green power and clean energy is likely to prove just that—just talk.”
West Texas Intermediate, the U.S. benchmark crude, has come under substantial pressure in recent months, falling to $85 a barrel from an April high of $111.93. Brent, however, is trading for almost $110 a barrel, which is more of a global price, Papa notes. The downside risk to prices, he says, is that “we have Global Recession No. 2. But as long as the global economy continues to limp by, the global oil price is going to be in the range of $100 to $110.”
EOG’s success stems in part from superior drilling prospects in places like the Bakken formation in North Dakota and the Eagle Ford Shale in southern Texas, where the company has added substantial acreage.
Papa says he spends 35% to 40% of his time on the road, visiting either division offices or field operations. “I take pride in knowing pretty much every well that we drill,” he says. “I know how it turns out. You can’t really separate yourself from the business.”
EOG was an early player in horizontal drilling and hydraulic fracturing, or fracking, which involves pumping a pressurized mix of water, sand and chemicals into the ground through a well to create cracks in shale rock. Those cracks, or fissures, enable oil and gas to be extracted. The technology has been around for a long time, but has been put into much greater use in recent years, vastly altering the amount of potential oil and gas in the U.S.
Fracking has come under attack by environmentalists, who contend it poses a serious threat to drinking water in the vicinity of oil and gas wells. Papa says their concerns are “amazingly overblown.” He also contends that the Obama administration has missed an opportunity to “embrace the bounty that the E&P industry has bestowed upon the nation” as a result of fracking. The drilling technique, he says, has lowered energy costs in the U.S. by about $50 billion a year, and created a lot of jobs.
Commentary:
Note that CEO Marl Papa spends over one third of his work time on the road, representing a lot of airplane miles and time away from family. And his visits to active rigs are as dangerous when he visits as they are to the folks that operate them day by day.
I challenge anyone to try to follow Mr. Papa around for a week to realize what his normal functioning stress level is. To those who say such executives do not deserve their earned compensation, I summon the words of Abe Lincoln… “Better to remain silent and be thought a fool than to speak out and remove all doubt.”
Lastly, as this summary was written, GDP growth in the third quarter of this year was revealed to have been at a 2.5% annual rate, largely dispelling the double dip recession concerns of the last few weeks by various media outlets. So, no one in North Dakota should lose any sleep concerning the prospect for oil revenues in our great state during the next decade and beyond.
© 2011 Lynn A. Bergman
DakotaBeacon