Q: So the entire company is you and two other guys?
Q: What’s the age range?
A: I’m the oldest… so we’re all under 30.
Q: And how long have you guys been in the oil and gas industry?
A: Well, this company started about a year ago. I just started with it back in January. The guy with the most experience, he is 27, has been involved in the industry since he graduated college, so about 5 years or so. The other guy has been in the industry for a couple of years.
Q: So what do you actually do? I mean, you’re not drilling and refining oil yourselves, I imagine?
A: No! Well, not yet. We’re working toward that. Working toward leasing the equipment to do our own drilling, I mean. But right now, we handle the leg work involved with getting the drilling leases. So basically, we’ll pick out an area that we’re interested in for drilling. We’ll go out there, and there’s a lot of research to find out who actually owns the mineral rights for the land. A lot of paperwork and legal documents to work through.
Q: Mineral rights? Is that the same as who lives on the land?
A: Not always. Out in west Texas, and any other area where it has been known there may be oil or natural gas deposits, it’s almost never the same. Back when they first found out that there was oil in west Texas, some people bought up or reserved the mineral rights for big tracts of land. When you buy a house, or a property, out there, you’re just buying the surface rights and the mineral rights aren’t always included due to a previous reservation.
B: So you have to contact both?
A: Right. You need to get a lease for the mineral rights, and for setting up drilling you have to have an agreement with whoever actually lives there. But figuring out who owns the mineral rights can be the hardest part. Like I said, these big plots were bought up decades ago. But then, whoever owned it all might leave it to his six sons when he died, and each of them might leave it to other people. Some of the documents I’ve dealt with were really short, like one page. Other times, they can be 20 pages long, because there are so many owners. I’ve dealt with people who owned 1/32 of the rights to a plot of land, because it was divided up so much.
Q: So you contact all of the owners, and basically have to get an agreement signed for permission to drill?
A: Basically, so we do all of that research and legwork, and get all the documents in order. Once we are confident in the owners we then contact them and negotiate the lease terms including length, signing bonus, and royalty payments. If they sign a lease we hook them up with a drilling company. Usually it’s one of the big oil companies, who do their own drilling. Sometimes, it’s an independent drilling company, who will turn around and then sell the oil to one of the big oil companies. But then our company gets money off of the deal: a percentage, or an overage, or whatever the agreement is.
Q: How do you decide what land to scope out? You don’t necessarily know where there is oil, right?
A: Right. The big companies can pay geologists to go in, and do these in-depth soil samples, to determine whether there’s oil there. We can’t afford that, but we can still look at research. Look at where shale outcroppings are, stuff like that. In areas such as the Permian Basin or west Texas, the major shales are well known so it is all about picking good tracts of land on top of those shales. But what we do most of the time… and we’ve gotten really good at this… we look at patterns in the land that the big oil companies are buying up, to find out what areas they are interested in. Then, we just go in and buy it up first, so the big oil companies have to buy it from us.
Q: Really! How entrepreneurial.
A: [Laughs] Yeah. But you have to understand, the big oil companies have their own people who they hire to do what we do. They hire land workers to go out, research the owners of the land rights, and get all of the lease documents and paperwork signed. But the big oil companies hire them as day workers. You know, like $200 per day or something depending on experience levels, right? Now, you know the number one rule about being a contract worker: you don’t want to work too fast. Because if you work really fast, you make less money. So they tend to stretch it out, take their time and not work themselves out of a job.
Q: I see.
A: We don’t get paid by the day or at least not anymore. We get paid when we close a deal. So we go in there and get it done fast. We get it done before them, and then hopefully by the time the big oil companies get there, we have the lease. They have to negotiate with us or we can present it to them if we think they may be interested. Our main assets as a company are our work ethic, being able to work fast, and then picking the right land to focus on. And we’re pretty good. I mean, we’ve made some mistakes. We bought up a bunch of land a while back, thinking it would be land the oil companies would be interested in. Then we couldn’t find anyone who would buy it for more than half of what we offered to pay. So… there’s risk. You lose money and time, but you learn, and move on.
Q: What’s it like on the sales end, talking to the actual land owners?
A: It’s very personal. It’s a door-to-door type of sales job. Especially out in west Texas. These people… they are smile-and-handshake business people, mostly. The personal relationship means a lot. You have to have that to close deals. One example recently, I was talking to this woman who had already spoken with another company about the lease to her land. She said she was already in negotiations, and didn’t want to step on any toes. No hurt feelings, you know. So I just chatted with her for a while, and told her I understood. Real friendly. About a month later, she calls me back, and says that she signed the paperwork with the other company, but still hadn’t received the signing bonus she was promised. So, I talked with her. Told her what legally she could do, what her options were. I told her that if she was able to get released from that contract, our company was still interested. But then I just spent time talking to her. You know, for like half an hour, about her family and stuff. Anyway, a couple of months go by, and she calls me back again, and tells me that she was able to break off the contract with the other company and she wanted to do business with us. That’s how deals get closed, see? It’s a personal relationship. In this industry deals can close fast but most take a lot of time. You need to be patient and build relationships with the people that live on or own the land.
Q: So I have to ask, as a small business in the oil and gas industry… what are your feelings about government regulations? Do they get in the way of you guys doing what you need to do?
A: For our company? No, not at all. Not for what we do. But I can’t speak to the companies that actually do the drilling. Once we’ve gotten our company going enough, to where we are doing our own drilling, then I’ll have more first-hand experience to be able to tell you about that. But I can tell you, my impression is… I mean, my impression about regulations… they’re not stopping people from drilling.
A: Not at all. I mean, sure, there are agencies you have to deal with. Railroad Commisions and other industries. There’s paperwork, and I know drilling wells is expensive. But these companies that are doing the drilling are doing just fine. In just the past month, in one county out in west Texas, 20 new wells have started up and there are many other counties just like that. There’s nothing getting in the way of drilling. Drilling is doing just fine in Texas.
Q: That’s interesting.
A: You have to understand that there are so many loop-holes, too. Companies want to drill and are very willing to compensate people to do so, but there are still plenty of people who are opposed.
A: If an oil company wants to drill in a place, it’ll do it. Regulations typically aren’t going to stop them.
Q: Give me an example.
A: So there is this one regulation, or what in the industry we call the 330-rule. You can’t extract natural gas within 330 feet of unleased land. Drilling for natural gas is different from oil. When you drill for natural gas you drill down and then horizontally. In urban areas, such as Fort Worth, this can mean your extracting gas from multiple land owners. So, you know, the oil company leases a bunch of land, and let’s say someone sitting on a section of the land and for whatever reason this person doesn’t want to sign a lease. Let’s say, they are against fracking or whatever. Well in most cases the drilling company may file that they will change their horizontals a little so they stay 330 feet or more away from the unleased property. With natural gas there is only one well site and possibly 3-6 horizontals drilled from it. It allows companies to extract natural gas from areas without many wells being all over the place.
A: Right. So that’s why, when I talk to people who are opposed to drilling for whatever reason, I always tell them: Listen. I don’t work for Shell, or whoever. But they’re going to do everything they can to drill these properties. So in my opinion you might as well sign a fair lease agreement and make some money from a signing bonus and royalty payments for years to come. Most people in west Texas with large tracts of land know the process and their major concerns are getting a fair price, percentage, and if they own the surface rights making sure their land is taken care of. In urban environments such as Fort Worth we would run into people who just wanted more money, but some had no reason and just didn’t want drilling in their neighborhood. In that case I would tell them it will most likely still get drilled, just around their property, so they should make sure they are earning money just as their neighbors are.
Q: Sounds like quite a sales pitch.
A: Well, it’s true. So that’s one reason the regulations aren’t really getting in the way of anything. But I’ll tell you something else, too. Since the regulations about drilling were put in place, back however long ago that was, drilling has become really safe. A lot safer for the people who are actually doing the work. I mean, you have some cases where people aren’t following the rules, aren’t following the regulations, and then you have problems. Like that BP spill. But as long as you’re actually following the laws, drilling is really safe now. So I’m all in favor of the regulations. People bitch about it because it’s annoying and it’s paperwork, and it cuts into their profit margin some. But it’s not really stopping business from getting done. It’s not stopping anyone from drilling.
Q: I have to ask: are you a Democrat or a Republican.
A: I’m a Democrat, definitely.
Q: Is that unusual in the industry?
A: Completely. It’s a very Republican industry. I don’t mention that I’m a Democrat to anyone I deal with at work.
Q: So… I guess you don’t want me to mention the name of your company in the interview?
A: [Laughs] No.
Q: No plug? No publicity?
A: No, it probably… well, it wouldn’t be helpful.
Q: Fair enough. Well, thanks for shedding some light on this side of the industry. Everyone always hears about “Big Oil”, I think a lot of people… or at least, a lot of people like me, who are not directly involved in the industry in any way… never even think about what it means to be a “small business” in the oil industry. I guess there really is such a thing as “little oil.”