Have Deal - Won''t Travel

Editor Column May 2006 Bulletin Have Deal - Won''t Travel
The AAPG Convention came and went last month, one of the biggest geological events that lands in Houston every few years. It consumes HGS members who volunteer for committee work and is driven by their energetic support. The convention draws people from all over the country and the world, and many friendships are renewed as colleagues who have not seen each other in years run into each other on the convention floor or around Houston. And while the AAPG Convention is a forum for medium and large companies and national oil companies, it is also a gathering place for the hundreds, even thousands, of small companies and independents that make up a large part of the United States domestic oil industry.
Among the independents, business is always at the forefront. This year, a typical greeting heard at the convention might be, "Hey, haven''t seen you in a while. What are you up to? Do you have any prospects? Do you have the leases? Do you have a rig?" Selling prospects isn''t quite what it was just a couple of years ago. Back then, a deal had to be shown repeatedly, and the question was always, "does the buyer like the deal, and do they have the money?" Now it is said, partly tongue-in-cheek, that if you have a rig available, you can sell virtually any deal.
At the beginning of 1999, oil was below $10 per barrel. Just 18 months ago, the price of oil broke the $50 per barrel ceiling. Consumers bemoaned the price of gasoline, and the national news services seized the moment. But unlike previous price run-ups, the national news was not citing the usual "big oil" culprits but was actually talking about real reasons that the price was up-increased demand, declining deliverability, reduced refining capacity, the Asian economy, a strike in Venezuela and so on. And investors, tired of a soft stock market, looked at $50 oil and said to themselves not "why is it that high?'' but "how can I get some of that action?" Private and public investment dollars are flowing into the industry in a significant way for the first time since the early 1980s. In 1992, I became an independent geologist and began selling prospects to the industry. At that time, if you were selling a prospect, you were expected to travel to the buyers to show your deals. In the course of selling prospects, I think I''ve probably been in every single office building in Houston at one time or another. To this day, when I go into a building, I may experience d‚j… vu, and have to look at the directory to see whom I may have showed a deal to in that building at sometime in the past. In the course of selling prospects, I''ve traveled to Dallas, Austin, San Antonio, Tyler, Luling, Victoria, Midland, Lafayette and even once showed a prospect on a pool table in Seguin, Texas. Once I sold a prospect to a company in Houston, and on the day we were to close, I showed up at their office, only to find the lights off and nobody home. Needless to say, the deal didn''t close, and it went back on the prospect circuit.
That prospect eventually sold, and the fellow that disappeared on me actually had the nerve to call me two years later to see if I had any deals to sell! I didn''t- at least not to him. At that time, if you were selling a prospect, you went to the money, where ever it was or appeared to be. It''s 2006, and I am now looking at prospects for investors and myself. When I began buying deals, I envisioned sitting in my office, making all those deal sellers come to me, as I once had to go to deal buyers. But I find that still I have to travel. "Yes, I have a prospect," I might be told, "but if you want to see it before it''s sold, you''d better come to my place. The sooner the better." Earlier in the week, I flew to another city to look at six prospects and had to make a decision on them before end-of-business that day or the remaining interest would be sold to another company. It has definitely changed in the last decade from a buyer''s market to a seller''s market. I think I like it better now, but wish I didn''t have to travel so much. Of course I also still sell prospects as well. And I tell the buyers, "Yes, I have a prospect, and you are welcome to come by and look at it. The sooner the better."