A few years ago, Texas A&M University approached distinguished graduate and former engineering professor Pete Huddleston about receiving an honor, but the Houston petroleum engineer, operator, author and consultant said he didn’t want to be a “legend.” Later, the school invited him to come early to a football game and sure enough, it unveiled a book of A&M legends and he was included. He had captained the 1955 varsity football team coached by Paul (Bear) Bryant.

Upon graduating in 1957, Huddleston worked for Marathon Oil Co. until 1965 (with two years’ leave as a first lieutenant in the U.S.A.F. from 1958 to 1960). But by 1965, he and his wife had moved 14 times in eight years, so when MRO offered him another transfer, he resigned and came to Houston. “Moving to Houston was naïve but not risky. I knew I could always go back on a drilling rig.”

Indeed, beginning at age 12 he had worked in Pecos County, Texas, on tailing rods, and he roughnecked until graduating from A&M.

By 1967 he had created Huddleston & Co. Inc., where he is still chairman. In 1971 he founded Peter Paul Petroleum Co., which manages joint ventures and partnership interests in more than 2,500 producing properties for private investors including an Ivy League school he won’t name. Distributions to date total more than $1.1 billion.

From 1981 to 1998 he taught petroleum engineering at A&M, wrote a manual that has been used by several schools, authored more than 130 papers and served on the SEC Oil and Gas Advisory Committee and FASB Oil and Gas Task Group on petroleum accounting.

From 1991 to 2000 he was a member of the School of Engineering Advisory Board, and received the Distinguished Alumnus Award in 2005 and Texas A&M Letterman’s Association Lifetime Achievement Award in 2012. However, he and his wife of 58 years, Flora, consider their greatest reward the scholarships they have provided for more than 200 university graduates from numerous accredited universities.

B. P. (Pete) Huddleston

Investor: You said you have several family-owned partnerships?

Huddleston: Yes. Peter D. Huddleston (president), Paul Huddleston, Lisa Huddleston Currie, Peter Currie (vice president), Kathy Huddleston, Dori Huddleston, eight grandchildren and one great grandchild.

Investor: Can you reveal some findings from your new Eagle Ford study?

Huddleston: We consolidated our data by county, so it’s not accurate by lease, but it gives you a good idea of the economics overall. Of 18 counties in the Eagle Ford, we find five are pretty good and in five, you will lose money.

Our projected average ultimate return is $1.50 back for each dollar spent. You will need two, maybe three years of production data before you can get a reasonable estimate of reserves.

For more than 7,500 Eagle Ford wells, the average EUR is 203,000 barrels and 847,000 Mcf. They’ll run 20 to 25 years.

Investor: Do you prefer consulting, operating or teaching?

Huddleston: I prefer consulting (it’s 90% of my time) because there is constant change and new projects. Our E&P operations are mature and they’re kind of like watching grass grow.

I enjoyed working in the field, but consulting had the potential of expanding my knowledge.

I came straight out of a major to do consulting and I couldn’t understand why companies constantly put pressure on you to increase reserves. Turns out larger reserves and the election to capitalize or expense costs allow you to manipulate your DD&A, which affects earnings. So I became fascinated with public accounting too. But I don’t use GAAP—I use the cigar-box theory: If I start out with a dollar in my cigar box and end up with $3 in it, I’ve had a good day.

Investor: What about teaching?

Huddleston: I would still teach the same thing, just updated: “How to manage oil and gas properties,” and “How to analyze public companies from SEC filings.” Our semester project was to evaluate two public companies, merge the two and build pro formas required in an SEC S-1 filing.

Investor: What do you think about exports?

Huddleston: Export is insanity. I think we’re getting ahead of ourselves. Eventually, later in their life, a lot of these shale wells won’t be economic. The original OPEC was the Texas Railroad Commission. In the 1950s, Texas proration rules limited our production to plus or minus 30% of the capacity for “conservation” reasons.

Investor: We’re getting ahead of ourselves?

Huddleston: Twenty years ago we could not envision shale being a major factor, so in the future there may be some other new technology. We monitor all of the major shale developments. A typical well will have 25 to 35 months’ life index, that is, the time to produce ultimate reserves at original capacity and no decline.

I believe ultimately that the shales will not sustain the U.S., although more infield drilling will happen, and will cause drainage, interference and hype the rates for a while—at costs that will not be economical.

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