Chatting With Dan Hughes

Dan A. Hughes Sr. and his twin, Dudley, grew up in East Texas and Louisiana pipeline camps where their father worked. In high school, Dan worked on a maintenance crew attending to those pipes, and during summers while in college, he was a roustabout in the Oklahoma oil fields.

But generating a prospect, making a discovery, then selling it to another company, is what makes his heart beat faster. This year, the American Association of Petroleum Geologists recognized him with the Norman H. Foster Outstanding Explorer Award for more than 60 years of making significant discoveries around the world, from South Texas to Canada, Colombia and Australia.

Hughes graduated from Texas A&M in 1951 as a geologist. His love for that field of endeavor was such that while serving at Fort Bliss in El Paso, he mapped some southeastern New Mexico geology in his off-duty hours. He actually bought some federal acreage for 50 cents per acre, then sold it to a local independent who discovered an oil field that still produces to this day. It was the start of a remarkable career.

After serving in Korea, Hughes joined Union Producing Co. in New Orleans, but soon transferred to Beeville in South Texas, where he still lives. In 1961 he became an independent and traveled all over the Texas and the Gulf Coast region generating prospects and retaining overrides as he sold those to other companies. In 1967, Hughes & Hughes Oil & Gas Partnership made a big gas discovery in Webb County, near Laredo, that became the Las Tiendas Field. Large enough to enable a 114-mile gas pipeline to be built, this field underwrote a bigger exploration program.

Through the 1970s, exploration expanded to Canada (in connection with Robert J. Gowdy, Anderson Exploration, they discovered the famed Dunvegan Field and 1.6 trillion cubic feet of gas), Europe, and Western Australia (his Woodada gas field supplied Perth). Along the way, these interests were monetized when the market timing was right. In 1996 Hughes began work in South America and after several years of trial and error, selected Colombia’s prolific Llanos Basin, drilling more than 100 wells and making several discoveries. One concession was sold for nine figures.

Active in many philanthropic efforts, he has endowed the Berg-Hughes Center for Petroleum and Sedimentary Systems at A&M, to support Aggies getting the best in petroleum education.

Hughes’ partners are individuals not in the oil business, and they invest alongside the company. From the Deep Wilcox to early Barnett and Eagle Ford shales, the Dan A. Hughes Co. has continued its success. Today it employs about 85 people. Son Dan Jr. runs the company now, along with Dan Sr. Like all geologists, they can’t resist pouring over one more seismic line. “We can’t find anything else that’s more fun,” he says.

Investor What is your company working on these days?

Hughes We’re primarily looking for oil right now, but we’ve done a lot of gas in the past and will probably do so in the future. We have been producing for 60 years, but now we’ve been developing more horizontal plays. These horizontal wells are really expensive and so, probably more appropriate for a public company to drill. For years we produced everything we drilled, but in the last few years we prefer to develop plays and sell them.

Investor How many wells might you drill this year?

Hughes I think we’ll participate in about 40. We have three rigs running, two in the Eagle Ford trend, but also drilling other zones like Buda and the Pearsall.

Investor Tell us more about the Pearsall.

Hughes It’s been known about for quite a while. It is deeper and more expensive to drill, though, and pretty gassy, so development will be slow with these low gas prices. They’ll catch up eventually, but it will be a while I think. Eventually, gas will be sold on a world market basis. I think exporting LNG will be the only solution.

We just finished a well in the Brown Dense near Monroe gas field in Louisiana. I don’t know how good that will be yet, as we are just testing it now. We do have plans to drill in Alabama this year in the Smackover trend. We have acquired a large position in the Sunni-land Trend in Florida and think that has good potential.

Investor To what extent are you still involved abroad?

Hughes We’ve been in Colombia for 12 years or so, and been very successful there. We actually have sold out of three different concessions down there over the years, and we have two more right now that we think are very favorable. We may drill on that later this year. We have a seismic crew working in Belize, too.

Investor Do you prefer domestic or international exploration?

Hughes I like them both. You have to start out in domestic and drill some wells to build an organization before you go international, but foreign operations have an advantage because once you get your concession—often millions of acres—your prospects are probably sparsely explored. You don’t have a lot of competition and you get such large blocks of land.

Investor What’s your philosophy?

Hughes We are exploration focused and we like the calculated risk…Ranch land is a good thing to own, especially if you get some production on it. It’s a better hedge against inflation than gold—and a lot more fun.