Chatting with Don Wolf

Over a 40-year stretch Don Wolf became an icon for starting or leading E&P companies, then parlaying the buy-build-sell model into successful exits. His crowning moment came in the $3.4-billion sale of Westport Resources Corp. to Kerr-McGee in 2006. Yet, by his own admission, he “stumbled” into the oil and gas business in 1965 when he was visiting his new in-laws in Calgary, just before college graduation, and took the opportunity to interview with Sun Oil Co.

Wolf was born in Wisconsin, where his grandparents, and then his parents, ran a small department store. With that entrepreneurial upbringing, he received his business degree from Greenville College in Illinois. He stayed with Sun for six years, where he became a landman, and subsequently did the same for Bow Valley Exploration in Canada, Tesoro Petroleum and Southland Royalty. He transferred to Denver in 1974 to run Tesoro’s land department for Canada and the Rocky Mountains.

His independent spirit took hold in 1977 when he cofounded Terra Marine Energy Co. That company sold, and he followed by starting General Atlantic Resources in 1981, which he took public in 1993. The following year, General Atlantic merged with United Meridian Corp. for $200 million. In 1996, Wolf joined Westport as chief executive, and took it public in 2000. He was named IPAM’s “Wildcatter of the Year” in 2001.

In 2006, Wolf formed his last E&P, Quantum Resources Management, which turned into his biggest career challenge, he says. The company made $650 million in acquisitions before the bottom fell out of the economy and oil prices in 2008.

“Timing is critical,” he says. “In the past, I was fortunate not to buy just prior to a big price collapse.” The company is now thriving, and Wolf continues as chairman.

Today, Wolf serves on the board of six energy companies and enjoys international travel, as well as golfing and fly fishing in the Rockies with his wife, Patty.

Investor How did you get started?

Wolf In my first job, I helped the engineers with joint-interest activities. I moved into land after that.

Investor Did the move to the land department change your career trajectory?

Wolf I think so. I made a lot of industry contacts and furthered my business judgment in assembling and marketing deals.

Investor How did you make the leap to do your first start-up with Terra Marine?

Wolf I was introduced to a fellow who wanted to break into the E&P business. I recruited two geologists and he backed us with approximately $2 million. We generated prospects in the Powder River Basin, North Dakota and the D-J Basin. When we partnered or sold them, we got our money back and a carried interest.

We did that from 1977 to 1980, and were quite successful. During that time prices doubled, and the cost of leases went up. We went to find more capital, and in the process sold the company.

Investor How was General Atlantic born?

Wolf One company we had contacted when raising money for Terra Marine was General Atlantic Group in New York City. I circled back to them. It was a time when penny oil stocks were going great guns. The idea was to raise a drilling fund, then take it public on the Denver penny oil stock exchange. General Atlantic had no interest in being public on the Denver Stock Exchange, but was willing to back me on the start-up. We started with $12 million and a handshake.

Investor: What has been your formula for starting, building and selling?

Wolf Back in the 1980s, companies were either drilling companies or acquisition companies, due to tax structure. We took a combination approach. Not wanting to risk the principal for our investors, we tried to marry acquisitions and exploration. Even if the exploration was unsuccessful, principal was protected through the future revenues from the acquisition.

Investor What is the biggest chance you’ve taken?

Wolf Leaving the bigger independent and going to a start-up with two geologists. To move into something so undercapitalized was a leap of faith.

Investor If you were to start an E&P today, what would it look like?

Wolf It would be focused on resource plays. Horizontal drilling and fracing have changed our business materially. I’m not sure a small, growing E&P needs to do acquisitions anymore. If it has core acreage in a good resource play, the returns are perhaps more attractive than to buy producing properties.

I am a believer in core acreage in the heart of the play. Economics are worth the extra cost of acquiring that position. And scale is important. You have to have running room and upside to conclude a successful ultimate sale.

Investor What advice would you offer to somebody starting an E&P today?

Wolf The team is critical. They need a business plan and enough experience that investors have some ability to do due diligence and gain confidence.

Investor Advice for the next generation?

Wolf Associate with smart and successful people, and with companies that are active and successful. And be sure that your word is your bond…a good reputation carries you a long way.