Not too long ago, though it may feel like a lifetime—oil was selling to the tune of $100 per barrel. These days, a consistent $50 per barrel would be music to the industry’s ears. It’s agreed that an upswing is sure to follow; it’s just a matter of when.

Oil and Gas Investor celebrates its 35th an­niversary this year, as does New Prospect Co. (NPC), a drilling contractor that was initially based in the Arkoma Basin. Eventually, the company diversified into wellsite consulting and other services, and its operations spread across the major U.S. basins and the Gulf of Mexico.

Investor sat down with Mike Oxley, NPC founder, and Jose Dominguez, executive vice president, to explore how the company navi­gated industry obstacles from the early 1980s to today.

In the 1970s, Oxley, an aspiring civil engi­neer, asked his uncle, John T. Oxley, founder of Union Texas Petroleum, and his cousin, John C. Oxley, founder of Oxley Petroleum Co., what they thought of his intended career path.

Without that conversation, Oxley might never have created NPC. His uncle warned that civil engineering was “a four-year cycle, boom, bust.” He insisted that Oxley look into the oil and gas industry instead. Oxley paused, then asked, “Is it noncyclical?” “Yes,” his uncle responded confidently.

That counsel, albeit ironic in light of his­torical industry volatility, struck a chord with Oxley. Somehow, NPC has kept time de­spite the ups and downs in the industry’s sine wave patterns. And it has maintained family as its cornerstone.

Today, Oxley is chairman of the board of NPC and determined to share everything he’s learned with his son-in-law, Domin­guez. Like Oxley, Dominguez began as an engineer and worked his way to the execu­tive level.

The company has endured downcycles through its willingness to adapt and its firm commitment to its roots. Like a growing family, it has transformed over time but retained the core values in its DNA.

Finding an answer

The career discussion prompted Oxley to visit his cousin’s drilling operations in Okla­homa. That trip left a mark on the young man, who had previously thought of oil rigs as sim­ple wooden derricks.

“I was in, I was hooked,” he said of his first experience in the field.

Oxley worked for his cousin’s company while pursuing his petroleum engineering de­gree at the University of Oklahoma during the “big boom” of the late 1970s. When he gradu­ated, the company’s leases were expiring, and the coworkers he’d come to know were con­fronted with a predicament.

“All the old-timers were around the office there, saying we have problems, we can’t get these leases drilled prior to expiration because there’s a backlog on rigs,” Oxley recalled. “Finally I just said, well, I’ve got an answer. I’ll just start a drilling company.”

Starting off with a bang

NPD was established in Greenwood, Ar­kansas, in March 1981, to provide contract drilling services in the Arkoma Basin. As planned, Oxley purchased two rigs for $3 mil­lion apiece. In June and October 1981, the first two holes were spudded.

On the final day of that year, however, the nation’s rig count peaked at 4,650 drilling rigs. In the Arkoma Basin, the rig count topped out at 130 rigs. The 1980s oil glut had begun. “I like to tell people I enjoyed two months of good times,” Oxley said with a chuckle.

Within its first year of operations, Oxley broadened NPD’s offerings to include roust­about, engineering and compression services, and pipeline and wellsite construction.

By the mid-1980s, Oxley had begun pur­chasing items from companies in bankruptcy. Brand new drilling equipment was selling for one or two pennies on the dollar. Rigs that had set Oxley back $3 million were going for less than $100,000.

By 1986, the Reed Tool Co. rig utilization tally had taken a dive to 473 rigs, and the count in the Arkoma Basin had crashed from a peak of 137 rigs to four.

“We only had two rigs, but our two rigs were busy—I liked to boast that we had 50% of the market share,” Oxley said.

‘Iron is iron’

NPD’s conviction lies in its motto, “Deeper for Cheaper,” and its investment in “its greatest asset—which doesn’t even appear on the bal­ance sheet—people,” kept the company alive as competitors vanished. Oxley said the motto implies professional integrity, the ability to be the lowest-cost producer and cognizance that the lowest-bid day rate isn’t always the best choice—the lowest-cost and accurate AFE is. NPD emphasized drilling curve performance, personnel qualities and track records.

In a time when larger, more widely known drilling contractors like W.R. Grace were slashing employees’ wages, Oxley maintained his workers’ pay. He still remembers the morn­ing after W.R. Grace, the Goliath to NPD’s David, cut wages, while he didn’t.

“Our employees making better wages meant they felt important, which translated into them taking care of the equipment and looking after New Prospect’s interest, which is directly aligned with the customer’s,” Oxley said. “Iron is iron, but people are the true differentiator.”

The next step

In 1998, sensing a market correction on the horizon, Oxley sold NPD’s seven drilling rigs to Nabors Drilling USA. During its 17 years in operation, NPD had held its own while 34 of the 37 other drilling contractors in the Arkoma Basin shut their doors. NPD had 66 differ­ent clients, drilling over 3.5 million feet in 535 wells, for an average of nearly 7,000 feet per well. Oxley retained the company’s nondrilling assets, like its ProData software and production and roustabout services, and leveraged them to launch a new service enterprise: NPC.

For the second time in his career, Oxley started a company just before a bust—this time two days before the bust, not two months.

“They started laying rigs down across the U.S.,” Oxley said. The agreement with Na­bors stipulated that the company could hire NPD’s employees. Due to the downturn, “they laid off my tool-pushers 48 hours after the rig was stacked.”

Employees came back to NPC in search of a job, and Oxley developed wellsite consult­ing services.

Spreading out

By 2004, NPC had divested most of its re­maining hard assets to hone in on its consulting services, Dominguez said.

In 2006, Oxley appointed Richard Howard to take over as president of NPC. Howard had come to work for New Prospect Drilling in the late 1980s as a completion engineer. When Oxley Petroleum sold to Chesapeake in 2003, Howard briefly worked for Chesapeake before returning to work for Oxley at NPC in 2005. Since Oxley had been a colleague of Howard for 25 years, Oxley knew he was someone who had the knowledge, business acumen and trust­worthiness to succeed him as president.

Over the last 10 years, NPC has supervised “over 23,000 wells in drilling, completion and workover operations … for over 190 E&P oper­ators,” Dominguez said.

At the same time, NPC has extended its reach to provide drilling and completion con­sulting services across major basins, including the Permian, East Texas, North Louisiana, the Rockies, Eagle Ford, Arkoma, Anadarko, Appa­lachia (Marcellus/Utica) and offshore the Gulf of Mexico in deepwater and shallow waters.

The company’s geographical expansion began in 2006 in East Texas due to NPC’s fa­miliarity with the area’s regional oil companies, and the proximity to the company’s expertise in Arkansas. NPC’s extensive experience with air drilling from the Arkoma Basin aided its grow­ing presence in the Marcellus.

Looking ahead

Dominguez, now heading the future of NPC, said that the company “has morphed from drilling contractor, to personnel solutions to pipeline construction, and we have done it without acquiring new businesses, incurring debt or having given away control of the com­pany. Instead, we lean on our people, from all levels of the organization, for feedback and business ideas.”

He’s confident about the future of NPC and the industry, betting on NPC’s “best guesses being exceeded.” After all, “nothing moves without energy.”

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