Hart Energy:

Let’s start off with a look at your family history with deep roots in Oklahoma. Tell us about the family progression through the years.

Robert Hefner V:

I am the fifth generation in the energy business. My great-great-grandfather, they called him ‘The Judge.’ He was the mayor of Ardmore around 1905. He went on to be a Supreme Court justice for the state of Oklahoma, which is how he got the nickname ‘The Judge’ and then he became mayor of Oklahoma City during the World War. What he did was paramount to the city's growth. When he ran for mayor of Oklahoma City it was on the platform that Oklahoma City needed an adequate water supply in order to grow and so he dammed up what was at the time known as Bluff Creek Reservoir and the city ended up naming it after him in his honor for his efforts in getting that particular project accomplished. It wasn't popular at the time either. Now everybody really enjoys it and all the other things came with it. So, it is a wonderful family legacy. My great-grandfather, my grandfather, my father—they've all done wonderful things in the industry as well. My grandfather, he had GHK Co. which for multiple decades held the world record for world's deepest well. Also, highest pressured well—I think he hit liquid magma or something like that at some point in time. So, it's quite a tall shadow to get outside of, but that is kind of where I'm at right now. I'm my own man. I'm looking to make my own way and share my particular story.

Hart Energy:

Speaking of making your own way. Can you talk to us about why your focus is in Oklahoma’s Anadarko Basin?

Robert Hefner V:

For me—I was born and raised in Oklahoma City. I hated the oil and gas industry growing up. I also didn't care for my name and I was planning on leaving to one of the coasts to be in the tech business. Ironically, my first deal I ever did out of college was a technology deal. It was a water technology. We took a publicly-traded company’s technology perpetual-license into a privately held entity. The company’s name was Ecosphere Technologies. And it was a fun deal but it taught me that technology is quite difficult. Then I gained a quick appreciation for the oil and gas business and wished I had listened to my father all those years growing up. So, as far as it is concerned now, it wasn’t a choice necessarily as much as it was required. I graduated December 2008—a terrible time in the industry. I couldn't get a job. I reached out to Aubrey [McClendon]. I reached out to Tom [Ward]. No matter who I talked to, I couldn't even get an interview. I got engaged, bought a house, got married [and] lost my job. So, it was quite hard for me out of college. It built character, that’s for certain. My whole career all I wanted to be was an in-house guy and really was jealous of all those guys who were in-house. But it built something that I would have never been able to build otherwise. So, it was more out of necessity than it was choice.  

Hart Energy:

Let’s discuss technology in the business right now.

Robert Hefner V:

At Hefner Energy, we are a fintech—financial technology—company that happens to invest in minerals and royalties in the Anadarko Basin. So, within that fintech platform, it's a heavy dose of data. You have to make sure you don't have a garbage-in, garbage-out scenario because if your analytics are flawless but you feed it with bad data, it spits out something that is quite bad. So, we have spent a lot of time on our data making sure it's very quality controlled such that it feeds into the analytics properly and we have very quick responses to mineral owners who are desiring to sell their minerals, for example. Or, for example, we use technology, in a sense of, we lifted video game technology from the video gaming industry for collision detection. So, polyline to polygon detection systems such that we can understand in space where a wellbore exists within a drilling and spacing unit. So, instead of just understanding the surface-hole location or the bottomhole location, for example, and prescribing all the production to either or. Some of these are three-mile laterals. Well, what about that middle section? And if you’re only understanding service-hole location, your systems, your machines are going to put all the value, all the production in one section when there's three producing sections in the unit. So, the idea is to automate as much as you can and let the machines do what they do well, which is aggregate, disseminate, transform data such that a human can do what they do best in making strategic investment decisions.

Hart Energy:

We know the market can be volatile. Do you think this is a good time for the younger generation and next-generation of leaders to look at how they can benefit from that environment?

Robert Hefner V:

I just recently was at the University of Oklahoma (OU) lecturing Mike McConnell's class, who is a great friend and mentor of mine. My message to that 3,000-level course in energy management at OU was: ‘Listen, guys. This is a terrible time. It's going to be very difficult. You're coming out at what the equivalent was for me in December 2008. So, if you're going to set yourself apart, you need to understand how to code. You need to understand advanced Excel. You need to understand how to model something such that you're valuable [on] day one. You can't be learning on the job anymore. You need to be applying yourself while you're in college.’ Within our own company, in our hiring process, I actually make every single candidate take a typing test to see what their speed is when typing. If they don't meet at least 40 words a minute, they're not hireable. We found that there's a high correlation between typing speed and computer proficiency. You absolutely have to have those skills in this environment. It's things like that. Another thing I would highly recommend to young people, especially coming out of college or who are currently in college and want to be in this space, is understand what your strengths are. Tom Rath put out a book called “StrengthsFinder 2.0”. I fully subscribe to his vision, which is we don't need to be a psychologist and focus on everything that's wrong with society or everything that's wrong with you. I don't need to find what you're bad at and make you better at it. Let's find what you're good at naturally and develop those skills to where they are true strengths. Figure out what your strengths are and put yourself in a position to succeed.

Hart Energy:

Do you have any plans to expand outside of the Midcontinent?

Robert Hefner V:

The next two years we are going to be in the Midcontinent and the Anadarko Basin specifically. We believe it is a multibillion-dollar opportunity for us and we don't have the dollars to satisfy that. Eventually, yes, absolutely. Everything that we're building is foundational to moving to other basins and we've built our data and analytics platform such that we can move to other basins with much larger ease. Oklahoma is a terrible state when it comes to data. It’s because we are just old. We are one of the oldest producing states. All that data that has been aggregated has been aggregated in a manner which was 19th-century technology. We're in the 21st century and the Oklahoma Corporation Commission is just now getting $5 million to modernize our systems. We’ve started out in what we believe to be the hardest data environment. We believe it's going to be much easier for us to take steps into easier data environments. Right now in our environment part of what's going on in the oil and gas community specifically is that we're being attacked on ESG. We have had bad governance in many instances and governance is a huge piece but also the environmental aspect. Climate change—it is real. It's impacting us. The divestment movement is becoming successful. If you look at the Norwegian Pension Plan—the largest pension plan in the world—they have chosen to divest of fossil fuels. Which for them it really means divestment of coal, not necessarily oil and gas. Regardless, it's having an impact. People are talking about it from coast to coast and this is our opportunity for the first time since maybe the turn of the century or the 1980s to have a voice as an industry and engage the public and we're doing a terrible job at it. And so, as an industry, I look around and I see the leaders of my industry being engineers and geologists—very technical people that demand rigor and they demand answers in the form of quantifiable objective statistics. Well, there is gray in this world too. And the reason gray exists is because there are facts on both sides. Otherwise, it would be black and white. What I think we do very poorly and what I'm really advocating for at the moment is to get involved, have those discussions, export our energy IQ across the country in an emotional way. I would encourage everybody to go to Life: Powered, which is a new resource for everyone. Well-backed—I think that it has $6.7 million for G&A this year. Bud Brigham and others are behind the effort. They are putting out content that really appeals to that emotion. Waking up, going through a morning routine, getting in your car and going to work—you'd be amazed the amount of petroleum in that system. You wouldn’t be able to brush your teeth. I wouldn't be able to see you because I wouldn't have contacts in. My wife wouldn't have her yoga pants and that would be pretty poor and you wouldn't have any makeup. So, petroleum really powers our life and that's not going anywhere. Once people realize that, I think the conversation changes quite quickly. Every conversation I have, coast-to-coast, people really wish they had heard this message before, that they had spoken with me earlier. Now, it's more of a conversation [and] it’s not combative. And so, we will address the issue of climate change. Largely, the coal-to-gas switch has caused the United States to lead the world in global CO₂ reduction.

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