Greene Light

In the oil and gas business, deals are often about who you know. The advantage in this case goes to Jim Crockard, CEO of LOLA Energy. Crockard heads a management team of former EQT Corp. executives heading to familiar territory: Pennsylvania.

As a warm winter saps demand for natural gas, the company is actively embarking on a leasing and acquisition program. In December, LOLA announced it closed on a $250 million commitment from private equity firm Denham Capital. Denham’s decision to fund a quarter-billion-dollar natural gas expedition may seem, delicately speaking, a little gutsy, yet the talent on LOLA’s management team had its pick of capital investors.

At EQT, Crockard served as senior vice president of business development and land. He made contact with his future management team, including drilling maestro Richard Hill, EQT’s executive vice president of drilling and completions; Lindell Bridges, who pioneered early technological advances in EQT’s Marcellus shale gas development program; and Dave Bradley, who supported EQT Midstream Partners LP’s IPO and is now LOLA’s chief commercial officer.

LOLA is seeking assets in southwestern Pennsylvania, northern West Virginia and eastern Ohio.

“What we’re targeting is Marcellus and Utica potential, with a preference being Marcellus that works economically right now,” Crockard said. “That’s easier on the dry gas side, harder on the wet gas side, but both are equally interesting right now.”

LOLA is in talks with two kinds of sellers: companies saddled with capital costs that undercut profits, and firms in over their head because of debt that can’t be supported at prevailing commodity prices. In either case, they’ve had to stop drilling. LOLA is also open to joint ventures or other arrangements that would give the company access to acreage.

The first stop for leasing is Greene County, Pennsylvania.

Why? Greene’s potential is sky-high, the landowners are dissatisfied with some of the companies currently working there, and for Crockard, it’s home. He was born there, attended elementary school, high school and college in the county and frequently returns from Pittsburgh, which is nearby, to visit friends and family.

Undeveloped leases began expiring in 2015 after the first five-plus-five leases from 10 years ago were taken. LOLA can offer a concentrated, robust drilling program.

Greene County is replete with opportunity. In July, EQT completed the best Utica well to date, the Scotts Run 591340. After an initial production (IP) rate of 72.9 MMcf of gas, the company expected it to yield about 2.3 Bcf over its first eight months.

Landowners may not react warmly to overtures from companies that have been active there in the past, because “no one truly planted their flag,” Crockard said. “In a place like Greene County, where we’ve got deep relationships and deep ties, those are easy conversations for us.”

Landowners know that a small private company like LOLA has its attention fixed on their leases, he said. “There’s a high level of trust when you’re known locally and you have a technical team sitting next to you that these folks know can drill these kinds of wells.”

Crockard is aiming to assemble at least 10,000 acres in one region. LOLA’s initial drilling target is the Marcellus, because the Utica is too expensive given the downturn in commodity prices.

“We know we can drill Marcellus wells, 4,800-foot laterals, for $5- to $5.5 million,” he said. Even at current gas prices, he figures, returns should be north of 10% in LOLA’s target areas.

The Utica is likely to work out some day, but for now, “it’s still a bet,” he said. “No one has enough data to know how those decline curves shape out. We think it will end up looking similar to the Marcellus, if not better.”

Drilling the Utica can be ultra-expensive, with some wells reaching $30 million. Companies may be spending extra money to better understand the geology. Crockard said LOLA’s search for leases and acquisitions that hold Utica potential will be key if the shale ends up paying off.

But Crockard has long had an itch to be entrepreneurial and take on an element of risk that isn’t possible in huge companies such as EQT. “You don’t just wake up in the morning and say, ‘Yeah, I’m going to quit and do private equity,’ ” he said.

“I guess all upstream folks have a little wildcatter in their blood somewhere.”