From crude gathering in the U.S. to offshore West Africa and now, Alaska’s North Slope, Dallas wildcatter Jim Musselman has seen the industry from many viewpoints. Wherever he goes, he prefers to be the early mover.
Some of his adventures are documented in the film “Big Men,” which follows his journey to the first oil production offshore Ghana while he was CEO of Kosmos Energy.
No longer with that company, his latest venture is as founder and CEO of Caelus Energy Alaska LLC, formed in January 2014 with backing from Apollo Global Management. In April, Caelus acquired the North Slope assets of Pioneer Natural Resources for $300 million.
Armed with degrees from Duke University and the University of Texas School of Law, Musselman began his career practicing law with responsibility for oil and gas financing. Later he founded JM Petroleum Corp., a crude oil gathering and purchasing company with more than $1 billion in annual sales.
Following its sale, he assembled investors to secure the first Class 1 horse race license in the Dallas-Fort Worth area. Musselman led the design, construction and initial operation of the Lone Star Park racetrack in Grand Prairie, Texas.
In addition, Musselman was asked to turn around Dallas indie Triton Energy. He did, and then it found and brought to first oil Ceiba Field, offshore Equatorial Guinea, in record time. In 2001 Triton was sold to Hess Corp. for $3.2 billion in cash and assumed debt. Next, he and his colleagues founded Kosmos Energy, which in 2007 found the 2-billion-barrel Jubilee Field, offshore Ghana.
Investor chatted recently with Musselman about his new Alaskan adventure and other matters.
Investor: Jim, it’s sure a long way from offshore Africa to the North Slope. How did that happen?
Musselman: At Caelus we’ve done a couple of large-scale deals now. One was with TPG Capital in Southeast Asia, where we farmed into a couple blocks, but we didn’t find anything of the size and commercial scale with upside we were hoping for, so we’ve sold that interest to a company that is soon to go public in Singapore. As we were winding that down, the Alaska opportunity popped up, and we really like it.
Investor: Why?
Musselman: Alaska has been the backyard for the majors since the 1970s, but there’s really not been a lot done since then on the exploration side. The TransAlaskan Pipeline was full for years. But … the pipeline is down to 500,000 barrels per day from 2 million, so the state has really been encouraging companies to come in and explore. It’s a good thing to see a government that’s so enthusiastic and wants our technology and our capital—and, it speaks English!
From Pioneer we bought the Oooguruk Unit, which is adjacent to the Kuparuk River Unit—the second largest oil field in North America. Pioneer built on an island in the Beaufort Sea, and we’re going to continue to drill wells there over the next couple of years to maximize recovery from the existing reservoirs.
Investor: Anything onshore?
Musselman: Yes, our Nuna development project is a different and extensive reservoir. We’ll spend $1.2- to $1.3 billion on that over the next few years, and we expect first oil in fourth-quarter 2016 once we’re up and running. We want to explore as well, so we’re looking feverishly for opportunities up there. As my E&P guys tell me, it’s the oiliest place in the world.
Investor: Besides the weather, what do you face?
Musselman: The rocks are tight, but we are comfortable with the new technology. It’s a funny time: It’s an old area that’s been looked at a lot, but we’ll try 6,000- to 7,000-foot laterals with 12-stage fracks. So in a way, it’s very similar to what they’re doing in the Permian Basin and the Bakken.
Investor: Do you prefer U.S. or international exploration?
Musselman: It depends on the opportunity set and what you can find at any given time. When we first went to West Africa in the late 1990s with Triton, there weren’t many independents there and the majors had left. We looked for stratigraphic traps off the structural highs they had worked on and drilled those. What we’ve found over the years is that we can make a nice living by working in areas the majors have left, where there aren’t too many companies and too much capital. The pendulum has swung from exploration to these shale plays, so that’s why we have this sort of opportunity back in the U.S.
Investor: Which technology do you feel has had the most impact on the industry?
Musselman: The advent of modern 3-D seismic is still the best thing. We’re projecting that U.S. oil production will grow to more than 12 million barrels per day in the next five years—that’s extraordinary.
Investor: What was the most exciting event in your entire career?
Musselman: Obviously, Jubilee was the most dramatic, the biggest thing I’ve done. To look at that log—a thousand feet of gross section, and sand after sand—it was thrilling.
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