The last time a photo of William O’Brien IV appeared in Oil and Gas Investor, he was six years old and sitting on the lap of his father, independent oilman William J. O’Brien III. The occasion was an interview for a June 1991 cover story on the Ark-La-Tex.

Some 25 years later, O’Brien IV is president and COO of the family business. Since 2010, he has managed its expansion into new ventures in three states and four basins.

O’Brien worked summers as a roustabout in the family business in his teens and has a degree in petroleum engineering from the University of Texas at Austin. He joined Devon Energy Corp. after college as a production, drilling and reservoir engineer in the South and East Texas districts; during his tenure he earned an MBA and certificate in energy finance and accounting from the University of Houston.

A native of Shreveport, Louisiana, O’Brien loves sports, the outdoors and family activities. The latter soon will absorb more time, as he and his wife are expecting twins. With the prospect of four children under age four, “You can say we’re looking for a full-time nanny,” he said with amusement.

William O'Brien IV

Investor: How has the company changed since you came aboard?

O’Brien: In 2010, our assets were 99.9% natural gas. Today, we’re 50-50 oil and gas balanced, with 100% of our capital going to oil projects, although most of our production remains gas. This month will mark the first time in our history that more revenue will come from oil than from gas.

We believe in a balanced portfolio. We like to have choices in where to deploy our capital. We’re a Midcontinent and Gulf Coast-focused company, but we’re spending the bulk of our capital still in East Texas.

Investor: What is your financing structure?

O’Brien: We’re unique in that regard—a fourth-generation, family-run company that serves as the operator and general partner of O’Benco IV LP. This is our fifth investment company since early 2000; it is an institutional quality, private, direct investment vehicle. Investors are institutions, family offices, asset managers and high-net-worth individuals. Our lead commercial bank has taken equity in our last three limited partnerships. The most recent company raised about $270 million.

Investor: What makes your structure attractive?

O’Brien: Three aspects: First, we directly source and raise our own capital, so investors aren’t paying financial sponsors. Second is our control structure, where O’Brien Energy is the general partner. There are few substantial private companies managed by a fourth-generation E&P rather than a financial sponsor.

Third is the amount of capital invested by our principals. Most funds are created with less than 5% funded by principals. We have 15% of the equity capital in O’Benco IV. So you know we’re going to do all we can to maximize returns. The limited partners get their capital back plus a 10% IRR, after which we back in for 25% of distributions.

We’ve done this multiple times, but our biggest splash was probably when we sold O’Benco II for $650 million to Berry Petroleum in 2008. Unlike financial funds, we don’t form another company until we exit.

Investor: How have you managed the downturn?

O’Brien: We think the market has bottomed, and we’re very comfortable. We haven’t slowed development drilling. We’ve cut back on anything that is not cash-flowing and accretive—exploration, leasing, infrastructure, new ventures. Our debt to EBITDA ratio is 1.2 to 1, and our healthy balance sheet is a reflection of our team, our assets and the O’Benco IV plan.

Investor: Other strengths?

O’Brien: We’re a low-cost producer and developer and a leader in exploration and horizontal execution.

In the past year, our pioneering approach has set us apart in two basins, one in East and one in West Texas. We significantly enhanced production, reduced water production and lowered costs. We’re constantly looking for new ways to drill and complete wells, explore, use 3-D and more. We think outside the box.

An example is our major conventional gas discovery and delineation in East Texas’ Middle Bossier play.

Investor: Do you drill unconventionals?

O’Brien: We have fracked the Haynesville, and we drilled a New Albany Shale well, but our focus is using horizontal drilling with unconventional techniques in conventional reservoirs, mainly carbonates.

Investor: Near and long-term goals?

O’Brien: Yesterday I told our board we were out of crisis management and back to business management. Our goals are to execute on our 2015 corporate goals, drill our PDP reserves and grow our inventory with good returns. Over the next two to four years, it’s to position ourselves to appropriately monetize our value. And then do it all again.

Investor: Opportunities from the downcycle?

O’Brien: The downcycle puts stress on some companies, and we are working toward a strategic transaction that will make O’ Brien Energy bigger and stronger.

Investor: Advice for others?

O’Brien: Find a trade you love and are good at, and then learn how to communicate and present effectively. And, a shout-out to Jon Brumley, who told me, “You’ve always got to enjoy the ride.”

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