New Privates: Oil and Gas Startups Stand Out

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Launching a successful oil and gas business can be a challenge during the best of times, but starting one up in the past several years has been proven particularly tricky.

Rollercoaster commodity prices, a shift to renewable energy and heightened governmental regulations are among the challenges companies have navigated. Throwing a global health crisis into the mix has only added to the volatility, but shaky times haven’t discouraged ambitious, new companies from starting up and standing out.

Whether they’re tapping into established relationships to succeed or utilizing new technologies in tried-and-true basins, new companies are emerging with innovative ideas on how to make the industry more productive, strategic and collaborative.

From family-run operations to longstanding professional partnerships, three growing companies in three thriving basins have shared how they’re navigating challenges, adjusting to evolving standards and remaining competitive.

Leveraging experiences

Petroleum engineer turned successful executive Don Dotson has big goals for Vencer Energy LLC, the new domestic, upstream startup company he leads, as it grows its presence in the Midland Basin.

“Starting Vencer has been both fun and challenging, as you’d expect when forming a new venture,” Dotson, president and CEO. “Although Vencer is early in its life cycle, our team has a lot of expertise, motivation and confidence that we will succeed at building a sizable, profitable and respected company that provides a best-in-class work environment with a rewarding culture for our employees.”

Vencer was launched in July 2020 with backing from Vitol, one of the largest energy and commodities trading firm in the world, with the mission to acquire mature, economically accretive, producing oil and gas assets in key basins. The company’s overall approach is to target scalable, operated assets with long-life reserves and low-base decline rates. Its goal is to generate “exceptional returns” through lowcost undertakings and strategic management.

Vencer executives rapidly mobilized a highly skilled organization in less than four months and have shown tangible results by leveraging their decades of combined experience to position the new company for growth as a largescale, reputable oil and gas enterprise.

In April 2021, Vencer announced its first acquisition to buy Hunt Oil Co.’s Midland Basin assets. The assets encompass 44,000 acres across five Midland Basin counties and daily production reaching about 40,000 boe/d, with plans to expand its Permian Basin presence through strategic business development efforts, exploitation and an aggressive D&C program.

Dotson elaborated on his key focus areas when developing the organizational structure.

“Of most importance, the Vencer team must have a diverse and significant amount of expertise and experience in all facets of the oil and gas space,” he said. “Possessing this, we can draw on our commercial, analytical or data-driven and operationally focused approach along with administrative strengths to optimize our operations and successfully execute our projects. Teamwork and collaboration are also essential contributors to success.”

Ben Marshall, head of Americas at Vitol, said the purchase would help establish Vencer as a significant shale producer in the nation.

“We expect U.S. oil to be an important part of global energy balances for years to come, and we believe this is an opportune time for investment into an entry platform in the Americas,” Marshall said in a statement. “Vitol has a long history of investing in quality upstream assets, and we are pleased to add this business to our global portfolio. This acquisition represents an initial step to building a larger, durable platform in the U.S. Lower 48.”

Dotson is banking on the belief in longterm rewards beyond the ongoing COVID-19 pandemic, despite some critics predicting an impending shift toward renewable sources of energy.

Dotson, who’s been working in the oil sector for more than three decades, said demand for oil is likely to grow as economic growth continues. “Many of us who have been through multiple cycles are optimistic as we see the building blocks in place for strong demand while supplies have some uncertainties. Most companies haven’t forgotten the lessons learned during the last downturn and are being strategic and disciplined with their development capital. This is assisting greatly by providing a measured approach to supplies and ensuring the recovery of our industry.”

Dotson began his career as a petroleum engineer at Amoco Production Co. before joining Samson Resources and Samson International, where he transitioned into management.

As the leader of Vencer, he said he’s hopeful to build a company “that is recognized by our investors and industry partners as an organization that creates value through strategic acquisitions, focusing on optimal operational practices and executing accretive capital projects.

“We aspire to be a top tier company in ESG [and] safety and regarded as a partner and employer of choice. We’ve started with exceptional staff, great assets with significant upside and have entered at what we believe is the optimal time in this cyclical business to maximize any basin in the Lower 48.”

He added, “Our company name, Vencer, means to overcome. Although we anticipate there will be bumps in the road, external factors we cannot control and lessons learned, we expect and believe that we’ll achieve success in the oil and gas industry for the benefit of our investors and staff.”

All in the family

Father and son duo Steve and Caleb Weatherl are combining their complimentary skills to apply modern technology to the most prolific part of the Central Basin Platform through their company, Stronghold Energy II Operating LLC.

The pair’s backgrounds seem like a match made in industry heaven. Steve, the chief executive, is an accomplished geologist who helped lead the establishment of some of the first economically successful horizontal Wolfcamp wells in the Midland Basin. President and CFO Caleb is a Harvard University business school graduate with strong financial connections.

“When I decided to go independent, we felt like Caleb’s financial background with my technical background would be a great fit for a team,” Steve said.

This isn’t the duo’s first collaboration. Steve first launched a family-owned company called Weatherl Energy Investments LP before he and Caleb started Stronghold Energy Partners. The latest iteration, Stronghold Energy II, was capitalized in 2017 with a $150 million commitment led by Warburg Pincus.

The new company was formed after the Weatherls identified a unique opportunity to modernize activity in the Central Basin Platform.

“We felt like the Midland and Delaware basins, while the rock is great, were getting a little overheated in terms of the prices that people were paying,” Caleb said. “We saw an opportunity to take some of the technological advances from the shale revolution of the past decade, particularly with regard to completions that had been broadly applied in the Midland and Delaware basins but had not been broadly applied in the Central Basin Platform yet, and apply those to the Central Basin Platform.”

The Central Basin Platform was one of the first areas in the Permian Basin to be developed. About half the oil historically produced in the Permian has come from the Central Basin Platform, but in more recent years has been shadowed by zones with more modest but very economic oil cuts.

Before partnering up with his father, Caleb worked in the energy vertical at Bain Capital LP, a leading multi-asset alternative investment firm. He also did some consulting for McKinsey & Co.

His exposure to the industry began much earlier; growing up in Midland, Texas, he remembers going to the office with his father as a child and taking a natural interest in the oil and gas world.

“He really taught me everything from the ground up,” Caleb said. “What is a joint interest bill? What is a revenue check? What is a joint operating agreement? How do you drill a well? How do you frac a well?

“He spent a lot of time just really mentoring me and teaching me the industry from the ground up. I was able to marry that knowledge that he imparted to me with my business background in consulting and finance.”

Steve described his son as a quick study whose strong analytical skills allow him to thrive in a multitude of ways.

“He did grow up around the industry and would come with me to look at morning reports prior to the time that you could get them emailed.”

Things have been working out well for the company so far; it has more than doubled its overall oil production since acquiring Devon Energy Corp.’s southern Central Basin Platform assets in early 2019 and has proven up hundreds of additional locations prospective for development.

“Our net revenue interests are very high because we have old, producer-friendly leases and so our economics—if you look at it from an internal rate of return standpoint or a payback period standpoint— are really competitive with core shale economics in the Midland or Delaware basins on all of our remaining inventory,” Caleb said. “We just feel really fortunate to have such a great asset.”

Building through partnerships

Relationships can make or break a burgeoning oil and gas company, and in the case of Trigo Oil and Gas LLC, strong connections put the company on the fast track to success.

When Travis L. Wheat founded Trigo in 2018 with the intention of pursuing mineral and royal rights in the Delaware Basin, a bigger opportunity soon presented itself as executives observed largescale divestments in the region. The company wisely anticipated that unique drilling opportunities would present themselves in beneficial market conditions.

“We believe that massive underinvestment in oil and gas brought on by economic, market and political conditions have created a very unique opportunity for a small independent like us to capitalize on favorable drilling opportunities and investments,” said Wheat, president and CEO.

With that in mind, the company plans to continue pursuing development and strategic partnerships to increase its footprint in the Delaware Basin, where it’s leveraging its past and present partnerships to outpace competition.

“We put together a lot of acreage in the Delaware Basin over the last several years for a small group, but we would not be here unless we had developed great relationships with landowners and our partners,” Wheat said. “Our current development would not be possible unless it was for our current partners putting a tremendous amount of trust and faith in us.

We are competitive, but we are only able to be competitive because we have formed great relationships and partnerships.”

Trigo was born through parent company Wheat Resources LLC, which enjoyed a slow burn of success since launching in 2012. It began by acquiring leases, mineral rights and surface rights throughout Ward, Loving, Pecos and Reeves counties, Texas, and would then sell down, or sometimes all, of its interest and use the profits to buy something bigger. It repeated the strategy until it had enough capital to lease operable size tracts of at least 320 acres.

As the company grew and launched Trigo, it wasn’t always a smooth process. Although 2020 was a notoriously difficult year for the industry, things were tough for the company in 2019 as well.

“There wasn’t really any activity, and we had decent oil prices but little to no cash,” Wheat recalled. “[There were] no acquisitions minus a few publics, but they were allstock transactions, which did not benefit the small independent. No one was buying, selling, drilling or investing. You even had some of the biggest private equity firms making a transition from oil and gas and closing down E&P portfolios.”

Fortunately for the company, things worked up after it landed two partners in Oklahoma City and began pursuing its ultimate goal of operating.

“We put together several thousand acres in the Delaware Basin, but we would not be here unless we had developed great relationships with landowners, operators and our partners,” Wheat said. “Our current development would not be possible without our partners in Oklahoma City putting a tremendous amount of trust and faith in us.”

Though the company itself is relatively new, Wheat and his partners have combined decades of experience within the industry, where they’ve worked tirelessly to forge relationships that have since become the cornerstones of Trigo, which serves as its parent company’s operating and mineral branch.

The practical management of resources has been crucial for the company’s success, said partner and vice president of business development Devin Speir.

“Aside from being a privately owned company, fundamental to Trigo is pragmatic stewardship of the resources given to us, investment in the relationships we depend upon and honest and transparent dealings with all stakeholders,” Speir said. “When these are fundamental in your company, all other things tend to fall into their proper place.”

Partner Michael Vinson, vice president of land and legal, said raising capital has been a challenge as the company continues to grow.

“It is the life blood of any organization, and the last several years, it has been incredibly tough to raise capital for oil and gas developments,” Vinson said. “I think we beat down nearly everyone’s door to put together the capital to drill our current prospect. We had lots of meetings to pitch our prospects, and we had lots of no’s, but persistence bore fruit and we are grateful for that.”