If you call yourself a wildcatter and you internally fund most of your own projects, then you've got to be good.

Tri-C Resources Inc. of Houston is a little company that takes big chances. It's a way of life that has worked for 15 years, and the company's growth is taking Chairman Mike Cone and his son, M. Scott Cone, president, into Australian ventures.
Mike Cone brings to the team 40 years of worldwide oilpatch experience. After graduating from Texas A&M University with a degree in petroleum engineering, he entered the oilpatch with Placid Oil Co. in southern Louisiana and moved through positions with J. Ray McDermott Oil Co., Buttes Gas & Oil Co. and Cliffs Drilling. The Cliffs job led him to the posts of chairman and president of Cliffs Drilling Co., an offshore drilling contractor with deepwater experience, until he retired from that company in 1991. Cone remained on the board until the company's merger into R&B Falcon Drilling Co. in 1998.
During that career, he spent time in Canada, the Middle East, West Africa and North Africa, as well as onshore the United States and in the Gulf of Mexico. He helped set up Tri-C in 1985 "for the young guys to run," he said. After his retirement from Cliffs, he decided they were having more fun than he was, so he joined them.
One of those young guys is Scott Cone, who graduated from the same university with the same degree as his father, but 22 years later. He spent 4 years with Texas Oil & Gas Co., but he left with a friend, John Clinch, to set up Tri-C with his father and Bo Herrin.
The group started business as a five-man shop, and like most startup companies, began with low-cost, shallow plays in territory the partners knew along the Texas Gulf Coast.
They were successful at their work, and they parlayed cash flow and property sales into deeper prospects with more upside, year by year. From a step-out-and-produce focus, they gradually changed to an exploration focus. And they continued their success.
Tri-C started drilling wells close to existing production at about 4,000ft deep. The company's wells average closer to 13,000ft now. "Just a little bigger and a little deeper every year," Scott Cone said. The company has drilled more than 600 wells on shore along the Texas Gulf Coast.
Now, after 15 years, the privately held Tri-C has 19 employees and six principals. In addition to the Cones, the principals are Clinch, executive vice president; Herrin, vice president of land; Steve Compton, vice president of exploration; and Mark Holmes, vice president of finance.
Wildcat rewards
All employees participate in each project. They get a piece of the upside and a piece of the downside. "We drill prospects 100% internally. When everyone is paying, you're more careful. We've never been in acquisitions. It's all through the drill bit," Scott Cone said.
"We're more high-risk. We like drilling wildcats. When we get producers, we sell them to someone who wants to produce," Mike Cone said. The company is going into its 10th major sale in 15 years for properties worth more than US $600 million.
"We drill 30 to 50 wells a year through booms and busts," he added. "With that level of activity, we have been fortunate enough to find meaningful reserves."
The corporate philosophy is straightforward. "If the deal is so tight we need to be grinding at the economics, we don't need to do it," Scott Cone said. "When you spend in the $20 million to $25 million range, you can't afford to chose 2-to-1 or 3-to-1 (return) deals that are price-sensitive. We're looking at a 20-to-1 return. By taking the high-risk prospects, we're not too sensitive to price."
A downturn in prices actually creates additional opportunities for a wildcatter. Majors may cut back on their operations, but they can't stop the closing deadlines for expiring leases. Representatives of major oil companies have come to Tri-C asking the company to drill a promising prospect with a pending lease expiration that doesn't fit the large oil company's criteria for priority placement in the budgeted program.
Australia
The wildcatter tolerance for risk and their enthusiasm for the rewards associated with that risk led the Cones first to Australian operations and then to a wildcat well in the Gippsland Basin at Australia's southern tip.
The Australia connection came through a visit with Dan Hughes of Dan Hughes Co., another wildcatter. Hughes had developed close contacts in the Australian oil and gas community. He came to the Tri-C offices a few years ago and said he was going to team up with Amity Oil, an Australian junior company made up of a bunch of ex-employees of Santos Ltd. Santos, Scott Cone said, is the premier exploration company in Australia.
That provided the link with people who knew Australia and had specific expertise in some areas of the country. That was the kind of wildcatting Tri-C knew.
Amity, Dan Hughes and Tri-C formed an equal-share joint venture and started examining the geology and seismic in mature basins in Australia. The job was easier because seismic shot in Australia becomes property of the state and is available to everyone at no charge.
"Amity picked the Cooper Basin and did a full geological and geophysical profile. We knew about upcoming rounds of relinquishments of Santos leases they had held for 50 years," Scott Cone said.
The Cooper Basin in south-central Australia, dominated by Santos, was doubly attractive because the infrastructure already was in place. It had pipelines leading to markets in Adelaide, Sydney and Brisbane. Many of the other places they investigated had better prospects, but there was no way to move oil or gas out of the area if they found it.
"These are 5 Bcf to 10 Bcf shots, and we're willing to take more risk for bigger exposure.
"We need to know we can market the properties," Scott Cone said.
Gippsland play
That willingness to take more risk for a company-maker prospect led Tri-C, with Amity, to the Gippsland Basin offshore at the east end of the Bass Strait, Mike Cone said.
Steve Compton did a field-size distribution analysis and found the Gippsland Basin, on a millions-of-barrels-equivalent basis per discovery, rewarded producers with the second largest fields in the world, with field sizes ranging from 500 million boe on up.
Some wells in the area have accumulated 30 million bbl of oil each.
The Cuttlefish No. 1 project looked good. It had the potential for 500 million bbl or more. It had sound geology and geophysics. Giant fields run by Esso (Exxon) surrounded the prospect.
The risk was in the trap, but the partners still had a 1-in-5 to 1-in-10 chance of a huge success.
The event that clinched the decision to drill was the availability of the Sedco Forex 702 semisubmersible. It had just finished one well and was on its way north to drill another. In between, it had a 2-week window that would allow it to drill a shallow prospect.
"We decided to drill, because we could drill the well for the amount it would take to just mobilize the rig later," Scott Cone said. "We went from prospect to spud in 21/2 weeks. That's never been done in Australia before. Walter Oil and Gas took a 25% interest in the project 2 days before we spudded at the table."
Kelly Downs consultant Jim Slater took over the project and acted as ramrod. The Cuttlefish was drill-ready in 18 days, quite a task in an area where permits can take 6 months. Fortunately, the rig already had passed Australian inspections and was qualified for work.
Unfortunately, the trap wasn't sealed. The oil had leaked out, and the Cuttlefish well in 160ft of water found only traces of oil.
It was the first real offshore well for the company, although it had drilled in bays on the Houston coast, and Mike Cone had spent much of his 40 years in the industry directing the activities of Cliffs Drilling.
Although that well was a disappointment, it fit easily within the company's risk-tolerance limits, and the company is going to continue working in Australia because the management team likes the territory and the working terms.
"We will definitely look at other prospects in Australia, but we're not actively looking from this office. We will be looking at deals brought to us," Scott Cone said.
The joint venture with Amity and Dan Hughes was just awarded the first relinquishment conversion in the Cooper Basin, and the companies are going through the detailed geophysical and work now. They already had done the geological profile. Amity is handling this part of the job because the company is familiar with the territory.
Wildcat opportunity
Other US companies may find a welcome market in Australia. Small-capital Australian companies have difficulty raising capital. "It's absolutely an area of opportunity for other independents," Scott Cone said. Combinations are available, and the lease terms are friendly.
He recommends teaming up with an Australian junior. The more expensive option is setting up an Australian operation.
Tri-C isn't limiting its targets to Australia, either. It was involved in the first bidding round that opened Venezuela to foreign investment, Mike Cone said. It didn't get the property, and it won't go back to Venezuela because the terms are no longer attractive, Scott Cone added.
Tri-C also looked at Argentina and Trinidad.
"We're open to look at any areas that a company may have a prospect in and is looking for a partner," he added. But Tri-C isn't looking for political risk.
It wants projects in which it can use its competitive advantage, the ability to take ultrahigh exploratory risk and move quickly. Another advantage lies in the experience of the people in the company to decide which projects have the best upside potential.
After they do their geological and geophysical homework, everyone in the company sits around the big conference table in the middle of the office and casts a vote. If everyone agrees, the company moves.
"The ability to move fast (in competition with the majors) is the only way we can compete. We can make decisions, move in and rig up in a week. We can move in in 3 days, if necessary," Scott Cone said.

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