Photo: Bloomberg Photo by Callaghan O & # 39; Hare.
John Sellers and Cody Campbell hold a hot August evening in the corner of an oil-themed bar in Midland, Texas. After flying in their private jet, they shake hands, joke, and negotiate with up-and-coming oilmen, contractors, and land traders, almost all in their early 30s. A life-sized, stuffed grizzly bear stands against a wall wearing a baseball cap embossed with "Make Oil & Gas Great Again".
It is not difficult to understand why Sellers and Campbell are so in demand in this highly competitive city, which has become the global center of the shale revolution. Over the past decade, they have bought and sold tens of thousands of oil leases in the Permian Basin, blessing shops with a handshake in restaurants, on truck hoods, and in bars like this one.
The co-CEOs of Double Eagle Energy III Holdings may be the most prolific and richest Texas Dealmakers you've ever heard of. At only 36, they have personally collated at least $ 500 million, according to an analysis of the Bloomberg Billionaires Index, which is based on typical deals in the sector. They declined to comment on their assets.
The oil industry has produced billions of dollars in fortune, from H. L. Hunt, who became famous in the 1930s, to Harold Hamm, who led the innovations in slate that began in the 2000s. But while most were made of oil, the new game is in the city of land. Sellers and Campbell started out as landowners, specialists in buying and selling drilling rights, all privately owned in Texas.
"You can have the best drilling engineer, the best geologist, the best of everything, but if you do not have oil and gas leasing, you can not drill a well," said Campbell, wearing a polo shirt, jeans and cowboy boots and sipping whiskey on the rocks. "The farmer was always despised for not being a scientist, not anymore."
You are not alone. Dozens of young entrepreneurs, mostly in their 30s, run private equity companies in the raging boom in West Texas and New Mexico, each worth billions of dollars.
Whether they realize that this kind of cash will of course depend on the whims of the shale industry, where constant profits remain unattainable. Rising costs and pipeline bottlenecks have stagnated this year. And as with any real estate boom, getting started early can make a career, while being late can break one. Many of the young men admire the late Aubrey McClendon, founder of Chesapeake Energy Corp., who became a billionaire leased land for natural gas drilling in the 2000s. But it is a cautionary tale: he was ousted after he had heavily relied on rising gas prices that never came.
The young upstarts are unaffected. Given that bigger rivals continue to burst – $ 30 billion has been announced in the last six months – they see themselves as a prime takeover target, and they are striving for that big payday.
Sellers and Campbell have been friends since their days in junior high school south of Amarillo. They played football together, first in high school and then at Texas Tech University. Sellers was a defensive lineman, and Campbell an offensive lineman who had a brief NFL career before a chest injury drove him out of the game.
They had entered real estate during their studies, but business stagnated in 2008 due to the financial crisis. So, on the advice of friends, they put everything they had left under contract in Haynesville, in the Slate Mountains of East Texas. They could quickly sell it to an operator who drilled and made a profit.
For the next four years, they perfected the piece, expanding to the Eagle Ford in South Texas and the Perm west. "It was all in, all in, all in, every time," said Vendor.
Their model initially consisted of quickly reversing leases and then participating as a non-operating partner in drilling. But they soon saw that the fast-growing fracking world opened up a huge opportunity that suited their background in the real estate industry.
Historically, the Permian wells were all vertical, meaning there was no incentive to find adjacent land. But since the late 1990s, when fracking began, shale production meant to drill sideways, pumping water, sand and chemicals under high pressure to create cracks in rock deep in the ground to release oil or natural gas.
As the operators became more sophisticated, they bored longer and ran horizontally for two, sometimes three miles. This meant that they had to complete several related leases. Slate play was less about finding oil than about bringing together the land needed to drill long holes. That's what Sellers and Campbell do – put the puzzle together. And, of course, multiple contiguous leases that allow for two miles of horizontal drilling are exponentially more valuable than they are alone.
"In certain areas we are in now, there are thousands of people who could have units that they think can be drilled," Campbell said.
In 2013, Private Equity knocked. With the Slate Revolution well under way, Apollo Global Management has backed Sellers and Campbell in an Oklahoma deal in which they more than quadrupled the initial investment in a year, they said.
Their largest payout came last year, when they sold about $ 70,000 acres to Parsley Energy Inc. for $ 2.8 billion. Since then, they have raised more money from Apollo, built an even bigger 80,000 acre position, and started a drilling company. Based on recent sales prices, their current holdings could be worth up to $ 6 billion. They declined to comment on this estimate.
The two have the reputation of being aggressive buyers, free brokerage commissions, a practice that has often held deals in the past.
"If someone brings us a deal, they'll be well compensated," Sellers said as he finished a chicken salad washed with Titos, a Texas-made vodka mixed with soda. "Our philosophy does not care what other people do as long as we agree with the price."
Here are profiles of other young Perm leaders.
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On a hot August afternoon, Will Hickey, 31, sits by a small pond in West Texas next to a dirt road and wipes an app on his cell phone. It shows the results of a recently drilled well: 2,400 barrels of oil per day. "We make a lot of oil, baby!" he says and pushes his fists with his business partner James Walter, 30.
Hickey and Walter worked at Pioneer Natural Resources Co. and Denham Capital in 2015 when they decided to join the oil business together. They moved to Midland and soon discovered an opportunity around the city of Pecos in the Delaware Basin. They raised $ 75 million from private equity firms Pearl Energy Investment and NGP to form their Colgate Energy company.
They bought small leases in this less developed part of the Perm and bet they could buy others nearby or swap them with larger companies, Hickey said.
Three years later, they received $ 450 million in investment from private investors, acquired their own rights in 30,000 acres, and went into drilling to run two rigs.
All but one of their 30 employees are under 35 years old.
"It's so fast out here, the land deals, the data, the technology – it's becoming more and more the game of a young man," Walter said. "Our office feels more like Google than Exxon Mobil."
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Mark Hiduke, 31, had always been aiming to be an investment banker, but the 2008 financial crisis limited his ability as a new graduate of Southern Methodist University. He soon joined Pioneer as part of a seven-person team responsible for buying and selling assets.
He noticed that a lot of businesses were going over his desk that were too small to be considered by big companies. "Leases were sold for $ 5,000 a morning," he said. "I thought," That's crazy, the rating should be five or six times like this. "
By financing NGP, he started PCORE and bought small, overlooked leases and sold them just 18 months later. The deal has brought its investors three times their money, although the price of oil has fallen by 68 percent.
He founded a second company called PCORE II in 2016, which leased land in the southern part of the Delaware Basin, which at that time was cheaper than the Midland Basin.
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While Tyler Glover, 33, owned land and minerals to Devon Energy Corp. Having scoured, after graduating from Tarleton State University, he came across a strange name: Texas Pacific Land Trust.
The Trust was established in the 1880s to repay the creditors of the bankrupt Texas Pacific Railway. He owns large land and mineral fees in West Texas. After more than 100 years of selling land, the trust was left with areas in Loving, Reeves and Culberson counties nobody wanted to buy.
By chance, this was the heart of the Delaware Basin, the western part of the Permian and one of the centers of the shale revolution.
Glover joined Texas Pacific as a farmer in 2011, the youngest in the company for at least 15 years, he said. Texas Pacific had a market value of just over $ 1 billion at that time.
When the market awoke from the size of the company's land ownership (1 million acre mix of land and licensing rights), its value soared to $ 6.4 billion to make it the most powerful large US oil reserve that never had a barrel pumped from crude oil. Glover is the chief executive officer, historically an administrative role.
"There is no way anyone could restore such a wealth base today," he said. "With the value of the land and the resources we now have, more active management of Texas Pacific is a necessity."
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Kentucky-born Rhett Bennett, 37, did not want to go into mining after completing his studies at the University of Georgia in 2004 after seeing his family's coal business as a child. So he jumped into the energy industry and after a few twists and turns back into mining immediately.
Coal is not supported. Mining for sand, the gravel that allows fracking.
Bennett moved to Texas in 2004 for the first time. He learned about oil leases from friends and started to turn them over. In 2015, he bought a large position in southeastern New Mexico and sold it to Marathon Oil Corp 16 months later. for $ 700 million, which meant five times the initial investment for him and his investors, he said.
Bennett then came to deliver sand for Frackers after noticing that most of the sand used for wells was transported by train hundreds of miles from Wisconsin. He opened Black Mountain Sand in West Texas and joined many other entrepreneurs trying to empower the Wisconsin crowd. He believes that his business in public markets will be worth about $ 2 billion.
"If you have been in the last 10 years, you are as experienced as anyone else," he said.
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Bloomberg's Tom Metcalf has helped.