Oil & Gas News

Private companies have capital discipline in their DNA

Gassier Wells, Capital

By: Mella McEwen – Midland Reporter-Telegram – In recent years, Tim Dunn, chief executive officer of CrownQuest Operating, has seen public companies come under tremendous pressure to show capital discipline and return capital to investors.

It’s a philosophy private companies, such as his, impose on themselves because they’re using their own capital, he said during a panel discussion to wrap up the Permian Basin Petroleum Association’s Annual Meeting.

He said it’s not fair public companies get all the blame for not making money earlier as they spent huge sums drilling new wells in the developing unconventional resource plays like the Permian Basin.

“No one held a gun to investors’ heads and made them put $30 billion into the Marcellus,” he said. “It costs $20 million to drill a well, double production, the price falls and they’re shocked! And dismayed!”

Of course, he admitted, it is a two-person dance, and the operators took that money and drilled all those new wells.

Dunn said when he recently spoke with investors, “we told them they need to stop asking about individual well economics and start asking about last well economics.”

Agreed Ken Beattie, CrownQuest senior vice president and chief operating officer, “You want that last well added to a development project to deliver strong economics.”

Asked by moderator Scott Kidwell, PBPA chairman, about the challenges currently facing the industry, Dunn said the industry has brought many of those challenges upon itself.

“Our product is so valuable and so transformative and has lifted so many people out of poverty,” he said. “It is such an integral part of life that people line up to buy it. We don’t have to sell anything, we don’t have to market it.” As a result, the industry has allowed others to frame its work and products.

The biggest direct risk for the industry on the horizon, he said, is “if the oil business doesn’t fight back.”

Asked about ESG, Dunn noted that his family bought and renovated the Green Acres miniature golf and entertainment complex. “You can’t get more social than that.” As for governance, he estimated that almost all of CrownQuest’s 250 employees are substantial owners of the company.

Rather than focusing on how profitable an investment might be, he advised first considering if that investment will make the community better. He pointed to the Ally Village development and the development currently being planned by the Johnson family of Summit Petroleum and the Faskens as falling into that category.

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