BY JENNIFER WARREN | D Magazine—America has been on the forefront of an oil and gas revolution for nearly two decades, owing to the pioneering entrepreneurs who persisted in the face of challenges to their businesses and personal fortunes. Tenacious Chief Oil & Gas Founder and CEO Trevor Rees-Jones is one of the few people to outlast and outplay the notorious booms and busts that the business has served up during a transformative era.
After graduating from SMU’s law school and beginning his career as an oil and gas bankruptcy lawyer, Rees-Jones wanted to make the leap to the business side of the energy industry. His experience representing creditors afforded him the opportunity to learn about the operational and financial aspects of the business. In 1984, he took the plunge and began putting deals together, rounding up investors and drilling wells. Four decades later, his storied past is one of legend and inspired achievement.
Chief Oil & Gas was founded in the summer of 1994, after 10 years of experience in drilling exploratory wells. Today, the firm produces 1 billion cubic feet (bcf) per day of natural gas in the Marcellus Shale in Pennsylvania, or more than 1 percent of the nation’s natural gas. “In the summer of ’94, I shifted to the sorriest, most-depleted basin in the U.S., the Fort Worth Basin of North Texas,” says Rees-Jones, age 68, in his classic Texas drawl. “No one wanted to go there.”
The Fort Worth Basin sits atop the Barnett Shale formation, the “unconventional” natural gas field stretching over parts of North and Central Texas including Tarrant, Denton, and Parker counties. Rees-Jones aimed to drill in a field that George Mitchell had used to develop Mitchell Energy in the early ’50s. According to Rees-Jones, the ’80s and ’90s were tough times in the oil business, with oil crashing to less than $10 a barrel in the summer of 1987. “After taking risks and drilling a lot of dry holes, when it looked like all hope was lost, completely setting myself on fire, I’d find something that kept me going,” he reflects. “That’s the story. That’s the truth.”
The First Play
Rees-Jones drilled his first well in the Barnett Shale in 1997. By 2003, he was drilling horizontal wells, which would soon become the rage, along with hydraulic fracturing, in the decade ahead in many plays across the country—and eventually the world. By 2005, Chief Oil & Gas became the second-largest producer in the Barnett, drilling more than 250 wells, 200,000 acres leased, and production surpassing 100 mcf of natural gas per day. Rees-Jones reflects on the Barnett Shale period: “Perseverance got me to this point to realize this opportunity. You can persevere, but if you don’t have good relationships, treat your partners and investors well, and be honest with integrity, then you won’t go anywhere.” At the end of the day, you need good people in business with you.
“After taking risks and drilling a lot of dry holes, when it looked like all hope was lost, completely setting myself on fire, I’d find something that kept me going. That’s the story. That’s the truth.”
— Trevor Rees-Jones
In 2006, Rees-Jones sold Chief’s leasehold and production assets in the Barnett to Devon Energy, and its pipeline and midstream assets to Crosstex Energy, for $2.63 billion in cash. It was one of a number of well-timed transactions. He subsequently reinvested some of those proceeds in an existing minerals-drilling partnership with Ross Perot Jr.’s Hillwood Energy. As the final exit from the Barnett Shale, the partnership sold out to Quicksilver Resources in 2008 for $1.3 billion.
For Rees-Jones, the period of time in the Barnett Shale was the most exciting time in the oil and gas business. “It was fun to have a play that you work on and develop,” he recalls. “Before I was used to the smaller conventional fields with a certain amount of barrels of oil. These [shale] plays cover tremendous amounts of area with a ton of running room.” The play kept on producing, hence the name unconventional. “We were always thinking this was going to stop in another quarter of a mile from past experience,” he remembers.
The Barnett period was the perfect storm, according to Rees-Jones. In the ’80s and ’90s, oilfield services costs were reduced. “We were drilling into an increasing natural gas price,” he adds. The initial acreage Chief leased was $25 to $50 per acre. At the height of [the Barnett boom], one of their leases cost $30,000.
Being early in the Barnett Shale, Rees-Jones says he and his team did not know it was the first of many new shale plays to be developed. At the time, the prevailing thinking was that oil wouldn’t move through shale, like natural gas, because of its larger molecule size. But EOG Resources proved that wrong in the Northern part of the Barnett, Rees-Jones mentions.
A friend of more than two decades, Kelcy Warren, CEO of publicly-traded Energy Transfer says, “Trevor’s accomplishments are remarkable. He is bright, tenacious, and most importantly, has an impeccable sense of timing.” On top of that, “Trevor is just a really good person,” Warren says. The two powerhouse energy industry leaders jointly own a Preston Center office building that houses the headquarters of their respective empires.
The Massive Marcellus
In shifting from the Barnett Shale to the Marcellus, there were three reasons to sell. First, Rees-Jones thought that natural gas prices had risen too high. They were a four to five multiple of earlier prices, and at $8-$10, he believed it couldn’t last. Second, having never had any money himself, even though he grew up in the Park Cities, he had to take care of himself and his family. With the tremendous amount of wealth being generated in one commodity in one field, Rees-Jones needed to diversify his assets. The final and main reason: Chief had competency in starting in a play early on and building a good asset base, which he deemed “an entrepreneurial approach.” Staying in the Barnett would require an operations and production approach, which was not appealing at the time.
With those left on the management team, the Marcellus Shale seemed to have potential, plus they were early to the game. After drilling about 300 Barnett wells with nine rigs, “we had a certain level of expertise we thought would give us an advantage in another play,” Rees-Jones recalls. By the winter of 2006-07, Chief was active in the Marcellus Shale in Appalachia, which would turn into the mother lode of natural gas. Alongside the Tug Hill investment firm, Chief leased the mineral rights on acreage in Pennsylvania, West Virginia, and Maryland.
With close to 600,000 acres of net leasehold, Chief Oil & Gas became one of the largest leaseholders in the Marcellus Shale by 2008. Chief Gathering was established as a sister company to build the infrastructure supply routes to the northeastern markets. By September 2019, the Appalachia region was set to produce 32.6 bcf per day, from around 1.65 bcf by year-end 2008, a near twentyfold increase.
Several more sales from 2009 -2012 completed the last of seven significant sales tallying to $7 billion, a Forbes article notes. This was after the financial crisis of 2008-09 which sent the economy and the industry reeling. “Today, our operated production is in excess of 1 bcf per day, over 1 percent of the nation’s gas production. We don’t own it all; we have some investors,” he says. The production of Chief-owned wells, however, makes it the second-largest privately-held producer of natural gas in the nation.
Materials and Minerals
Divesting from oil and gas anytime soon isn’t in the card for Rees-Jones, even though the natural gas side of the business is struggling. He points to the low stock prices of peers like Range Resources, Antero Resources, and Southwestern Energy, shocked at what looks like a race to the bottom. “Wall Street is down on shale and I don’t think they have the story right,” he says. “[Shale] has been a profit engine over the last 13 years now since 2006, with many significant sales.” There have been numerous benefits to the shale revolution, including reviving an old industry, employment, tax revenues for new schools, and better national security, he adds.
Rees-Jones believes there are plenty of oil wells to be drilled at the price point of $50, even in the $40s, with a futures price of $57 per barrel for West Texas Intermediate crude oil in mid-September. “Natural gas stocks have been beaten up badly from the tremendous oversupply,” he offers. “No one should be drilling for it right now. It’s suicidal and some will go into bankruptcy.” In the Permian Basin, owing to the massive amounts of capital needed to drill and complete shale oil wells, he expects the majors like ExxonMobil and Chevron to buy out smaller firms, merging them into these mega-producers.
Rees-Jones has been building substantial mineral and royalty positions through his company called Rees-Jones Oil and Minerals. Since the 2006 sale in the Barnett, he has been allocating capital to the Permian Basin, which he says is “another Saudi Arabia of oil.” It is the most active play in the nation. In 2008, the Permian Basin was producing about 710,00 barrels per day of crude oil; by year-end 2018, it tallied 2.4 million. The minerals and royalty portfolio is more valuable now than his Chief Oil & Gas Marcellus assets, Rees-Jones says.
Paying It Forward
His good fortune has benefited many others—at least two million individuals. The Rees-Jones Foundation, founded with his wife Jan, largely focuses on the health and development of disadvantaged children throughout North Texas and the world. From 2006-2016, more than $300 million was awarded through grants to nonprofit organizations. Over the decades in the business, Rees-Jones says Jan definitely upheld the marriage vows of “for better or worse” at all times.
A stubborn streak helped him survive wild swings in the industry. “I clearly have to be one of the hardest-headed people in the world,” he says. “There’s nothing wrong with people who left the business; they may have been smarter than me,” he adds with all sincerity.
A lot of luck has been involved. “But there is also the saying: ‘how lucky I get the harder I work,’” Rees-Jones says. “Even on heels of dry holes, I could get up, make it to office, and get working on the next deal.”
The energy titan’s timing has been impeccable. At a time of industry transformation, which Rees-Jones helped drive, he has worked relentlessly through the highs and lows. He has tales to tell and wealth that is shared with family, friends, and the less fortunate. One could call that many lifetimes of achievement.