A Billion Dollar Goal
Austin Exploration is involved in the acquisition, exploration, development and production of onshore oil. Founded in Australia in 2006, the company soon shifted its focus to the United States to take advantage of new opportunities. “We were just starting to see the emergence of the unconventional plays,” remembers COO/Executive Director Guy Goudy.
The team turned their attention to these unconventional plays in order to reach their goal of becoming a billion dollar company. “Guy and I started working on positioning the company into some of the largest basins in North America in terms of oil,” says Chairman / President / CEO Dr. Mark Hart. “We knew we had to have large properties if we were going to be a billion dollar company. We would have to have properties that would allow us to produce [enough] oil and cash flow.”
Austin Exploration’s first move was to secure 5,000 acres in Texas’ Eagle Ford Shale, one of the three largest oil basins in North America. “Then strategically we shifted north to the Niobrara formation,” Dr. Hart recalls. “That basin is pretty much tied with the Eagle Ford in terms of production; about 400,000 to 450,000 barrels a day coming out of each of these two basins.”
Austin Exploration’s Niobrara property originally measured 11,560 acres, but the team has recently added 3,700 more acres to their Colorado properties, bringing the company’s total Niobrara and Pierre Shale holdings to a whopping 15,260 acres. “Austin has positioned itself to be in two of the three largest… most prolific oil basins in North America,” Dr. Hart points out.
During this time the team also turned their focus to the eastern United States, dramatically improving operations on Austin Exploration’s 4,000-acre oil and gas property in Kentucky. “We advanced our position in Kentucky from a small, less than a barrel a day of production, to 40 barrels per day of production,” Dr. Hart shares. The company also has holdings in Mississippi, but Austin Exploration’s Kentucky property is key to its long-term strategy. “That eastern business unit is helping with cash flow to support what we are trying to do in the larger basins in the west, in the Eagle Ford and Niobrara. We use the eastern business unit – the lower capital cost business unit – to produce enough oil and enough cash flow to keep the business running until we can expand our positions in terms of capital in both of the other large basins.”
This strategy became even more crucial when oil prices began to drop. “We set ourselves up for this downturn,” Mr. Goudy says. “We did see the downturn coming in October, and we acted very quickly on it just to make sure that we would be one of the companies that would be able to capitalize on the opportunities of this downturn. For a small company to be able to say that is pretty unique.”
The team is not overly concerned about the current downturn, and Dr. Hart predicts that oil prices will begin rising again in 2016 and continue trending upwards through 2017 and 2018. “The cycle occurs every seven or eight years,” he points out. “We have had five major cycles like this since the 1970s.” The team has a solid plan to weather the storm until oil prices rise again. “We are drilling low cost wells that will still produce oil and cash flow to keep the company alive and surviving through these difficult times.”
Austin Exploration’s low cost wells in Kentucky, Mississippi, and Colorado’s Pierre Formation have been key to the company’s survival. “The company is very fortunate to have a diversified asset base with conventional, lower cost drilling prospects and also higher cost, nonconventional horizontal type prospects,” Mr. Goudy points out. “We are a small company, but this downturn hasn’t crippled us in any way. We’ve been able to adapt, cut costs, and look at lower cost drilling programs. That is something we are pretty proud of – particularly because for a long time, when the nonconventional horizontals were the big focus, a lot of the investment community thought we just needed to focus on one particular basin. But we have always firmly believed that you need to have a diversified asset base. Oil always has its up times and its downturns.” The company is currently considering acquiring even more acreage with low cost drilling prospects.
Austin Exploration’s people have also helped the company maintain an edge, even during tough times. “We have a very solid team of people that will carry out our mission of being a billion dollar company,” Dr. Hart states. Austin Exploration prides itself on hiring the best and the brightest technical talent available; many team members hold advanced Degrees, Masters and Doctorates, and are considered experts in their field. A strong training program ensures that employees stay on top of the latest market trends and technologies, safety advancements, and business processes.
People and properties must be well managed for the company to stay ahead, so Austin Exploration utilizes the Six Sigma Program to keep everything running smoothly. “It all ties in to a disciplined management approach,” Mr. Goudy says of the company’s success. The Six Sigma methodology helps regulate and maintain everything from communications to process mapping, ensuring that the entire operation stays on track. “It really is an excellent program. Dr. Hart gained a familiarity with the program in some of his major executive roles working for some of the largest energy companies in the world,” Mr. Goudy says, adding that applying the program to a smaller company has been remarkably effective.
Austin Exploration’s successful strategies and remarkable growth have been turning heads throughout the industry. In March, the company was nominated as a finalist for Themark Exploration and Production (E&P) Company of the Year, in both the Gulf Coast and Rocky Mountain regions, at the 2015 North American Oil and Gas Awards. “We were runner up behind EOG Resources,” Mr. Goudy says. “They are a $50 billion company. We are in the $20 million dollar range, so we are certainly very happy with that.”
The team is thrilled to be recognized alongside industry giants, and they plan to keep plowing ahead until they too become a major industry player. “I think sometime in 2016, we will step up our development program in Niobrara in Colorado and would expect significant production growth as a result,” Mr. Goudy predicts. “That will allow us to reach our first goal of being a billion dollar company.” Reaching that goal will require time and careful planning because of the expense involved.
“Fortunately, the team laid out their goal – and their plan – from day one, so we are well on our way toward affording the cost of all those wells. “Capital funding is going to be critical to us reaching our goals, but we’ve taken it all in steps,” Mr. Goudy points out. “First, we had to have the property – now we have the property. Then we had to have the people – now we have the people. Next, we will need to attract development capital to drill the property, complete the property, and reach our goals.” His estimate on acquiring this capital is quite optimistic and, despite the current downturn, Austin Exploration is well on its way. “Within a two to three-year time frame we should reach our goal.”