In 2005, many energy pundits were talking about the imminent exhaustion of America’s hydrocarbon reserves. Talk of peak oil abounded, with many predicting that the United States would soon become nearly entirely dependent on OPEC and other net oil exporters.
But then one of the most propitious developments in the history of the U.S. energy industry took place. Throughout the mid-2000s, a number of new drilling technologies began hitting the market that suddenly made vast reserves of so-called hard oil — oil that had previously been considered economically infeasible to extract — profitable to extract for the first time. Much of this previously unrecoverable oil is located in hard shale and sandstone formations throughout North America. And the suddenly viable economics of exploiting these massive plays would change the fortunes of the whole country, helping to rocket the economy forward at a critical time in the nation’s history.
The two crucial technologies that led to this sudden surge in the exploitation of hard-oil plays were horizontal drilling and hydraulic fracturing. Other systems, such as highly automated, self-directing drilling rigs, also were widely deployed, dramatically reducing labor costs while simultaneously increasing production levels and the ultimate estimated recovery on many wells.
Gulf Coast Western was there from the start
Matthew Fleeger had spent most of his youth in and around the oil fields of Texas and Louisiana. In 1970, his father had founded a small upstream oil services company called Gulf Coast Western. After pursuing a successful entrepreneurial career of his own, founding and selling two major companies in the process, Matthew Fleeger would ultimately find his way back to the oil business that his father had started decades before. Today, he is the CEO of Gulf Coast Western. And under Fleeger’s leadership, the company has been transformed into one of the key players in the present U.S. oil boom.
Creating value through deep expertise
The key advantage that Fleeger and Gulf Coast Western had at the beginning of the American oil boom was the one thing that no amount of money can buy: decades of successful experience. Fleeger was quick to leverage the company’s deep knowledge of the exploration and production side of the business while making optimal use of its hundreds of strategic partnerships. Gulf Coast Western was able to quickly adopt state-of-the-art drilling technologies while using its staff’s world-class geologic knowledge to uncover some of the most lucrative drill sites in the country.
As a result, the company has made a fortune for itself and its hundreds of investors. But Fleeger says that the real shale boom is just heating up. He points to top industry analysts, many of whom say that the U.S. shale boom is likely to continue through 2040. And this will create some of the best opportunities to invest in American oil extraction that have ever existed.
Gulf Coast Western joint ventures generate more than high returns
The American oil exploration and production industry makes heavy use of joint venture partnerships to structure individual drilling operations due to thse limited liability and massive tax advantages that come with this form of ownership. For accredited investors, Gulf Coast Western joint ventures offer much more than the opportunity for outsized returns. They confer what is arguably the most favorable tax treatment of any industry in the country.
Eligible investors are often able to write off current-year drilling costs, equipment depreciation, prospect costs and completion costs. What’s more, these things can be written off against that person’s personal income. Wells inside the partnership that may produce millions of dollars per year into the future, in some cases, may reduce investors’ personal tax bill to nothing.
Interview With CEO Matthew Fleeger
- During the brutal oil recession, what did you do to make it through those difficult industry times?
“I focused my energy on becoming more efficient. It required the evaluation of every aspect of our business and finding ways to cut overhead without losing people. I also put a concerted effort on being more creative. My team was big part of this and no creative option was off limits. I explored many avenues with an open mind which I previously would not have considered.”
- What was the most important leadership quality you learned during those times?
“Having a positive attitude in the face of adversity. I believe this is a contagious mindset for everyone and is required in every successful leader. You have to constantly portray this quality or else, negative morale and despair will creep into your business quickly”
- How did you motivate and encourage your employees, so they didn’t switch industries?
“I openly explained to my team how committed I was to the future. Providing communication on what buying opportunities are being generated right now. The difficult times at that time were really posturing us for some exciting days to come.”
- How did your years of business experience in several unrelated industries help you manage Gulf Coast Western?
“My previous business experience showed my cyclical downturns in many sectors of business. This allowed me to remain calm and avoid overreacting. In every downturn, tremendous opportunities surface. A considerable amount of my resources were in other industries and remained diversified. I used my cash reserves and other resources to capitalize on the calamity of the oil market. “
- What do you think of the current oil climate/environment now?
“I have a positive outlook but remain cautiously optimistic. Gulf Coast Western is operating more efficiently than ever, thereby, we have the flexibility to ride the “Oil Price” roller coaster successfully.
- Has this created a change or pivot in your company culture going forward?
“Yes, there were two prevailing changes created within my company by the current environment. The ability to acquire Low-Risk Profile projects at affordable costs and to partner GCW with other companies that are well capitalized for the future.”
- Where do think the price of oil is going in the next 12 months?
“I believe a trading range between $55-$75 for WTI is going to continue. This is based off the fundamental economics right now, and GCW is thriving with our new approach to this climate.”