Experts and industry research suggest the next evolution of oil and gas exploration and production has arrived— and it’s use of innovative technology, collaborative working groups and skilled professionals can be found thriving at the historic Barrow Ranch.
Low crude oil prices and diminishing returns are spurring industry investors to search for their next opportunity, and many are turning their eye to the attractive value proposition offered by conventional sites, like the Barrow family’s 32,000 acre spread near Beaumont, Texas—an area long known for its rich resources.
HISTORY OF BARROW RANCH
The story of Barrow Ranch dates back to the Spanish Land Grants, and it’s woven through the most tumultuous period of Texas history. Its oil resources were transported in the first pipelines to power the Allied forces through WWII, and their newly found deposits of natural gas and crude oil will power global economies.
WHAT IS IT ABOUT CONVENTIONAL EXPLORATION THAT’S ATTRACTING INVESTORS LOOKING FOR STRONGER RETURNS?
Industry advancements have made the process of identifying hydrocarbons more precise, and the precision has substantially shifted the risk level of exploration.
Prolific resource plays and efficient extraction methods, including horizontal drilling and fracture stimulation, have enabled the industry to circle in a holding pattern and enjoy profitable returns. The large scale production was considered favorable to the blanket sands often found on conventional sites, because they were harder to identify and extricate. This created a lull in activity for many owners with mineral assets, including the Barrow Ranch ownership group. However, low prices combined with innovative, precise, exploration techniques have piqued investors interest, and conventional plays are once again seeing strong investment and production.
TECHNOLOGY IS CUTTING THE RISK LEVELS IN HALF
In recent years, the technological and cost improvements of 3-D seismic data acquisition, more sophisticated geological models, depth imaging and more robust petrophysically-based AVO software have opened the door to subtler, yet economically-sound drilling opportunities. Clay Harmon, a Principal and lead geophysicist at Pingora Exploration, shared that
“before the technological improvements in AVO analysis and 3-D seismic data, the investment risk to spud a well could be 1-in-6, which isn’t an attractive investment option, but the advancements are enabling us to be more precise and bring the risk level down to 1-in-3 or even 1-in-2.”
BARROW RANCH OWNERS ACTIVELY SEEK NEW PARTNERS AS THEY PREPARE TO CELEBRATE A CENTURY OF PRODUCTION ON THE RANCH.
The industry lull didn’t deter the Barrow Ranch’s familial ownership group, even after the operators producing on their land, including Trans-Texas and Kerr-McGee, exited the market through bankruptcy or acquisition. The owners decided to create their next opportunity, and thanks to their ingenuity, they’ve gained access to a high-quality 3-D seismic map, a producing well and six additional prospects in just five years.
How were they able to spark the next level of production?
Owner Robert McDonald, the husband of RJ Barrow’s granddaughter Bibi, credits their success to having a collaborative, experienced ownership group and finding the right professionals to bring to the table. For the Barrow family, that meant networking at TIPRO where Rob met Diana Frazier, President of Guardian Mineral Management & Consulting.
“I met Diana at a TIPRO event back in 2014. At the time we had the acreage, the 3-D seismic study and the organized management, but we didn’t have the partners.”
Diana’s experience as a Certified Professional Landman (CPL) gave her the ability to propose solutions and help the family attract the right partners.
Within just a few months, a formalized working interest partner group including the Barrow Family, Guardian Mineral Management & Consulting, Pylon and Pingora Exploration was working together in full-force.
WHAT HAS NEARLY A CENTURY OF EXPERIENCE AS MINERAL OWNERS TAUGHT THE BARROW FAMILY ABOUT SELECTING PARTNERS?
Mineral owners are often flooded with options and knowing who to will make the strongest partner can be a challenge, so we asked Rob to share how the Barrow Ranch ownership group chose Guardian Mineral Management & Consulting, Pylon and Pingora Exploration—all of which are boutique firms.
The family was seeking strong professionals who would use innovative approaches to finding the hydrocarbons and would work collaboratively to build the next evolution of the ranch’s oil and gas production.
“Our ownership group is unique. It’s a small familial group with the rights to approximately 32,000 acres and a long, successful history working with operators. We understand the need to create collaborative relationships with operators and the complexities of governmental entities, so we negotiate with realistic goals and are able to reach consensus quickly. We also have high quality 3-D seismic data that covers our entire property plus a one mile halo around it.”
Rob knew pretty quickly Diana’s expertise would be an asset and help the ownership group create interest and broker new partnerships.
“She’s very informed. She’s an eloquent speaker who is really analytical and intentional. Because of her experience and expertise, we get unbiased, well-informed reviews and opinions—quickly. I love working with her. She delivers the facts and even when it’s a hard truth, and it’s that unbiased intelligence that makes an advisor a strong asset.”
When we asked about working with Les Clark and Clay Harmon from Pingora Exploration, he pointed to the incredible and tangible results. Their innovative approach to identifying hydrocarbon markers has already created a producing well and six additional prospects in just under three years.
“It just speaks to the talent of people in the working group. They bring a new approach to finding the hydrocarbons, and it’s exciting to see the science and technology advancements at work.”
WHAT TECHNOLOGICAL ADVANCEMENTS ARE SHIFTING THE INDUSTRY AND SPURRING NEW PRODUCTION AT THE BARROW RANCH?
High quality 3-D seismic data and AVO analysis, both of which are common in offshore drilling, have arrived on land—and savvy professionals like Pylon and Pingora have found new ways of identifying hydrocarbons.
Back in 2007 Samson Energy acquired 3-D seismic over the Barrow’s acreage and surrounding area—approximately 64,000 acres in total. The Barrow’s knew the new technology would lead to the next wave of production. Even though Samson Energy released the leases a few years later, the ownership group gained a copy of the high-quality 3-D seismic study.
That data enabled Pylon and Pingora professionals to apply innovative analysis approaches and identify hydrocarbons that had been overlooked in the past.
Clay explained that the technology is enabling professionals to see below the drilling depth with an increased accuracy—and because of the 3-D data—he’s able to use AVO (Amplitude Variation with Offset) to pull apart the layers and look at the structures from various angles.
“The data enables us to look at a series of subsurface samples over angles from 0 degrees to 50 degrees, display it in the gather panel and look at changes. I’m able to see what it looks like in different situations. It’s why we were able to identify a new fault trap without any exploration. We’re updating estimates, but the initial estimate showed a potential of 10M barrels of oil and 100Bcf of natural gas.”
Les reinforced that while advancing technology is creating new opportunities—it requires an experienced professional to convert it into intelligence and identify the hydrocarbons.
“The Barrow family really saw the potential and took a less conventional path working with us, since Pingora’s experience is primarily offshore. There’s often a large distinction made between onshore and offshore expertise.”
However as Clay reminds us,
“The structures are the same, underneath the water that is, so our offshore experience has been a benefit. We had significant experience using that caliber of data and AVO analysis offshore. When you’re a geophysicist, onshore/offshore isn’t a real-world distinction. Our onshore work and offshore work are mutually beneficial, since we learn from each and cross-pollinate the science of identifying markers.”
WHILE IT MAY SEEM THAT THIS DEAL SIMPLY FELL INTO PLACE, IT’S THE PRODUCT OF STAKEHOLDERS WHO UNDERSTAND THE ART OF CRAFTING A GREAT DEAL. SO WHAT’S THE SECRET?
During each of our interviews, the stakeholders highlighted the importance of technological advancements, but they all credited the success to relationships. Rob stressed that the small, familial ownership group is very intentional about their management strategy—they look for collaborative partners, they reach decision consensus in a timely fashion and they negotiate with priorities in focus, many of which are focused on preserving the legacy of the land and their community commitment.
Given that Pylon and Pingora Exploration were new to the Barrow Ranch, their first contract was brief, just 60 days to crash the data. It offered all parties a low-risk opportunity to explore future partnership and build a strong, collaborative relationship. This led to a six-month agreement as the relationship strengthened and quickly grew to a two-year lease. Les shared that “The owners are very reasonable with lease terms, so it helped attract capital partners quickly. It’s truly a unique relationship—one that’s very collaborative instead of adversarial.”
Diana Frazier and her team at Guardian Mineral Management and Consulting have negotiated thousands of leases, so she helps clients create reasonable terms that protect the owners’ interests and keep the deal moving forward.
“People assume the negotiation process is all about the revenue, but for most owners, it’s only one component. For example, we’ve seen owners who insist on restricting production months to preserve their favorite hunting season. They’re willing to compromise on some financial points in order to preserve a tradition important to their family or the land’s history.”
When we asked her about what she sees negotiated most often, she pointed to tangible benefits like roads and improved infrastructure that benefit both the operator and the ranch. She also shared with us that,
“There’s no perfect deal recipe, and that’s why an advisor’s connections and experience are critical. An experienced professional has the exposure to craft a deal, knows when (and how far to push) without alienating the stakeholders.”
In reference to the Barrow Ranch, her role is to serve as an advocate and advisor to the family’s ownership group.
“My role is to serve the family, from helping them find interested parties, to negotiating the deal, and keeping their priorities in focus. As a national boutique, we’re well connected to industry players and use our network and connections to help clients, like the Barrow family, generate interest and gain access, but we’re also able to offer a high-touch service. Guardian’s clients know they can always pick up the phone and reach us to discuss questions or ask for advice. While it sounds simple, and really it should be, having a responsive advisor can make or break a deal.”
So what is the recipe for a great deal?
Unfortunately, there isn’t a cookie cutter approach that other owners can duplicate. Diana explains why having an experienced and responsive advisor is key to any negotiation.
“It starts by really understanding what’s important to the owners. It varies, because you can negotiate financials, length and renewals, locations and restrictions. That’s why building a strong relationship and trust element is key to how we operate.”
The Barrow family has a rich history, so it was important to identify strong partners and lease terms that would preserve the land and legacy carefully crafted for 200+ years.
Diana’s first move as the family’s advisor was to leverage her firm’s network and connections to pull in strong professionals, starting with Mark Schoomaker, the Founder of Pylon.
“Mark is an incredible geophysicist, and while he’s much too humble to ever think it, his innovative approach and remarkable career has contributed to the industry advancements we’re seeing today. I’m incredibly blessed to have such a well-recognized geophysicist right here in Fort Worth.”
We aren’t able to publish the proprietary intelligence, so interested investors can connect with Les at Pingora Exploration to learn more.
Where other professionals had overlooked the hydrocarbon markings that are stirring a flurry of investment interest on the Barrow Ranch, Mark instantly saw the opportunity and pulled in Pingora Exploration, who frequently works collaboratively with his firm, Pylon.