June 14, 1982 Houston Business Journal
MEMOS…
When wildcatting is in the blood, can you ever do anything else? Not until you find something more fun, according to J.D. “Jakie” Sandefer III, and he hasn’t come across that something yet.
Sandefer, chairman and president of Sandefer Oil & Gas Inc., agreed to give a few insights into what makes a wildcatter – that stalwart of the oilfield – tick.
From his headquarters in First City Tower (officing 100 employees) Sandefer, 45, negates the image of the legendary rough-and-tumble schemer who gambles everything on one well in search for black gold. In fact, those days may be over. Sandefer talks of exposure and letting the law of averages work.
“I don’t think its risky if you drill enough wells. The name of the game is exposure. You’ve got to get enough holes in the ground to give yourself the chance of finding oil or gas.”
It’s a hard business and the odds are against a one-man shop today, Sandefer says. And that’s the basis of his evolved oilfield philosophy.
“In order to drill enough wells to make the rate of return for both the company and the investors, it takes a team. You just can’t get exposure on a small scale basis. Most small outfits are generating their own prospects. You are limited to the exposure you get based on your own geologists. Then you take in partners on a deal-by-deal basis,” Sandefer explains.
“When you have drilling dollars, when you have money in your pocket, you can drill your own prospects and you can reciprocate with other companies. That’s the exposure a lot of independents don’t get.
“We look at 10 deals a day that independent geologists bring in. We probably get 30 calls a day.
“We look at 30 outside deals before we drill one well. When you’ve got your own geologists you pretty much have to go with their deal. Our lifeblood is the independent geologist. The whole world is our staff,” Sandefer continues.
“That’s where having drilling dollars affects ability. About the strongest thing in business is the power to commit. If you’ve got dollars and you see a good deal, you can move faster than the major companies. We can make fast decisions. That’s the advantage of companies like ours.
Sandefer has set a budget of $61 million for its oil and gas exploration program in 1982. The exploration budget represents an increase of $29 million over the previous year’s amount. Sandefers total capital budget for 1982 will exceed $100 million, including present development activities.
But Sandefer hasn’t always had money in his pocket and admits he’s “peddled deals all over the country.”
“When you’re producing a fleeting asset…you run scared a whole hell of a lot of time in this business.”
Sandefer has been wildcatting for 23 years – since his graduation in 1959 from the University of Oklahoma (where he was starting halfback for the Sooners). He followed a 50-year oilfield tradition begun by his late father, operating out of Breckenridge and Abilene until 1975 with activities concentrated in the West and Central Texas areas. The small organization was responsible for more than 300 wells to be drilled and participated in several significant discoveries.
In1975, Sandefer opened a Houston office and began his Gulf Coast activities. Sandefer was then discovering what he now preaches—that the deal by deal method of financing exploration is inefficient, time consuming and virtually eliminates the power to commit to expensive, higher-potential prospects.
In 1979, Sandefer decided to change the scope and method of operation. He sold a substantial portion of the oil and gas properties owned by his companies and reorganized into the present entity, Sandefer Oil & Gas Inc.
“To control your own destiny and to build a company, you have to have discretionary drilling dollars so you can participate in other people’s deals.
“We decided to do it differently – to go the joint venture route, which meant more people and a different source of financing.”
At the outset, “we spent 75 percent of our time recruiting and the other 75 percent raising money,” says Sandefer.
“I’ve been associated with oil people all my life. I decided I was going to take what money I’ve made and put it back into the people I had met through the years – the real super stars that I felt could help build a company. I put these guys together and shared ownership with them.”
And Sandefer confirms, “The money’s out there, but anybody who ever says it’s easy to raise …just hasn’t done it.”
Next week: Sandefer talks about money – how he raises it, how he spends it.
-Pat Baldwin
