Trevor Rees-Jones: The Wildcatter
He left a law career to search for oil and gas on a speculative basis, and once drilled 17 dry holes in a row. He never gave up, though, and today he’s a multibillionaire “throwback” to the great Texas energy legends.
The under-the-radar dinner at Dallas’ Petroleum Club with top Chevron officials and the governor from the Northeast capped a busy day for energy entrepreneur Trevor D. Rees-Jones.
A few hours earlier, Texas Gov. Rick Perry and Rees-Jones—the founder, president, and CEO of Dallas-based Chief Oil & Gas—had hosted a reception of top business executives for the Republican Governor’s Association at Rees-Jones’ Park Cities mansion.
The dinner that followed in downtown Dallas was a heavyweight affair as well.
Chevron was buying 228,000 acres in the Marcellus Shale natural-gas play from Chief and its Marcellus partner, Tug Hill Inc., and there were issues about the transaction to discuss.
Among those breaking bread with Rees-Jones at the exclusive private club: Pennsylvania Gov. Tom Corbett, whose state is home to a good portion of the Marcellus gas field; Tug Hill founder Michael Radler, who doubles as Chief’s COO; and Gary P. Luquette, president of Chevron North America Exploration and Production Co.
Looking back on this particular day, and recent others like it, the Chief CEO says: “I’m riding at a pretty high altitude now.” Which may be an understatement.
Rees-Jones, 60, was ranked on Forbes’ latest list of the 400 richest Americans with an estimated net worth of $3.3 billion, up from $3 billion the year before. The Highland Park High School graduate earned the money drilling mainly for natural gas in shale deposits in North Texas, and elsewhere, with his 17-year-old company, which has grown to employ about 120. He’s also become one of the region’s foremost philanthropists, giving away tens of millions of dollars to nonprofit groups.
Often described by associates as a “bigger than life” personality who will seal a deal on the strength of a handshake, Rees-Jones has emerged along the way as a modern-day Texas wildcatter, a 21st century energy legend in the mold of H.L. Hunt, “Dad” Joiner, and Monty Moncrief.
“He’s the best partner we’ve ever had, and I’ve had hundreds of partners,” says businessman Ross Perot Jr., whose Barnett Shale gas field in Fort Worth sold for $1.3 billion after Chief developed it. “Shale plays are sweeping the nation now, but it all started in Fort Worth with guys like Trevor. It was little companies, little guys, risking their capital, and they changed the world. Trevor is a classic great businessman who bet it all on a dream, and it worked.”
The Chief CEO, for his part, says he’s mostly been “awfully fortunate.”
Risk and Reward
Rees-Jones, who grew up in University Park, didn’t set out to be an energy entrepreneur.
He was the oldest of three children—he has one brother and one sister—born to a lawyer-father and a housewife-mother. As a teenager Rees-Jones (the name is of Welsh origin) was an Eagle Scout, which “took a lot of work,” recalls Jim Francis, a Dallas businessman and Republican operative whose younger brother was good friends with Rees-Jones growing up.
Francis’ father and Rees-Jones’ father were law partners and hunting buddies, Francis remembers, and both families lived on Centenary Avenue. “All the Rees-Jones kids were just good kids,” Francis says.
After graduating from Highland Park High, Rees-Jones went on to earn a B.A. degree from Dartmouth College and a law degree from Southern Methodist University. Then he worked for more than five years as an oil-and-gas bankruptcy lawyer at Dallas’ Thompson & Knight firm. Eventually, though, “I just realized that being a lawyer was not my calling,” Rees-Jones says. “I felt more interested in putting deals together from a business standpoint: getting things done, getting wells drilled, finding a gas field, establishing production. I was just intrigued by that more than researching the law and writing briefs.”
When he left Thompson & Knight, Rees-Jones says, he had $4,000 in the bank that he parlayed into a $48,000 line of credit from Republic National Bank. Over the next decade he worked in the oil and gas fields drilling or investing in more than 400 “high-risk” exploratory wells, mostly in Southwest and Central Texas. At one point, he drilled 17 dry holes in a row.
“Every two or three years, I’d find a new little field to get on down the road. Then you’d get down the road and be broke again,” Rees-Jones says. “I loved it.”
He sometimes got discouraged during this period, but he never quit. “I was single back then, and I could take a deal with risk,” he recalls. “But when I got married, I had to find a way to lower my risk profile.”
The result of that decision was Chief Oil & Gas, which Rees-Jones started in 1994 with four shareholders for “just a couple hundred thousand dollars.” Early on, he says, the company focused on “picking the last meat off the bones” of the remaining gas reserves from George Mitchell’s wildcatting partnership in the Boonsville gas field in Wise County. “It was pretty low-risk,” Rees-Jones says of the Boonsville play. “But it was also pretty depleted.”
It wasn’t until 1999 that Chief turned its attention to the Barnett Shale, a so-called “unconventional” gas field stretching over parts of North and Central Texas including Tarrant, Denton, and Parker counties. Mitchell’s company, as it happened, was pioneering a new drilling technique there called hydraulic fracturing, or “fracking,” to extract natural gas trapped inside the area’s shale rock formations.
Chief jumped headlong into this revolutionary technology—“we were a gnat flying around the big elephant,” Rees-Jones says—including the use of horizontal as opposed to vertical drilling, at the same time that natural-gas prices were taking off. By the mid-2000s, Chief had become the second-largest producer in the Barnett and the biggest in Tarrant County.
It was around this time that the Dallas wildcatter struck the first of the big, extraordinarily lucrative natural-gas deals that would make him rich.
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. He then reinvested some of those proceeds in an existing minerals-drilling partnership with Ross Perot Jr.’s Hillwood Energy at Fort Worth’s AllianceTexas development. That partnership sold out to Quicksilver Resources in 2008, for $1.3 billion.
Meantime, Chief had expanded its natural-gas exploration, development, and production activities beyond Texas to the massive Marcellus natural-gas shale play in Appalachia. There, Chief and Michael Radler’s Tug Hill investment firm leased the mineral rights on some 650,000 acres in Pennsylvania, West Virginia, and Maryland.
Two years ago, the companies agreed to sell 30 percent of their Marcellus interests for $406 million to Canada’s Enerplus Resources Fund. In 2010, Chief and Tug Hill sold another chunk of the Marcellus assets to Exco Resources for $459.4 million. Then, earlier this year, they completed the 228,000-acre sale to Chevron Corp. That left Chief and Tug Hill with about 125,000 acres of Marcellus leasehold, in what Rees-Jones calls a “highly productive area.” While the value of the Chevron transaction was not disclosed, Forbes writer Christopher Helman recently wrote, “My estimate is that the deal means another $1 billion pay day for Rees-Jones.”
Despite his record of such successful, multimillion-dollar deals, the Chief CEO scoffs at the idea that he was able to “time” the sales to Devon and Crosstex, for example. “I wish I could take credit for that, but it’s impossible to do,” Rees-Jones says. “Just as you can’t pick the right time to sell a stock, we didn’t realize that the market was nearing a peak, or was anywhere near a peak, at the time we sold in 2006.
“We were not trying to time the market, although in hindsight the natural-gas price peak was ’06 to ’08. At the time of the Devon sale, prices were around $9 [per million cubic feet of gas]. We actually accomplished another sale—the Alliance leasehold interest with the Perot family—right before the market crashed, when the price was up to around $13/Mcf.