Guma Aguiar, vice-chairman and chief executive officer of private Houston independent Leor Energy LP, took an interesting and unusual route to finally work in the oil and gas industry.
Unlike many executives in the exploration and production business, Aguiar didn’t start with a background in oil and gas. Instead, he worked first in 1999 as a clerk on the floor of the New York Mercantile Exchange with a focus on energy markets, especially gas, then dabbled in trading.
Aguiar later joined his uncle, Thomas Kaplan, to manage family investments ranging from venture capital to private equity and debt. It was during this time that he became responsible for creating a US company focused on aggressive oil and gas exploration.
“I made an investment in an oil and gas start-up company with my uncle. We had some fairly good success early on and decided that this was something that we would like to do,” Aguiar told OGJ.
After forming a partnership with his uncle in 2003, Aguiar moved to Houston to start looking for other deals.
“This is one of those ‘old school-type’ success stories,” Aguiar says. “I had a little bit of money that I’d saved, and [Kaplan] put some money up as well. We started looking for some properties in North Louisiana and East Texas.”
Growing from concept
A breakthrough came when Aguiar met a geologist in his 70s who had a concept for a gas play with very little data to support it. The geologist was John Amoruso, and the play was what later would be called Amoruso gas field in Robertson County, Tex., in the Deep Bossier trend.
Until that point in 2003, Aguiar says, “Few companies had drilled any Deep Bossier wells, and I do not think any company had had any success.”
Aguiar recalls Amoruso’s concept as it was drawn on a chalkboard in front of him: “[Amoruso] had this concept that the gas was coming off the shelf edge, and it formed thick sand packages.”
Encouraged by the geologist’s ideas, Aguiar led Leor through a period of heavy acquisition. Leor continued acquiring acreage in the Deep Bossier play for 6 months when the former Burlington Resources Inc. (now part of ConocoPhillips) was gaining success in the region.
By the time Burlington drilled its first Deep Bossier well, Leor held the lion’s share of the trend’s acreage. Aguiar credits companies like Burlington for calling industry attention to the play. “At that point, they were basically our best promoter,” he says.
Chance for success
Leor tried to ensure that it dominated the fledgling play. This month marks a year since Leor drilled its first well in the area. Since that time, the company has been able to ramp up production from 6 MMcfd of gas to about 100 MMcfd. “For onshore North America, that’s unheard of,” Aguiar says.
In July 2005, Leor cut a fateful deal with the US subsidiary of EnCana Corp. of Calgary to jointly explore and develop its Robertson County acreage.
Then in January, Goldman Sachs Principal Strategies Group led a $45 million equity investment giving the participating investors a minority interest in Leor.
And in June, Leor sold 7,400 net acres in its Amoruso field acreage to EnCana for $242.9 million in cash and 4,039 net acres adjacent to its Amoruso leasehold. Leor now holds interests in about 50,000 gross acres in Robertson County and 150,000 gross acres in the Deep Bossier trend.
Aguiar says of the deal’s beginnings: “EnCana has done an excellent job of operating these wells, which are very, very complex: high-temperature, high-pressure, and deep. It’s one of those things where we thought they would be the best in the business.”
This deal was important to Aguiar, he says, because entering into this sort of transaction gave Leor access to EnCana’s vast experience and expertise in drilling and completing the unconventional gas wells, which was important because the Deep Bossier wells Leor and EnCana are drilling at Amoruso field are “different from conventional Bossier wells, and much different from Barnett shale wells,” for example.
“You don’t know when you’re going to see a kick because there’s so many different sand packages,” he says.
Working with EnCana, Aguiar has access to skills of former Tom Brown Inc. and Matador Resource Co. workers with experience drilling for unconventional gas.
High exposure
Leor and EnCana Oil & Gas (USA) Inc. expect to have drilled 22 wells in Amoruso gas field by yearend (OGJ Online, July 28, 2006).
Currently, says Aguiar, the joint field owners have five rigs working in the Deep Bossier trend and expect two more to arrive in the next 45 days. Aguiar said, “If we continue to have success like we are having, I think it may be appropriate to add even more rigs in 2007.”
Aguiar says that in a $10-12/MMbtu gas environment, he would like to have more rigs working the area. Even with gas prices in the $5-6/MMbtu range, however, he thinks Leor’s high-risk, high-cost operations are economic.
“We’re pretty exposed to gas prices,” Aguiar says. “With our history and the fact that we brought production on so fast, we’re really not in a position to hedge.”
In the short to medium term, Aguiar plans to raise more equity and possibly bring more partners on board. Currently he and his uncle control most of the company but would consider taking the company public in 2007-08.
“Technically and operationally, we’re extremely sound,” Aguiar says. “The guys that I brought on to work for me here are masters of their trade. We had the benefit of really selecting the best guys to add value to the company.”
The company’s chief financial officer, as an example, was a Solomon Smith Barney banker for 17 years. Everyone on our management team, says Aguiar, himself just 29 years old, has 25 or more years of oil and gas experience.
In the Deep Bossier play, Aguiar says, things can only get better. “Over the course of time, as we drill more wells and better understand what’s going on there, we will be able to cut costs and bring our wells on line with better economics.”
In the family
Aguiar appreciates the experience of working with his uncle. “In today’s world you just don’t see too often two family members being able to partner up and be so successful and have such a great relationship and make a lot of money along the way,” he says.
“One thing that people have noticed about Tom and I is that we’re sort of like throwbacks to the old days-we do a lot of deals on handshakes.”
Aguiar says the family feeling extends to employees. “You don’t come to work for the company; you come and join the family. It’s not just the money for us. It’s thinking about people and caring about them.”
Career highlights
Guma L. Aguiar, cofounder of Leor Energy, has served as vice-chairman and chief executive officer since the company’s inception.
Employment
Aguiar began his career as a clerk on the floor of the New York Mercantile Exchange. Aguiar joined his uncle, Thomas Kaplan, to manage family investments in 2001. During this time he was given responsibility for creating a US company focused on oil and gas exploration. After assembling a lease position in Louisiana and Texas ranging from unconventional natural gas to shallow oil, in 2003 Aguiar identified and executed the company’s acquisition of its flagship property in the Deep Bossier trend of East Texas.
Education
Aguiar attended Clemson University, where he studied business administration.
Affiliations
Aguiar is chairman of the Lillian Jean Kaplan Foundation and is involved in numerous philanthropic activities.
