North Coast Energy Inc. (NCE), Twinsburg, Ohio, began oil and gas operations in 1981, but Pres. and CEO Omer Yonel claims it had not turned a profit for its first 18 years—not until NUON Corp., the largest energy and water utility in the Netherlands, with $7 billion in assets, acquired the small energy firm as its entrée into US markets.
It took NCE public in 1998, the same year that Yonel joined NUON's North American operations. He was named NCE's CEO in 1999 and "rebuilt its management team from scratch," he told OGJ. "So you might say this company is only 3 years old."
Niche market
NCE explores, develops, and produces primarily natural gas in the Appalachian and Illinois basins. It's active in Ohio, West Virginia, Virginia, Kentucky, and Pennsylvania, with an average 37% working interest in 4,080 producing wells and is operator of 3,800. Net proved reserves at the start of this year were estimated at 147 bcf of natural gas and 1.2 million bbl of oil; net production totaled 22 MMcfd of gas and 272 b/d of oil. NCE holds 299,000 net acres under lease. It also owns and operates 1,446 miles of gas gathering systems with access to northeastern US gas markets.
Its proximity to large US gas markets and access to numerous interstate and intrastate pipelines are primary keys to the company's success. "Because we're so much closer to the burner tip, Appalachian gas commands a premium price," said Yonel.
The company's aim is to acquire strategic properties, maintain a diversified drilling program, manage price risks, improve profit margins through operating efficiencies and advanced production techniques, and expand its natural gas gathering systems.
"We are on target to drill a record 117 gross (104 net) wells in the company's 2002 drilling program," Yonel said. In the first 6 months of 2002 the company drilled 40 gross (29 net) wells, successfully completing all of them and adding 5.4 bcfe of reserves, replacing 111% of NCE's production during the same period. "Our corporate goal for the year is to replace at least 150% of oil and gas production with the drillbit alone," Yonel said.
In 4 fiscal years from April 1997 through March 2001 and the 9 months ended Dec. 31, 2001, the company added 36 bcfe of proved reserves through drilling at an average cost of 64¢/Mcfe. During the same period, it acquired 109 bcfe of proved reserves at an average cost of 66¢/Mcfe.
Management plan
Yonel plans to focus on development and production of natural gas "as long as it is practical and profitable." But he also acknowledges responsibility to position and develop the company for continued success under "the next generation of management," when energy markets and technology may be vastly different from today.
A graduate of the advanced management program at the University of Pennsylvania's prestigious Wharton School, Yonel is working to open management of NCE—or any company—to more input from both inside and outside the firm. That includes subjecting all corporate decisions to comment and input from "every employee."
He also advocates cooperation between companies and collegiate business schools to enhance "out-of-the-box" approaches to corporate operations. It's a concept that "got laughed at in the 1990s," but which is finding more acceptance in the wake of Enron Corp.'s and other business scandals, Yonel claimed.
"Because we're so much closer to the burner tip, Appalachian gas commands a premium price."
