Tommy Nusz and Oasis Petroleum: Doing What’s In The DNA

20180522 tommyNUSZ 5786 final
20180522 tommyNUSZ 5786 final

The Planner

“You have to be deliberate and take your time, and don’t get ahead of yourselves. You have to watch out for each other because somebody gets a tear in their glove, or something like that, that has skin exposed, you can get frostbite.”

Tommy Nusz, Chief Executive Officer of Oasis Petroleum, one of the most active producing companies in the Bakken Shale play, is talking about how his employees are trained to carefully go about their business in the often-subzero temperatures in North Dakota and Montana. “Our guys are always watching out for the other guys, because you lose feeling, it gets numb (snaps his fingers) that fast and then the guy doesn’t know that he has a hole in his glove. You have to be deliberate, you have to take your time and don’t get ahead of yourselves.”

We’re sitting in the Oasis Petroleum executive conference room in the company’s downtown Houston headquarters, where we interviewed Nusz in late May. The temperature was approaching 100 degrees in Houston that day, but Nusz was expanding on the special measures his field employees must take when conducting their jobs during the very long, bitter winters in the Bakken Shale region, where the company had operated exclusively from its founding in mid-2007 until it announced a significant acquisition in the Permian Basin of West Texas last December.

“There are certain times where you just have to shut down — whether it’s for a blizzard, whether it’s just too cold or whether it’s the wind in the spring,” he explains. “The weather goes from really cold and then you go into Breakup (the term for the spring thaw, when the ground’s ice cover melts and the Bakken oil patch becomes a muddy quagmire) for lack of a better term, and guys move around in the mud.”

SHALE Oil & Gas Business Magazine July / August 2018 Cover Story - Tommy Nusz CEO Oasis Petroleum Inc.

Such are the joys of drilling wells in the Great White North. Of course, now Nusz and his team must work to prepare their employees to operate in the often-oppressive heat of the Delaware Basin, that Southern and Western portion of the greater Permian Basin in Texas, into which the company made its initial entry by acquiring a little more than 20,000 acres situated in Loving, Ward and Winkler counties; one of the most attractive parts of the play.

“In the Permian in the summer, the focus is on hydration,” he says. “You know when you think about, when we were kids, we had the whole thing about Gatorade, and the Florida Gators and all that? And when we played football, they didn’t give you water, because it made you soft, you remember that?”

Oh, yeah, we remember that, and not very fondly. But let’s move on.

“So, just like anything, like sports or any other activity, when you’re sweating that much it’s making sure you don’t get dehydrated. So, we focus a lot of attention on obvious but important things like that.”

The Builder

When the ConocoPhillips buyout of Burlington Resources (BR) was completed in April 2006, no one questioned the quality of BR’s senior leadership team. Led by CEO Bobby Shackouls, they had taken a company that had experienced significant financial difficulties during the mid-1990s and grown it into one of the most successful and largest independent producers in the country.

No one at the time anticipated that more than 10 members of that company’s very talented senior management team would go on to become chief executive officers of other companies, but that’s exactly what happened. Tommy Nusz was among the earliest to make that leap.

“The [buyout] announcement was made in December 2005, and the deal closed in April 2006. I kind of new when the deal was announced that I would probably do something different,” Nusz says in reflection. He began talking to people shortly after the first of 2006 and decided he would pursue one of two paths: “One, I could get a real job, and two would be starting my own thing,” he says with a laugh.

SHALE Oil & Gas Business Magazine July / August 2018 Cover Story - Tommy Nusz CEO Oasis Petroleum Inc.He decided to give himself until August of that year to see if he would land in a suitable position with an existing company. Well before that time, however, he made the decision to include an alternate path. “Pretty much everything I looked at,” he says, referring to landing an existing position, “is going in and cleaning up someone else’s mess. It almost became a self-fulfilling prophecy because there was plenty of capital out there looking for management teams and we could do something where we could get up every day and do what we want to do with the people we want to do it with.”

Thus, when August rolled around, he started pulling a business plan together and took the initial step of convincing another BR colleague, Taylor Reid, to join him in this new endeavor. Reid agreed, and has filled the role of Chief Operating Officer for Oasis starting on day one. After pulling together their business plan, the two men embarked on a private equity roadshow that fall.

By early 2007, the pair had the beginnings of a deal in the works with Encap Investments, one of the country’s largest private equity venture capital firms. Things progressed rapidly after. “We launched with Encap in early 2007, and it turned out that another company had made the decision to get out of the Williston Basin at the same time. We closed March 5, 2007, with Encap, we [went] to a data room on April 12 and 13, we sign a preliminary sales agreement in May and we close that deal in June,” he chuckles, “We had a $100 million commitment and we spent $83 million of it in three months.”

Out of that transaction, Oasis acquired 175,000 acres in the Western portion of the Williston Basin, which was not at the time considered to be a very promising part of the play. “This wasn’t where, you know, you had Elm Coulee, and you had EOG Parshall, you were hearing about some of the big wells over there,” Nusz says, looking back on the risk involved. “The rest of the west side, people had kind of given up on. But we said, ‘Hey there’s a lot of oil here, in wells that come on at very high rates but decline very fast. This isn’t a geological or resource problem, this was an engineering problem. And this is what we do.’”

It’s what he and Reid and the rest of the company’s staff do quite well, in fact, judging from the results and growth the company has achieved in the intervening 11 years. Today, Oasis ranks as the fourth largest producer in the Bakken play, and a massive portfolio of 506,000 net acres under lease. The company’s most recent investor presentation boasts of an inventory of more than 1,000 net drilling locations in the Bakken, to go along with the more than 500 net locations the company has available related to it’s new position in the Delaware Basin.

The Developer

As things developed, it was Nusz’s experience in one of his many assignments at BR that made the recent Permian acquisition attractive to him. Burlington had a lot of success, especially the last 8-to-10 years of its life, as it executed on a strategy of building large, contiguous positions in a handful of major basins where the company could focus on repetition of its core competencies in resource play development.

We asked Nusz if he and Reid imported any of the management strategies from Burlington into this company?
“Yeah, well, that’s important — especially on the heels of us just having done this Permian deal. So, there’s two things — back in the BR days, I was the joint interest and acquisitions manager in Farmington for three and a half years. That was back when the Fruitland Coal was taking off,” he says.

The Fruitland Coal was, in a sense, the precursor to the Barnett, Haynesville and Marcellus Shale plays. Centered in the San Juan Basin of Northwest New Mexico/Southwest Colorado, it is a coal formation that was extremely rich in dry natural gas, which was held in place within the coal by water pressure. Some of the early producers in the play drilled vertical wells into the coal, perform what today would be considered tiny frac jobs (but were then state of the art) to help release the water and recover the production as the water pressure dropped and released the gas. BR developed an open hole completion method that was the catalyst for the play to really take off.

In addition to the Fruitland formation, the San Juan is also home to more conventional dry- and wet-gas producing formations like the Pictured Cliffs, Mesaverde and Basin Dakota. Thus, it is a region with “stacked” formations where companies are often able to execute multiple completions in a single wellbore, similar to what is taking place today in the horizontal wellbores in the Williston and Permian Basins.

Nusz was responsible for BR’s mergers and acquisitions group in the late 1990s and Reid was part of his senior staff running that group. “We were trying to buy up more acreage around our large, consolidated blocks across the company. In addition to being in charge of acquisitions and trying to build our position, I also ran our Strategic Planning, Corporate Engineering and Corporate Supply Chain Management organizations during that time,” he says.
It was during that time frame, Nusz says, that he and Reid “kind of took a step back to figure out what we’re good at.

Oasis pipe.jpgWe said, ‘Let’s focus more on what we’re good at and build meaningful positions where we’re as good or better than anybody else.’ That is when Taylor and I started the initiative to look at Canada and thought, ‘Hey, this looks a lot like what we do in the San Juan Basin.’” The outcome of that process was BR’s initial entry into Alberta with the acquisition of Poco Petroleum in 1999, a major acquisition of mostly natural gas reserves that was almost doubled two years later with the buyout of Canadian Hunter.

Both Poco and Canadian Hunter were producers in Canada’s Deep Basin, a prolific natural gas producing region that is almost a mirror-image of the San Juan. It is at the Northern tip of what the industry commonly calls the Rocky Mountain Fairway on the border of Alberta and British Columbia, while the San Juan Basin is at the Southern end of that Fairway.

While climate conditions in Canada differed wildly from those in New Mexico and Southern Colorado, the physical similarities of the two basins’ topography and geology allowed Burlington to focus on repeating the core strengths and competencies developed in the San Juan Basin, and transfer both into the Deep Basin. The success of its Canadian operations played a large role in the company’s overall success, in the end helping to make it such an attractive takeover target for ConocoPhillips.

By the same token, the climate conditions in the Bakken are a world away from those in the desert of West Texas – you might as well be experiencing two different planets. But, for Nusz and Reid, it was the physical similarities present in the geology and execution of the two plays that led the men to focus on the Permian as a prime spot to target for expansion.

“You know, we’ve got a tremendous asset in the Williston Basin and now we’re the fourth largest producer,” Nusz says. This is quite impressive considering the company was only started in 2007. “But we’ve focused on what we’re good at, we’ve continued to build on our big blocky positions just like in the BR days, all the way back to San Juan. Even when we went public, we told people we’re going to be Williston focused but there’s going to be a point in time where it’s going to make sense for us to do something, have another portfolio element.

“At one point in time, about three years ago, when the downturn started — just by coincidence, we started looking at other places, predominantly from Williston down to the Permian where we could do the things that we’re good at. We’re going to continue our focus on the Williston, but we’re also going to look out of the Williston if for no other reason than to know what’s going on in these basins from a technology standpoint, supply growth, all these other kinds of things.”

Nusz also points to both his and Reid’s early years in the business as sort of a germination point for their decision to focus on the Permian. “Both Taylor and I, when we came out of college, went to work in Midland, and you’re always going to kind of gravitate back to the things that you know.

A couple of years ago, [we] moved into full field development [in the Williston] so we have the experience to do that. Now, that being said, full field development in the Permian is going to be like the Williston on steroids — all the input elements and takeaway elements and all those things — but at least we’ve got a lot of practice. It made sense to us and it’ll be a great compliment to what we already have.”

For those unfamiliar with the term, “Full Field Development” takes place when an operator, after an initial phase of testing and scoping the resource and geology of an initial acquisition, then moves in to expand its position through the acquisition of adjacent acreage, building out necessary infrastructure and fully developing and producing the available resource.

When we asked Nusz what he tells investors, analysts and others when they ask if he plans to try to expand on the company’s new position in the Permian, he chuckles. “Well, what I tell people is, when they ask ‘Well, how do you think about it?’ I say, ‘I don’t have to think about it.

You can look at the appendix of our investor slide deck and it shows you how we built the Williston position over 10 years. So, if you need a roadmap, you can just go look at that.’”

He pauses for a moment, and continues: “You know, we started from scratch, it was cold zero when we started up in the Williston. [The Permian] gives us another portfolio element, it provides some diversification, which is important when you try to make capital allocation decisions. It’s a little more difficult field development because the way we do it, it’s process, plan, people and execution.

“Our people are planners,” he adds, smiling. “They don’t really like it when I go upstairs and say ‘Hey, I want to move this around at the end of this year.’ But at the same time, they know they have to be adaptable when circumstances change. When you’re trying to drill 10 to 12 wells per drilling [or] spacing unit, it’s really difficult to get all the permits and all the other input elements lined up and make sure you’ve got the takeaway. In Williston it’s a little more straightforward because it’s all Western U.S., section, township and range. It’s a little easier to put two sections together and you get a drill block. But you get to West Texas and it’s a patchwork quilt. So, we focus on the things we can control like execution, and we manage the business risk around the things we can’t control. That has served us pretty well. The Permian represents five percent of our total company production now, but it will grow.”

We asked Nusz if his company having gotten into the Permian play toward the back end of a period of tremendous acquisition and expansion activity has caused Oasis any operational issues. “You know, it’s interesting — it’s the oil field, right? So, the oil field is filled with myths and untruths, like ‘you have your late entrance to the Permian, you won’t be able to contract for quality services.’ Well, yeah, we have. We’ve gotten services at reasonable prices and a lot of it’s because people have worked with us in Williston. They want to be with us as we grow. They find us to be good collaborating partners, we try to include them as much as we can on our planning processes,” he pauses and smiles, “and we pay our bills.”

Yes, that tends to be a key factor in contracting for oilfield services, all right.

The Opportunist

The oil price collapse of 2014 and the three years of industry downturn remain fresh on the minds of everyone in the industry today, but that was actually the second major price correction through which Nusz and the Oasis team had to manage the company. The first such downturn began barely a year after Nusz and Reid had completed that initial Bakken acquisition.

As luck would have it, that initial price collapse came about just at the time Oasis was getting its initial drilling program underway. “We didn’t drill any Bakken Wells in the first year. We did a bunch of plumbing work, optimization work and then the next year, in 2008 we did our first deal on the East side of the basin (a $54 million acquisition of 131,000 additional net acres),” he says, looking back on that time. “It’s funny, we started drilling wells in the middle of August, and if you remember, the oil price hit $147 in July. We start[ed] picking up rigs to meet our farm-in commitments we’d entered into on the East side of the play, and oil goes from $147 to $35 in six months. So, we start[ed] laying the rigs down, we left a bunch of the wells that we drilled uncompleted, and we deferred the completions until the summer of ’09. In the spring of ’09 when everyone else was running for the hills, the Encap guys stood right behind us.”

Encap, in fact, agreed to allocate more capital to risk on Nusz and his team, enabling them to seize on the opportunities to make some bargain-priced acquisitions during the downturn. “We took the opportunity to acquire more acreage,” Nusz says. “By that time, after we did that first deal, we had already upsized the initial capital commitment to $200 million in the fall of ‘07. The next thing you know, we had 300,000 acres.” From zero to 300,000 in less than two years — sounds like a Jaguar commercial.

The Football Coach’s Son

Taking advantage of opportunities when they present themselves; careful planning for success; focusing on the things you do best and repeating success. If those sound like the kinds of things your high school or college football coach tried to pound into your brain in your younger days, well, that’s probably no accident.

Tommy Nusz’s eyes mist up when asked to talk about the influence his late father, Dave Nusz — a very successful football coach at the college and professional levels — had on his life. It quickly becomes obvious that influence was huge.

“He coached college football — when he graduated from the University of Maryland that was what he started doing,” Nusz begins. “His first full-time job was at William and Mary, and I think it was a year later, Lou Holtz also came to William and Mary. I was actually born in Virginia and then he went to the University of Detroit, they dropped the football program, and then he went to Texas Western College (now The University of Texas at El Paso, or UTEP). It was Texas Western College at the time, when the basketball team won the national championship [in 1966], he was there.”

But, as is typical in the life of a football coach, the moving was just getting started. “He went from there to Mississippi State,” Nusz continues. “And then he went to Memphis State for a year, SMU for two years as defensive coordinator, Vanderbilt for three years; so I went to three different high schools. I went to Plano High School for two years (while his father was at SMU).” Plano High was, at the time, one of the two largest enrollment high schools in Texas, the other being Brownsville High.

Nusz faced a lot of competition when he went out for football before his sophomore year there. “We had 150 freshmen going to be sophomores at spring practice. We had 4,500 kids in the high school. It was before they split it up. So, we had some good football teams. It was like playing in a small college, we must have had eight coaches [or] 10 coaches. In fact, one guy we know, who’s a lawyer over at Mississippi State, and also the radio announcer for women’s basketball, one of his relatives — I think his or his wife’s uncle — was one of my coaches at Plano. The older you get, the smaller this world gets, you know?” No question about that.

Still, the moving around wasn’t over. “So, we went from there to Vanderbilt University, from Vanderbilt to the University of Louisville, and then he ended up coach[ing] two years in the USFL. Then he went to work as a scout for the Seattle Seahawks for 14 years. So, we moved all over the place — mostly in the South, of course. You learn to be adaptable,” he says with a laugh.

But it quickly becomes obvious that Nusz took away much, much more than that from his father.

“There’s a lot of things I got out of that experience. Being adaptable and the changing environment and meeting new people, of course,” he continues. “So much of it is the people that you were around. I mean, you’re not going to hang around football practice all the time and talk to coaches and meet with coaches without having a firm handshake and making eye contact. And then too, you’re around teachers. My mother was a teacher and my dad was a football coach, his passion was coaching people, and its competitive if you want to win.

“You know, he was just a good person. A lot of my people skills came from him — how he treated people, how he interacted with people, the respect for others. I learned about human interaction and coaching people and trying to make people better every day,” he says. “In fact, I was in El Paso just this last year — I’m getting way off track, but I’ll come back. I took my mother to the 50 year reunion of that UTEP team that beat Ole Miss in the Sun Bowl in 1967. I talked with Billy Stevens, who was a hotshot quarterback at Texas Western at the time, and he said, ‘You know your dad was a defensive backs coach, but he would come out with me every day and we’d each throw 100 passes.’ They had this little game that they set up — of how many spirals out of the 100, each one of them [could] throw. They called it “Rumble” for some reason — who knows why — my dad used to come up with all sorts of crazy stuff like that.”

“He was a defensive backs coach, but he also wanted his quarterback to be better,” Nusz continues, relating things back to how he applies these learnings to his role at Oasis. “That’s one of the things we tell people around here: If you’re in a leadership position or if you aspire to be in a leadership position then I want to see tracks around the organization where you’re trying to make somebody better on Wednesday than they were on Tuesday and better on Thursday then they were on Wednesday.” Good stuff to learn from a parent, and good stuff to pass along to others.

The Booster

This discussion brought our interview around to Nusz’s activity as a prominent supporter of Mississippi State athletics, an interest he shares with his wife, the former Terri Foster. Tommy Nusz and his wife met while they were both students at MSU, from which they both graduated in 1982. The couple married shortly after embarking on their professional careers, and they have now been married 35 years.

“Terri was one year behind me, but because I worked for Halliburton the whole time I was in college, it took me five years to get out. So, we graduated at the same time. I went to Midland in ’82 and then we got married in January of ’83. I brought her to Midland then left her for six months while I was out in the field,” he says, laughing. “That was a great way to start.”

As is typical with young couples starting and raising a family, Tommy and Terri Nusz didn’t spend much time focusing on engaging with their university during their first 15 years together. In the late 1990s, they began to reconnect and it hasn’t been all about athletics.

“You know, you leave college and especially if you move away, you get focused on your job and your family and you can get a little bit disconnected,” Nusz says. “We re-engaged in a meaningful way back in 1998, for a laundry list of reasons that I won’t bore you with. We’ve gotten more and more involved. It really started with the engineering department when we helped them fund some of the startup of a new entrepreneurship program.”

“We do a lot of things academically through scholarships and professorships, some facilities on the academic side, primarily with the engineering department,” he continues. “In athletics, we’ve done a lot of things with football, especially in helping to fund the football-only practice facility. And that’s a function of my history.”

But it isn’t just football – the Nusz’s are also heavily involved in promoting women’s athletics programs at MSU. That has a lot to do with Terri, Nusz explains. When they decided to go into this activity, she told him, “I don’t care, you do whatever you want, but do something for the girls.” The interest in women’s athletics also has much to do with an early interest in horses and the sport of equestrian horse jumping shown by his daughter, Megan.

“Megan is a world class horse jumper,” he says with obvious pride. “In that sport, the women compete with the men, it’s coed. So, Scott Stricklin, who was the Athletics Director at the time, knew that he had a soft target here, somebody who has interest in women athletics. One thing we did was help with the anchor funding needed to completely redo the women’s basketball locker room when [women’s basketball Head Coach] Vic Shaffer came to Mississippi State. Of course, they’ve been to the National Championship game two years in a row. When Vic got there, we averaged 1,000 people in attendance, now we average closer to 7,000 in women’s basketball. That’s really strong.”

“Scott came to me several years ago, I think it was in 2013, and said, ‘Hey, I’ve got a problem: We’re supposed to host the SCC Softball Tournament next year, but our facility is not tournament ready.’” It turned out that Stricklin had agreed with his counterpart at South Carolina to trade years to serve as host for the tournament, so that MSU could push out its date to 2016.

“So now we have a new softball stadium,” Nusz says with a laugh. “We had a lot of fun with that and we’re still very involved. I’m on the foundation board, I’m on the investment committee on the foundation board. Plus, I’m the President of the Bulldog Board.” The what?

Nusz laughs. “The Bulldog Club Board. It’s like the 12th Man Foundation [at Texas A&M], it’s the athletic fundraising arm.” He laughs again. “I mean why wouldn’t I be? One day over a beer I’ll tell you that story, how that happened. It wasn’t something that was necessarily on my mind to do at the time, but I am honored to do it and I love it.” We are also very involved with the Sonny Montgomery Center for American Veterans. About 10 percent of the student population at MSU, actual veterans and dependents, run through there.

We note that it just sounds like he’s an easy touch when it comes to MSU.

Another laugh. “Yeah, I know — exactly. Anyway, we do a lot of stuff there. We go to many of the football games, we go to women’s basketball, softball, we go to…ummm, I probably shouldn’t say all this stuff because somebody is going to say, ‘Hey, when does he do work at Oasis?’ But hey, most of it’s [the sports events] on the weekends and I have a great team around me here at Oasis.”

OK, fair point. Even the CEO gets the weekends off. Most of the time.

The Father

Ask Tommy Nusz about his and Terri’s kids, and his face just beams with pride. As noted above, their daughter Megan has been a world-class equestrian. “When she was in high school, she was so busy traveling that we couldn’t catch her — she would travel every weekend in the horse show business,” Nusz says. “I mean, she’s traveled by herself to all these places. Been all over the world, ridden in the biggest classes in the world against the best riders in the world, the top 100 riders in the world, ridden for the U.S. Equestrian Team in Brazil and Slovakia, of all places.

“She graduated high school early, and then she took a gap year. She went to TCU for five semesters and then dropped out of school to focus on riding. Last year, after eight years of that, she comes to us and says, ‘Hey, I never finished college and I gotta finish.’ Nusz feels like seeing her brother graduate may have been a bit of a factor. So now, she’s at Mississippi State, finishing her degree.

“She started back last August and then turned 30 in September so she’s older than some of her professors,” he says with a laugh. “She’s like the Rodney Dangerfield [in the movie “Old School”] of Mississippi State. Of course, she knows so many people there because we’ve been going up there for such a long time and she teaches some riding lessons on the weekends. So, she enjoys coaching, which is no surprise.”

“Our son, Brant, is five years younger than Megan. And he graduated from Mississippi State in May of ’16. Brant’s a hotshot driver down in Florida, primarily in a sod business, but he does a bunch of other stuff as well. He’s started his own company, so he works for himself, and he’s learning all the ropes of building a business. And you know, he’s not calling me for money, so I think he’s doing pretty well,” he says with another fatherly laugh.

“So, we have this family full of nontraditional kids — they’re both kind of nontraditional, unstructured people that don’t want to sit in a box all day.”

In other words, they’re a lot like the defensive backs coach who stayed after practice every day to work with the team’s quarterback, and the CEO of the company that operates exclusively in the often-frozen tundra of the Bakken Shale who decides his company’s next logical move is into the arid desert of West Texas.

Like so many other things in life, a lot of it is in the DNA.

 

Photos by Michael Giordano and courtesy of Tommy Nusz