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Why one of the world’s most successful energy investors changed his mind about oil

11 Mar

For many years, Pickens was convinced we had reached “Peak Oil.” In his most recent book, published in 2008, he confidently predicted we would never see oil prices below $90 a barrel ever again.

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Pickens famously wouldn’t allow any part of the wind farm to be built on his ranch. In 2010, Pickens’ wind farm idea was moved to Minnesota. Two years later, he sold out of it, losing something around $160 million. (As Boone told me, “I lost my ass in wind.”)

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I can’t think of another person in the world who has made billions in three different kinds of endeavors – drilling for oil, corporate raiding, and trading commodities. But after spending some time with Boone, I can tell you why he has been so successful in these fields: All of these businesses require a total and complete commitment to “mission critical” capital-allocation decisions.

If you’re drilling for oil and you need to drill 20 wells to measure the size of a discovery… would you quit if your first 10 wells were dry? Boone doesn’t. He sticks with his conviction no matter what.

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So… what happened? Why did Pickens go from being a major backer of wind farms to selling the deal at a huge loss? Pickens doesn’t change his mind lightly. What changed is that huge new oil wells began producing all over Texas. His entire thesis – Peak Oil – was wrong. And without genuine energy scarcity, all the alternative power he had been betting on wasn’t going to be economic.

The final straw, Boone told me, was when he discovered a large oilfield lying under his own ranch. It’s already producing 6,000 barrels a day of high-quality crude oil.

“It’s the best oilfield I’ve ever found,” he says while looking at the maps of Mesa Vista in his boardroom. Each well is represented graphically, showing its position, its initial production rate, and its estimated reserves.

http://thecrux.com/why-one-of-the-worlds-most-successful-energy-investors-changed-his-mind-about-oil/

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Posted by on March 11, 2015 in Uncategorized

 

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