2005-11 Article on GVD Time Magazine 1

Has This Man Found the Next Gusher?

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Sunday, Nov. 20, 2005
By Cathy Booth Thomas and Jyoti Thottam / Houston

With oil near $60 a bbl., a mystery of geology becomes more and more intriguing: Where will we find the next great oil discovery to rival such gushers as Alaska's North Slope or Britain's North Sea? One might think the giant oil companies have the answer. But the biggest customers of all are turning to a 79-year-old Texan who operates like the Indiana Jones of the oil patch. Gene Van Dyke is one of the last of the wildcatters, independent operators who roam jungles and deserts looking for black gold. He has become the man to see if you need millions of barrels of crude oil a day to fuel a booming industrializing country, which is why the rough-hewn geologist found himself in Bermuda two years ago, hammering out a deal with executives of the Chinese national oil company Sinopec. "They were under pressure," Van Dyke recalls, and they were ready to make a deal. That meeting set in motion a year of negotiations, culminating in a $40 million deal to explore off the coast of West Africa.

That's where Van Dyke believes the world's next great oil field lies. He is now the largest deepwater license holder in Africa, with 20 million acres under license, an area equivalent to 70% of the Gulf of Mexico's deepwater fields. He believes that the region could hold as much as 100 billion bbl., equal to the reserves of such oil powers as Iran or Kuwait. Now wealthy partners are lining up to pay the cost of drilling exploratory wells, which runs into the tens of millions per try. "The Chinese and Indians, they're the ones that are the real, real market for the deals we have," Van Dyke says. "They don't need to make money on the deal itself. They just need the product." The emergence of giant Asian buyers on the market has made Van Dyke's dealmaking much easier. At one point, Sinopec and CNOOC, another Chinese state oil firm, were unwittingly bidding against each other for a single block off the coast of Morocco. CNOOC's failed attempt to buy Unocal for $18.5 billion earlier this year and India's bids against China in deals in Ecuador and Kazakhstan signaled that the two countries are serious about oil. In the process, they have given new life to the risky business of wildcatting.

Van Dyke has always liked to walk on the wild side. Ten years ago, when he started nosing around West Africa, the price of oil was only $20 per bbl. His friends thought he was crazy sinking money into leases with untested, unstable countries. Today, with a barrel of crude at close to triple that price, demand soaring and experts sounding alarms about depleting reserves, the majors are following Van Dyke's lead. In the offices of Houston-based Vanco Energy Company, of which Van Dyke is chairman, you can see where this wildcatter is placing his bets. African tribal masks and art adorn the lobby and a 6-ft.-high, full-color topographical map of the African continent dominates one wall. Van Dyke has spent more than $100 million looking for oil in his West African patch, and early results were promising enough that ExxonMobil, Shell, Unocal and France's Total have signed up as partners.

These days there are other wildcatters running tiny public companies investing in places like Peru and the Caspian Sea, but no one else is negotiating with sovereign governments for million-acre leases on Van Dyke's scale. On a trip to Libreville, Gabon, Van Dyke shook hands with President Omar Bongo, in power since 1967 and one of the most entrenched rulers in the world. Van Dyke has signed similar leases for the right to look for oil with the leaders of Morocco, the Ivory Coast, Equatorial Guinea, Ghana and Madagascar.

What's it like for a teacher's son from Normal, Ill., to deal with the notorious strongmen of Africa? "I've been doing the same thing for 50 years," he says with a shrug. "Just a bigger scale. Same damn thing." Having picked up a degree in geological engineering from the University of Oklahoma, Van Dyke got his start in the dusty fields of Wichita Falls, Texas, in 1951. His mentor, wildcatter S.D. Johnson, taught him the basics: find a farmer with promising land and get him to lease you the rights, then find an oil company willing to drill. Van Dyke hitchhiked to Fort Worth and Dallas to make his first deals. "I had about $500 to my name," he says. "I slept in whorehouses." He had no capital to invest in drilling, so he put the farmers and the oil companies together, typing the contracts on a portable typewriter on the hood of his rental car. His strength was making a deal look good, or as friend and fellow oilman Denny Bartell says, he had an ability to "powder the pig." Van Dyke would often keep a small percentage interest, but he was usually out of the operation before drilling began. "The first year, I made about $40,000, and that was 1952," he says. "I didn't find a barrel of oil."

When West Texas got played out, Van Dyke took that dealmaking skill to the Gulf of Mexico. His finds were modest but rich enough to allow him to play the role of Texas oilman to the hilt. In 1969, when a man might pay $25,000 for a nice house in a decent neighborhood, Van Dyke spent $1 million for a house that he later embellished with a 1-acre man-made "lake."

Wildcatting as he knew it, however, had started to disappear. In the 1970s, wildcatters flocked to places like Idaho, the Dakotas and Appalachia, but left the big plays to the majors. Oil exploration had moved into the open ocean, and the high costs shut out most independents. But while other wildcatters became investors or consultants or began specializing in "strip wells" that draw oil out from nearly depleted wells, Van Dyke decided to go for broke, launching a bid to become an international deepwater wildcatter in the North Sea in 1973. The gamble paid off with another modest find--60 million bbl. off the coast of the Netherlands--and allowed Van Dyke to be part of the development of deepwater exploration technology, such as 2-D and 3-D seismic analysis, during the 1980s and '90s. Most wildcatters operate with a success rate of less than 10%. By pinpointing promising fields with 3-D seismic analysis, Van Dyke thinks he can improve the likelihood of a find closer to 20%.

But ultimately it's the price of oil that will determine Van Dyke's success. Thanks to intense demand for production, the cost of operating a drilling rig is now $400,000 a day; it was half that just a year ago. This year alone, Van Dyke drilled two dry holes off the coasts of Morocco and the Ivory Coast. Next year he'll try again in Morocco and in Ghana. He has just finished a $15 million 3-D seismic program in Madagascar, and he is planning his first well there, 6,000 ft. underwater. "You might spend $20 million on a well, but if you hit on it, it's worth $5 billion to $10 billion," he says.

No wonder Van Dyke isn't getting out. "People say, Van Dyke, why in the hell don't you retire?" he says. "Well, hell, I don't hunt and fish. I don't play golf. My wife won't let me chase girls, so what else is there?" And like any other great oilman, he's still got big dreams. "I'm taking all the properties we have in West Africa, going to make a great big sale, probably to the Chinese, the Indians, going to keep about a 15% interest." A deal like that could make him a billionaire and, of course, set him up for the next big play. "We're looking at the Black Sea, Russia, maybe the Caspian Sea area. We're getting into tar sands--getting into that in a big way," he says. "That's what the next generation of wildcatting will be doing." Van Dyke plans to be there.