DRILLING ON
INVESTMENT GROUP GETS A SECOND SURGE OF ENERGY

By Kelly Hildebrandt
LMT business writer

After the multi-million company's sale late last year, the founders of Michael Petroleum Corporation are rallying for another round.

Glenn Hart, a co-founder of Michael Petroleum, and two major investors of the company - EnCap Investments, LLC and Graham Whaling - gathered to establish Laredo Energy.

Building on years of experience in Zapata and Webb counties, Hart, president of Laredo Energy, will again be drilling in the area with many of his senior management team members from Michael Petroleum behind him.

"We're doing the same thing over," Hart said of establishing Laredo Energy.

Headquartered in Houston, Laredo Energy will drill wells in Webb and Zapata counties. With two Laredo-based employees already, Hart said he intends to build an office in Laredo. Currently, the company has a temporary office.

Michael Petroleum was bought by Calpine Natural Gas in August and by mid-October Laredo Energy was already formed, Hart explained.

"Calpine came along and basically made us an offer we couldn't refuse," Hart said of why he decided to sell the company.

Hart said they will acquire existing natural gas fields with already active wells and will also lease mineral rights from landowners in order to begin drilling new wells. The natural gas will be drilled and then sold to the highest bidders, which are typically utility companies, Hart said.

Thus far, Hart said they've bought land with 15 existing wells and are already beginning to lease new land. In 2002, Hart said they intend to drill 10 to 15 new wells.

"We want to be a billion-dollar company in five years," Hart said.

In 2001 Hart said Michael Petroleum was the second largest natural gas producing company in Webb County and the sixth largest taxpayer.

"We're just real happy to be resuming our acquaintances," he continued.

Since the bulk of business and drilling is done in Webb County, Hart said they decided to link the business to Laredo by naming it after the Gateway City.

Hart got his first taste of the oil and gas business as a child. His father this year will celebrate his 50th year in the business, Hart explained.

"We're trying to figure out what's going on two and three miles under the surface," Hart said of why he got into the oil and gas business. "It's kind of a risk taker's business."

After attending Texas A&M University, where he received a degree in petroleum engineering, he went to work for a large oil company and in 1980 began working for Sanchez Oil and Gas, he said.

But in 1982 he and a partner ventured off on their own and founded Michael Petroleum. The company was named after Hart's son, who was four months old at the time the company was incorporated. Neither he nor his partner at the time, Rene Garza, wanted their names in the title of the company.

"If we were to get rich we didn't want anyone to know, and if we were to go broke we sure didn't want anyone to know it was us," he recalled.

In 1985 they purchased their first land rights in Webb County, he said.

Each contributed only $5,000 to start the company. Hart said that was the last contribution either of them had to put into the company. After that, capital invested into the company was loaned until EnCap and Cargill, a company that Wayland Investment Fund is affiliated with, invested $57 million to restructure Michael Petroleum in 2000 after it filed for protection under the Chapter 11 Bankruptcy Code in 1999. When it was sold last August, Michael Petroleum was worth $371 million, he said.

"I would say we were successful," he said.

With about 400 active wells at the time Hart and his partners decided to sell. He said it's a bit odd seeing the wells now that he no longer owns them.

"All of a sudden it's like an artist with a clean canvas," he said. "We're starting over."

Hart is also a part owner and investor in the Laredo Entertainment Center.

(LMT business writer Kelly Hildebrandt can be reached at 728-2547 or by e-mail at kelly@lmtonline.com)