NEW GAS COMPANY IS READY FOR BUSINESS

Times Staff Reports

A new gas company with big aspirations has opened for business in Laredo.

EnCap Investments, LLC, R. Graham Whaling, Jim R. Smith and certain members of the former senior management team of Michael Petroleum Corporation have formed a partnership, Laredo Energy, to acquire and develop natural gas reserves in South Texas. The company also has offices in Houston.

"When EnCap and Graham Whaling, former Michael Petroleum chairman and managing director of Global Energy Partners, approached the Michael Petroleum senior management team about starting a new energy company, the decision to go forward was unanimous," said Glenn Hart, president of Laredo Energy and former CEO of Michael Petroleum. "We feel very fortunate to have EnCap, Graham Whaling and Jim Smith as partners."

EnCap was the largest shareholder of independently held Michael Petroleum, which was sold to Calpine Natural Gas in August 2001.

"EnCap is very excited to make another investment with a proven and experienced management team that has one of the best track records in South Texas," said Bob Zorich, managing director of EnCap. "We look forward to a long and profitable relationship with them."

"The acquisition and development of natural gas reserves in Webb and Zapata counties are what we know best," Hart added. "Since Calpine Natural Gas did not retain all the senior staff of Michael Petroleum when it acquired the company last August, the remaining executives decided to re-group and form another energy company."

So what are Laredo Energy's short- and long-term plans?

"Short term, we're starting from scratch. As you have to walk before you can run, we have concentrated our initial efforts on purchasing small natural gas-producing properties and leasing mineral rights on similar sized tracts from landowners. However, since we have a capital partner with 'deep pockets,' we will also go after large acquisitions as they become available. We intend to build a billion-dollar company within five years," Hart explained.

Hart noted that Webb and Zapata counties are still the top two natural gas-producing counties in Texas.

"Railroad Commission District 4 (South Texas) produces approximately the same amount of natural gas as the entire state of Oklahoma," he said.

Hart said the company is in the process of buying existing natural gas-producing fields and drilling additional wells.

"We are also leasing mineral rights from local landowners in order to develop the natural gas reserves on their land. The resultant natural gas production will be sold to the highest bidder, generally a utility company, on a daily or monthly basis," he said.

Laredo Energy will have plenty to contribute to the Laredo and area economy, Hart said.

"Michael Petroleum was the sixth largest taxpayer in Webb County. I also expect Laredo Energy to become a significant taxpayer in Webb and Zapata counties as it grows. Michael Petroleum had seven employees in Laredo, plus some 20 full-time contract personnel. I expect Laredo Energy to grow similarly. Additionally, dozens of local contractors and hundreds of employees will be working on Laredo Energy projects," he said.

Hart said the business opportunities in Laredo are tremendous and that he is optimistic that the community will continue to flourish.

"Laredo is a great place to grow a business. It is also the center of my entire business universe, due to my involvement with Laredo Energy, the Laredo Entertainment Center, Laredo's first professional sports team and the commercial real estate tract around the Laredo Entertainment Center," he said. "Laredo will be one of the outstanding success stories of the 21st century."

Whaling serves as Laredo Energy's chairman and CEO.

Other members of the company's senior management team include Douglas R. Fogle, vice president - engineering; Jerry F. Holditch, vice president - geology; Robert L. Swanson, vice president - finance and accounting; Scott G. Stevenson, vice president - acquisitions; Mark R. Lange, vice president - land; Steven B. Jaques, vice president - technology.

Additionally, Mario Gonzales, former superintendent of operations for Michael Petroleum, has been named superintendent of operations for Laredo Energy. Gonzales is based in Laredo.