Chet Morrison energy group looks within to stay afloat

With oil and gas prices stagnant and companies cutting back on their workforce, how does an energy company stay productive and competitive in this economic environment?

For the Morrison Energy Group, it means creating demand for your own services.

The parent company has partnered two of its subsidiaries – Houston-based Rooster Petroleum and Houma-based Chet Morrison Contractors – to bolster both its natural gas reserves and work for its support and logistical laborers.

The hope is that by doing this, Chet Morrison Energy can avoid the notorious boom-bust cycle of the oil and gas business.

“Most companies in the oil and gas business are either E & P (exploration and production) or services. We’re a little different in that we have both,” said Martin Ferron, CEO of Morrison Energy Group.

“We have our own oil and gas activity to provide work for services in lean times,” he continued. “That has been what we are focusing on this year, to help the service company have a reasonable year in a poor market. If we can build our oil and gas business, over time we will provide work to our service group as and when they need it.”

Rooster Petroleum was formed in 2005 to conduct oil and gas property acquisitions, exploitation and exploration focusing on Louisiana’s coastal waters, the Outer Continental Shelf in the Gulf of Mexico and the north Texas Permian Basin.

The company has 18 offshore oil field properties, 12 of which they operate and six that are either non-operable or are a minority stakeholder. Five of their properties are directly south of the Tri-parishes.

Ferron said it has only been in the last two years that the partnership has gotten off the ground.

While Rooster Petroleum is small by industry standards, it has seen tremendous growth in its reserve capacity.

“We started the year with just 8 BCFE (billions of cubic feet equivalent) of reserves. By mid-year, we had increased that to 24 BCFE,” Ferron said. “That’s the equivalent of four million barrels of oil. That’s pretty nice for only six months.”

Rooster Petroleum acquires “sunset” or mature properties from oil companies where it has identified additional un-captured value.

Platforms and other infrastructure in the Gulf of Mexico might need repairs and upgrades, or onshore properties may need better engineering, drilling or tertiary recovery mechanisms to revitalize existing production.

Rooster can find workers through Chet Morrison Contractors to perform the needed work to explore and exploit untapped oil reserves.

“What happens is the seller tends to run the property from the start until a certain point in its life,” Ferron explained. “Then they decide they want to go explore into deeper waters or they want to go onshore. So they will leave some production in place to cover the abandonment liability.

“Oftentimes, too, they have not looked for new reserves in the surrounding areas or they haven’t cut operating costs like they should as production declines,” he continued. “So, with a new set of eyes and a different approach, you can cut cost and improve the reserve situation to create incremental value. That’s kind of the name of the game.”

Ferron said many energy companies that had been active in offshore exploration and production have decided to move onshore because of the recent spate of hurricanes and highly volatile commodity prices.

He sees the current environment as an opportunity to acquire those properties at a reasonable price.

“We’re not as concerned because we have the service assets of Chet Morrison Contractors to deal with that risk,” he explained. “I think we better understand it and are better prepared to deal with it than a normal exploration and production company.

“We’re actively bidding for properties that are being sold. There is a rigorous market for that,” he added. “Plus, we have some drilling plans for later in the year, which will provide some work to Chet Morrison Contractors that they might not get in the ordinary course. We can do internal work instead of trying to get it on the external market.”

Ferron’s outlook for the natural gas market over the next year is uncertain.

The benign hurricane season has given platforms in the Gulf time to recover from the ravages of hurricanes Gustav and Ike last year. But with initial weather forecasts predicting a mild winter, natural gas prices will remain low through next year, he said.

“I think it’s a little early to say how natural gas prices are going to respond but (production) levels in the shallow water Gulf will probably remain depressed,” Ferron said. “Hopefully, that situation will start to resolve itself by the middle of next year as the economy improves and demand for natural gas responds accordingly.”