|
Vol. 231 No. 6 |
 |
|
| NELL L. BENTON, ASSOCIATE EDITOR |
How to turn $1,000 into a $2.2 billion energy empire
The first thing I learned about Gary C. Evans, the founder of Magnum Hunter Resources, was that he used $1,000, to start a company and, 20 years later, sold it for $2.2 billion. This certainly caught my attention. I was intrigued and decided I had to know more.
 |
Gary C. Evans, chairman of the board and CEO of Magnum Hunter Resources.
|
|
After starting out as a banker, specializing in energy lending, Evans decided he wanted to get into the energy business full time. At 27 years old, he was able to do a leveraged buyout of a subsidiary of Chapman Energy by using $1,000 of his own money and signing a $1.2 million promissory note. This was June 1985.
“The mid-’80s were some really rough years in the business, as oil dropped down to around $11 a barrel,” Evans said. “Our service business was established, but lots of customers couldn’t pay their bills and my payroll was high. We began really having to be proactive to stay alive and taking over wells in north-central Texas. That’s what kind of kept us going through those years.”
After serving as president and CEO of Sunbelt Energy, Evans rolled Sunbelt and its subsidiaries into a public shell traded on the Boston Stock Exchange called Intramerican Oil and Minerals. Evans changed the name of the company to Hunter Resources soon thereafter.
If the mid-’80s were difficult, the next few years were a trial by fire. “We really had to fight for survival through buying foreclosed oil and gas properties and just trying to beg and borrow where we could to survive because money was just not available to anyone,” Evans remembers.
The next five years were the upswing for which everyone had patiently waited. Hunter Resources continued to grow, due in large part to the company’s involvement in pipeline systems and its operation of wells for others. The company earned fees on management, and in 1995 —the 10-year anniversary of its founding —Evans merged Hunter Resources with Magnum Petroleum. Magnum Hunter Resources (MHR) became a publicly traded company.
MHR continued to grow through acquisitions from big companies like Burlington Resources, Chevron and Unocal. Just as Evans saw an opportunity in the down cycle of the mid-’80s, he moved forward in the late ’90s to take advantage of the fact that major companies were divesting what they deemed as non-core assets. Evans’ goal was to buy them as cheaply as possible, enhance them and turn them into profitable businesses.
Between 1995 and 2002, MHR had a series of multimillion-dollar deals. After acquiring Prize Energy for $540 million in 2002, the company got up to a billion-dollar-plus market cap and just continued to expand. At the end of 2004, Evans began looking for strategic alternatives. In June 2005, he closed a deal to sell MHR to Cimarex Energy for $2.2 billion.
After Evans sold MHR, he ventured into the area of alternative energies and, in 2006, founded GreenHunter Energy as a holding company for renewable assets, focused on the segments of wind, biomass and biodiesel. GreenHunter owns the country’s largest biodiesel refinery in Houston, a number of wind locations around the US and a large biomass project in Southern California.
In May 2009, Evans took over management of Petro Resources Corp., headquartered in Houston. In July 2009, Evans resurrected the MHR name by changing the name of Petro Resources Corp. to Magnum Hunter Resources. MHR grew through several more acquisitions, the addition of $50 million in capital and a strategic plan of increasing acreage in shale plays around the country. Today, Evans spends about 95% of his time working with MHR and the rest of his time with GreenHunter.
When asked about his thoughts on the future of energy, Evans doesn’t skip a beat: “As an energy guy, whether its black or green, we need it all. It’s not just one or the other.” He explains that the biggest mistake so far has been the lack of a long-term vision to keep alternative energies financially sustainable. “You have to jump-start the industry to give it legs. You can’t do that with one-year tax credit extensions because nobody makes business decisions based on a one-year horizon.”
Evans believes that, in order to make our energy future work, we must look at what has worked in the past. “I go back to the oil and gas days when nobody knew what coalbed methane was in the ’70s and early ’80s. The federal government passed a production tax credit that was long-term. All of a sudden, big companies began drilling for CBM and, all of a sudden, the industry grew. People figured it out: You had a tax credit, an advantage, and, as a result, CBM represented over 10% of the US gas supply. The tax credit went away, and everyone was fine because it had been established over a long-term period. That’s how we created a whole new industry.”
Despite his success in surviving—and thriving—in the ups and downs, Evans is adamant that timing is not what led him from $1,000 to where he is today. “I’m a big believer that if everybody is on the same side of the fence, and working together as a team, we’ll all have better chances of success. So spreading the wealth out to your key management and all of your employees is pretty important. When we sold Magnum in 2005, we made 37 millionaires.”
Evans is quick to add, “And those were not all C-level. Those were people in the field ... At the core of this, it’s about people, and it always will be.” 
|
