How to make change
During Michael Smith’s first job out of Colorado State University there was no way he could have anticipated the events in his life that would lead to a career in oil and gas, let alone his return to CSU as a leader in the industry to deliver scholarships benefiting hundreds of students and their families.
Michael Smith shares his story during the annual College of Business scholarship luncheon.
“As a student at CSU in the 1970s, I had no intention of getting into the energy business,” said Smith. “I knew nothing about oil and gas, and I thought that oil gushed out of the ground like I saw in the movies.”
He had become a successful real estate salesman, but knew he wanted a change. However, it wasn’t until Smith invested in his first oil well that he fell in love with the business.
“The well turned out to be extremely successful and it launched me into one of the greatest industries that anyone could spend a career in.”
When he first moved to Colorado from New York, Smith thought that the pumping jacks dotting the high plains were water wells until a CSU geology student explained the units were drawing oil from one of the largest fields in Colorado, the Spindle Field.
Undaunted by the unfamiliar, and fueled by his insatiable appetite for knowledge and a fierce work ethic, Smith began to seek out mentors who could help him understand the industry.
“I put in hours learning the business and read everything I could,” said Smith. “Everything I could get my hands on.”
“I literally learned the oil business by going out and watching wells get drilled, and in the oil business nothing happens during the day.”
Responding to phone calls in the middle of the night, Smith would slip his boots on and drive along dark and dusty roads to visit active oil sites, discovering how data was collected and observing the operations.
A new company, a new direction
A view of the east entrance of CSU’s chemistry building in the early 1970s, where Michael Smith spent time as a student. University Historic Photograph Collection, Colorado State University.
In 1981, Smith founded Basin Exploration to focus on drilling the new and emerging codell/niaera drilling play along the front range of Colorado. During a significant growth phase focused on drilling and acquisitions, the Spindle Field caught his eye.
“Ironically, I bought the whole field, all thousand plus wells that I once thought were water wells,” said Smith.
But by the mid-90s, things began to shift. Small independent companies were having success in the shallow waters of the Gulf of Mexico using 3D seismic data analysis that could now be processed at workstations by smaller independents. Previously, the technology required super computers that were only available to the majors and very large independents.
So Smith made the difficult decision to move his company from the Front Range to the Gulf of Mexico, completely revamping the management of his company and bringing on expert geoscientists.
The success Basin Exploration found in the Gulf boosted the value of the company from around $50 million to a sale value of $410 million just five years later.
A pump jack at sunset. Image by Justin Vidamo.
Fast forward to present day and Smith is now the chairman and CEO of Freeport LNG, a liquefied natural gas company he founded in 2002.
Although decades had passed between the start of both companies, one thing stayed the same: change.
“How you respond to change will affect every one of you,” said Smith, addressing students during the scholarship luncheon.
In 2005, when Freeport LNG started construction on its $1 billion import terminal, demand for foreign gas was forecast to grow, but then a technological breakthrough changed everything.
The rapid expansion of horizontal drilling coupled with multi-stage fracturing brought a glut of new fuel to the U.S. market.
So Smith made a decision: “We switched.”
The company then began work on a $13 billion export facility to move the gas to foreign markets with great demand.
“I am not saying that change isn’t scary – it is – but each time I confronted it and pushed forward I was better for it.”