The Great American Energy Boom is responsible for some of the most incredible roughneck-to-riches stories in business history. Aubrey McClendon built Chesapeake Energy into a land-grabbing juggernaut, lost his shirt (and his spot on The Forbes 400) from too much borrowing and is now clawing his way back. Harold Hamm envisioned using horizontal drilling and hydraulic fracturing technology to bring up oil from under North Dakota and amassed a $19 billion fortune at Continental Resources. Trevor Rees-Jones has built a $5.4 billion fortune to explore shale gas under Texas and Pennsylvania.
But when it comes to pure wealth whiplash, it’s tough to top the tale of 36-year-old Bryan Sheffield, who in just six years has parlayed family connections and a trader’s taste for risk into 120,000 acres of Texas’s oil-rich Permian Basin and a personal fortune that could soon top $1 billion. “What Bryan has accomplished in such a short time is incredible, and it just highlights the amazing wealth creation occurring in Texas right now,” says Cameron Horwitz, managing director at US Capital Advisors in Houston.
Haven’t heard of him? If you’re not from Midland, the dusty heart of the boom-and-bust West Texas oil patch, that’s not surprising. But here, amid the thousands of bobbing pump jacks and endless dirt access roads that service them, he’s royalty, the son of Scott Sheffield, CEO of Pioneer Natural Resources (the largest operator in the region), and grandson of Joe Parsley, a West Texas oil legend. Despite being born into the industry, Bryan Sheffield kept his distance—at first. “I was searching for my destiny in the Chicago commodities pits,” he says. Then he moved to Europe to trade interest rates. “But I was a break-even trader, barely getting by.”
At 29, with a new wife, he came home to give the family business a whirl. At his grandfather’s suggestion, Sheffield agreed to take over operatorship of the 109 original wells grandpa Parsley and partner Howard Parker had drilled near Midland back in the 1960s and 1970s. They had long since sold off most of their assets in the region, but held on to these wells and could choose who managed them.
“I didn’t even know what that meant,” says Sheffield, who quickly learnt that this silver spoon had a fair amount of grit in it. The operation requires driving hundreds of miles of back roads a month, checking gauges and valves, making sure pumps are working and nothing is leaking. The job paid about $500 per well per month, or some $600,000 a year. Sheffield could hire people to do the work (“I’m a finance guy. If I tried turning a wrench, a pressure valve would go out and kill someone”) and have cash left over to build something bigger. “Do what you want,” said his grandpa. “Just take care of the properties.”
Hoping to learn something about the business before taking it over, Sheffield asked his dad to let him take a six-month crash course at Pioneer, which owns some 7,000 wells spread over 900,000 acres in the region. His most important tutor was Paul Treadwell, an operations foreman who had been with the company since 1992. They spent days driving the fields. Bryan was green, but he knew what questions to ask. And Treadwell, 11 years older than him and the father of three teenagers, was a patient teacher. “I love to teach people. And he’s got a great memory,” says Treadwell.
It didn’t take long for Sheffield to catch oil fever. Prices were surging, hitting a record high of $147 per barrel in mid-2008. Armed with new knowledge and a new partner (Treadwell left Pioneer to join him), he decided to do some drilling of his own. He named his new company Parsley Energy, in honour of his grandpa. The only problem: Oil leases were so expensive that he couldn’t afford to start drilling.
But, as anyone in boom-to-bust Midland can tell you, good times don’t last. In early 2009, oil prices fell to $35 per barrel as the Great Recession sank the global economy. Rather than pour precious capital into what would be uneconomic wells, many Permian operators just let leases expire.
Sheffield’s trading instincts kicked in. He started buying up drilling rights—worth a couple thousand per acre before the crash—for as little as $500 each. “I got lucky,” says Sheffield. “The best time to lease is when others are letting leases go.”