The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters (12 page)

George Mitchell didn’t show any kind of reaction. Neither did his son. It wasn’t clear Bowker was getting through.

Bowker rattled off some more numbers, such as an estimate of the amount of natural gas in each ton of rock in the Barnett.

George Mitchell looked impatient. Some of Bowker’s terminology was best suited for technical journals. Mitchell was an old pro, but it was still too wonky for him, at least at that moment. He was at the edge of his seat, hoping to make a decision on whether to go full steam ahead in the Barnett. He didn’t need a dissertation on the rock’s characteristics.

“What does that mean?!” he interrupted in frustration. “Give it to me in square miles.”

Mitchell wanted to know how much gas was in each of the five thousand square miles that Mitchell Energy controlled in the Barnett. He needed a simple number representing how much gas the company was actually sitting on per square mile. Mitchell didn’t care how much gas was in each ton of rock.

Bowker hadn’t really thought it through in those terms. He borrowed a calculator and began punching up figures as the executives in the room watched and waited. After a long minute or so, he looked up. He said he and his team believed there were 185 billion cubic feet of gas for each square mile in the area. That was
more than four times
Mitchell’s previous estimates. Mitchell was extracting only about 7 percent of the gas stored in the Barnett Shale, not the 30 percent the company thought it was getting, Bowker argued.

Bowker was finished. The consultant in the room was asked for his view on the presentation and he concurred with Bowker. There was a hushed silence as everyone looked at George Mitchell, waiting for his reaction. A smile formed on his face that grew bigger and bigger. It was dawning on the septuagenarian what kind of treasure his company was sitting on. Mitchell stretched his arms out wide and looked excited.

“This is huge!” he exclaimed.

Todd Mitchell flashed Bowker a smile. He too was convinced by the presentation and agreed with his father’s enthusiasm, a sign that management would go all in on the Barnett.

George Mitchell now understood that the Barnett Shale held more gas than almost anyone believed possible. And thanks to Steinsberger’s work, they now had a method to get it out. The company, and perhaps even the nation itself, had an unmatched opportunity. And it was happening just as more experts were wringing their hands about where new sources of oil and gas would come from in the United States.

Mitchell realized he’d have to lease a lot more land in the area if he was going to seize this prime opportunity. But the only way they could do it at reasonable prices was if no one else found out how eager Mitchell Energy now was to expand its drilling. He spoke up again, this time with more urgency and seriousness. “This is the biggest secret in the history of the company,” he told the group. “No one can hear about this!”

The group left the room in high spirits. Bill Stevens exited through another door by himself, heading in a different direction.

•   •   •

S
anford Dvorin, the stubborn wildcatter from Newark, was making his own progress. Dvorin was working to unlock gas from shale, just like Mitchell. He was just as certain the Barnett area had a world-class supply of gas, if only someone would let him drill in their backyard.

By 1996, Dvorin had focused on drilling in the city of Coppell, a Dallas suburb five minutes from Dallas/Fort Worth International Airport. The city was close to a natural gas transmission line, making it easier for Dvorin to sell gas if he ever found some of it. Coppell was just fifteen miles away from Mitchell’s wells, another reason he thought he had a sure thing. If George Mitchell was excited about the area, it must have real promise, Dvorin figured.

Coppell was an up-and-coming city with little interest in energy drilling. Its young and affluent homeowners already enjoyed brick homes worth a quarter of a million dollars, paving-stone intersections, and turn-of-the-century lampposts.
¹
The city had little need for gas wells, and little need for Sanford Dvorin. Besides, striking oil or gas in suburbia seemed preposterous. Most were certain that if there were reservoirs to be found, someone already would have done so.

After a year, though, Dvorin met Bill and Adelfa Callejo, Coppell residents who agreed to let him drill on their land. The Callejos were well-known attorneys in Dallas who had devoted a lifetime to sticking up for outsiders; Adelfa had spent three decades as an activist defending the rights of Mexican Americans and others after becoming the third woman to graduate from Southern Methodist University’s law school. The Callejos also happened to own 130 acres of open land zoned for light industrial development. At the time, the acreage was being leased for cattle grazing, making it perfect for drilling.

The Callejos agreed to lease their mineral rights to Dvorin and even formed a close relationship with him, rooting hard for his success. As a royalty partner, the family figured to do well if Dvorin discovered gas on their land, of course. It was about more than money, though.

“We were
mishpucha,
” Bill Callejo, a New Yorker of Puerto Rican Catholic descent, told the
Dallas Observer,
referring to the Yiddish word for family. “We established a good family relationship, and the business came later.”

They fully appreciated their odd pairing with Dvorin. “You have a Puerto Rican Yankee, a Mexican Texan [Adelfa Callejo], and a Jewish oil operator from New Jersey,” Bill Callejo told the
Observer
. “What a trinity. . . . We’re giving it a legitimacy it claims in TV shows.”

It took Dvorin another year to persuade Coppell officials to let him drill on the Callejos’ land. Early on, he couldn’t find any financial backers. He was a lone, quirky wildcatter with a limited track record, and he was focused on questionable acreage. Dvorin had to put all his net worth into drilling his one well, which he dubbed Callejo No. 1.

To ease the financial pressures on Dvorin, the Callejos agreed to forgo their lease payments in exchange for a bigger cut of profits if Dvorin discovered gas. Soon he found a small company called Foundation Drilling & Exploration willing to finance his efforts, allowing him to proceed.

In early 1997, Sanford Dvorin and his son, Jason, began drilling. Their work caused an initial roar that disturbed some neighbors, but others began to root for their hometown Don Quixote. “I never prayed to God for money, only for the health of my family,” Adelfa Callejo said at the time. “I know if the gas well comes in, I will benefit. But I asked God to please let it happen—for the Dvorins. They have so much at stake.”

Even the Mitchell team was pulling for Dvorin. Mitchell executives never wanted the bother of drilling in the highly populated Dallas–Fort Worth region, but they figured if Dvorin could extract gas from his slice of the Barnett, investors might become excited about their own drilling, boosting Mitchell Energy’s slumping shares. They figured they might even learn something from Dvorin.

Dvorin’s early attempts at fracturing the rock met serious problems, just like George Mitchell’s had. After some trial and error, though, he reduced his gel and increased the water in his mixture, just like the Mitchell team. He began to see some progress.

Often, Dvorin gathered his drilling team to go out for lunch at a local steak restaurant, where he picked up the bill, according to Jim Henry, who lent a hand to the effort. Other times he set out silver trays of barbecue for members of his crew who had worked through the night.

“Sanford liked to ask how your wife was, how your kids were, there would be plenty to eat, and he’d pick up the tab,” Henry says. “Some provincials might have been a little suspicious of a New
Joisy
Jew who spoke with a thick accent, but he was a generous and goodhearted character who became popular.”

Dvorin and his family lived in a trailer on location, sometimes munching on bagels and whitefish salad from a Dallas delicatessen as they watched the fracking crew do their thing.

“They were a poor excuse for bagels,” Dvorin says.

When politicians or members of the Mitchell team visited, the Dvorins handed out T-shirts reading “The Well in Coppell.” The Mitchell engineers shook their heads, befuddled by their neighbor’s unbridled optimism.

Dvorin and Foundation received permission to drill additional wells nearby. As they made progress, some of their field workers began to notice unfamiliar men roaming around, trying to get on their property. The men seemed to be attempting to ascertain how much progress Dvorin was making.

The same thing was happening near George Mitchell’s wells. In past drilling eras, such skullduggery often resulted in gunshots aimed at pairs of fast-retreating feet. The ever-confident Dvorin had a different approach to his uninvited guests.

“I waved to ’em and yelled over, ‘Hey, what do you want to know?’” Dvorin remembers.
*

In April 1997, a year or so before Mitchell began making real progress in the Barnett, Dvorin received an early indication that he’d struck gas. Not only that, but it seemed to be in substantial amounts.

“This has got us so excited we can’t see straight,” he told a reporter, while pointing to a copy of early test results on the well. “That’s a big well. A very big well.”

Dvorin was sure he was on the brink of uncovering life-altering amounts of natural gas. He leased new properties in the western part of Dallas County and set plans to drill a hundred new wells. He figured the financing would come as word spread about his amazing discovery. Within months, he got a few wells going, and they also produced gas, just as he had predicted. He had somehow succeeded in extracting natural gas in Dallas County for the first time, despite all the skepticism.

As he watched the wells pump out gas, though, Dvorin’s enthusiasm slowly began to ebb. His wells produced gas, just as he had predicted, but the amounts weren’t huge. His costs were soaring and it was proving more expensive to drill in the city than he expected. Natural gas prices weren’t keeping up, adding to his strain. He kept at it, but he wasn’t making nearly enough from his wells to offset their high costs. He had yet to master the horizontal drilling that would be crucial to that part of the Barnett, further handicapping his efforts.

“I thought he’d produce a lot of natural gas,” says Jim Henry, the former Mitchell Energy executive. “His ideas turned out to be geologically sound and people who came in after him did very well. He was just a little bit ahead of his time.”

Soon, Dvorin found himself in a messy legal dispute with his backer, Foundation Drilling. Dvorin didn’t have enough capital to hold on to his acreage and he had to give up his leases, a disastrous turn of fortune. He remained as the operator of the Coppell wells, but eventually was fired from that job, too.

“When the smoke cleared the only ones who made money were the lawyers,” Dvorin says. “It got so nasty I almost sat down and cried.”

At one time, Dvorin had leased five thousand acres in the Barnett at an average of fifty dollars per acre. Less than a decade later, the same acreage would sell for $22,000 an acre, or $110 million. Around that time, the area under the Dallas/Fort Worth International Airport that Dvorin was set on drilling was leased for nearly $200 million, as big companies like Chesapeake Energy became convinced the Dallas area was full of natural gas, just as Dvorin had tried to argue to investors.

By then, Dvorin and his son, Jason, had moved on from the drilling business.

“I’m seventy-three years old, I don’t want to spend my time looking into the past and cursing,” he said in an interview in early 2013.

Sanford Dvorin lost his big lead in the Dallas–Fort Worth area and could only watch as Mitchell and others made progress. Rather than become a rich Texas oil and gas man, Sanford Dvorin became an altogether different archetype of the energy pitch—a wildcatter who came close to a huge find but couldn’t quite pull it off.

“The saddest part is we were right, and took heat, but we didn’t profit from it,” he says. “I didn’t make millions, but I sure got screwed out of millions.”

Today, Dvorin lives in a 2,000-square-foot home in a Texas suburb and drives a 2003 Cadillac. He and his son roam the region searching for attractive acreage to try to flip to exploration companies, a challenging endeavor.

“If it was easy work the Girl Scouts would be doing it,” he jokes.

Dvorin holds out hope that he and his son will strike it rich yet, perhaps by discovering the next hot drilling location or by operating wells for someone else. He’s also developing new and improved production tools, as he waits for his lucky break.

“Sooner or later, the pendulum might swing back,” he says.

•   •   •

M
itchell Energy’s shares slowly began to rise in 1999, as the outlook for natural gas prices improved. Relying on Bowker’s data, Mitchell ordered the company to step up its leasing in the Barnett. The company also drilled more wells and did another round of fracking on old wells, realizing there was a lot more gas to be found than they had first thought.

Stevens grumbled when he heard about Mitchell’s desire to lease even more land, several people at the company recall. One day after a board meeting, Stevens approached Todd Mitchell and another executive with an urgent request. “Go talk to your dad and tell him to stop buying” acreage outside a core area of the Barnett. He continued to argue that the core held promise, but the rest likely wasn’t worth the time and drilling expense.

For his part, Stevens downplays his disagreements with others at the company. “We were all working for the same end result, and depending on your role in the company, you may have had different perspectives,” he says. “I was balancing a lot more than the Barnett,” including other parts of the business.

The leasing continued, but it was clear the acreage would have to produce larger amounts of gas soon or someone would pull the plug on the efforts in the Barnett. It didn’t help that by October 1999, George Mitchell was a hands-off figure at his company. He had turned eighty years old, and while his cancer was under control, Cynthia was showing early signs of Alzheimer’s disease and her illness weighed heavily on him.