Despite his initial reluctance, Rusty Hutson Jr He could not escape his family vocation.
Born and raised in a working family in the middle of the West Virginia oil and gas fields, United States, Both his father, his grandfather and even his great-grandfather made a living in the energy sector.
They worked in wells and pipelines, doing hard manual labor, day after day and year after year, to support their families.
During his summer vacation from high school and college, Rusty used to work with his father.
But in 1991 he became the first Hutson to graduate from college, and he wanted to do something completely different with his life.
“I decided to get into the oil and gas business It was the last thing I wanted to dohe says. “It’s really hard work.”
With his accounting degree from Fairmont State University, West Virginia, Rusty embarked on a successful banking career for a decade that would take him to Birmingham, Alabama.
ORn old gas well for US $ 250,000
But as the years went by, Rusty became annoyed that he hadn’t followed in his father’s footsteps in the family business.
“West Virginia was a difficult state when I was growing up. It still is,” he explains.
“There were two types of people: You either worked in the (coal) industry, or you worked in the oil and gas industry. It was generational. If your father and grandfather did it for a living, then you (also) did it. “
“And as the years progressed, I was increasingly drawn to that world. I also had a desire to build something, to do something entrepreneurial.”
So in 2001, at 32, Rusty bought an old gas well in West Virginia for $ 250,000 with the money he got by re-mortgaging his house.
“It was an old, small well, it had been in production for years, but for me it was like gold,” he says.
“For the next four years, I continued to work at the bank, but when I had free time I would go to West Virginia to work on the only well I owned at the time.”
Income of more than US $ 500 million
Today, Rusty’s company, Diversified Gas & Oil (DGO), owns more than 60,000 oil and gas wells in West Virginia, Pennsylvania, Ohio, Kentucky, Virginia, and Tennessee, states that are part of a region known as the Appalachians.
DGO employs 925 people and has annual income of more than US $ 500 million. About 90% of its operations are derived from natural gas and 10% from oil.
The company follows a very specific business model: it does not drill to find new oil and gas reserves.
Instead, it buys old wells that larger producers no longer want, because initial flow levels have fallen.
“They don’t want these old wells, but they still have an average of 50 years of useful life, so we can manage them very efficiently and earn money, “he says.
Rusty says DGO has benefited from the so-called “shale race” that has been seen in the United States for the past decade, in which many oil and gas companies have given up traditional wells to dedicate themselves to fracking.
Cpublicize on the London Stock Exchange
In very simple terms, unlike traditional wells, from which oil and gas are directly extracted, the fracking It first involves injecting a high pressure mixture of water, sand and chemicals into oil shale rocks.
This fractures the rocks and allows the extraction of large amounts of oil and gas that were previously unavailable.
Rusty maintains that the turn of the entire industry towards fracking and its higher production volumes have allowed DGO to buy thousands of old traditional but still productive wells at a lower cost, which has facilitated the rapid expansion of its business.
In 2017, the company decided to go public to raise funds to continue growing.
Rusty chose the Alternative Investment Market of the London Stock Exchange (LSE), which was a move unusual for an American company.
“We weren’t big enough to launch into the United States,” he says.
“And I did not want to follow the route of private capital because didn’t want to work for someone else and try to recover part of the percentage. “
“A practically unique proposal”
DGO is currently on the verge of climbing to the top of the London Stock Exchange.
James McCormack, energy analyst at Cenkos Securities, says DGO’s strategy of “acquiring low-cost, long-life, low-declination (oil and gas) producing wells” is “a virtually unique proposition.”
“Under Rusty’s leadership, DGO has grown rapidly since its public offering (IPO) in February 2017, has been increased production 20 times and reserves 23 times, “continues McCormack.
Carlos Gomes, another sector analyst from the Edison group, highlights that DGO has become the largest producer of conventional gas in the Appalachian region.
“The company has mature, low operating cost and long-lasting productive assets that generate very stable cash flows,” he adds.
Parental advice
In the long term, DGO’s plan is to continue buying wells to replace those where production is halting.
Rusty says the company currently has plans to expand to other states, such as Texas.
For the short term, the entrepreneur says rest easy despite the collapse of oil prices and gas due to the coronavirus pandemic.
First, because it has long-term agreements on the price at which it sells its production, and then because its business operates more efficiently than that of the larger ones.
Also because he can go to his father when he needs help and advice.
His parent, Rusty Sr, is the supervisor of the company’s operations in northern West Virginia.
“He is 72 years old and loves it“Rusty says.” What if he tries to tell me what to do? Oh, of course”.
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