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Oil’s Offshore Oddball As the price of oil drops, America’s shale frackers are running scared. But upstart Venari Resources is sitting pretty thanks to deepwater finds in the Gulf of Mexico that should still turn a profit at $60 a barrel. BY CHRISTOPHER HELMAN
I Undersea adventure: BP’s Gulf disaster didn’t deter Venari Resources’ Brian Reinsborough from hunting oil offshore.
n an era of plunging energy prices, mounting environmental regulations and a glut of oil flowing from wells across America, Brian Reinsborough’s business plan seems more than contrarian. It seems downright nuts. While the rest of the industry is using fracking and horizontal drilling to pull up shale oil from under the ranches of Texas and North Dakota, Reinsborough, CEO of Venari Resources, is looking 100 miles offshore in the Gulf of Mexico, taking huge bets on deepwater wells that cost as much as $250 million each, ten times the cost of rival onshore wells. Launched with $1.1 billion in private equity backing, Venari is working in water 4,000 feet deep and drilling 5 miles down, where the
40 | FORBES DECEMBER 15, 2014
pressure is 15,000 psi and the temperature can hit 300 degrees. Risky? Just ask BP. Yet so far his winners have outnumbered his losers, and Venari is now one of the least likely victors of the American oil boom, with an outsize stake in some of the biggest deepwater discoveries of recent years, including a find called Shenandoah, thought to hold more than 1 billion barrels of oil (potentially worth some $70 billion, even at current low prices), and Guadalupe, a discovery announced by partner Chevron in late October that could end up being just as big. Falling oil prices, down some 30% recently, have been oddly good for business, Reinsborough insists. That’s because even after investors put up as much as $7.5 billion to build a massive production platform like Chevron’s new 160,000-ton Jack/St. Malo structure, the fields are so vast and the volumes so big (think 20,000 barrels a day from a single well) that they can still make good money at oil prices as low as $60 a barrel. Rival shale-oil producers are struggling at $80. “It’s ironic,” says Reinsborough. “Lower prices are making our business more appealing.”
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