Energy Company Searches for Oil, From the Lab

By Mel Duvall Print this article Print

Mapping software pinpoints new sources of oil and natural gas for fast-growing company.

Revenue Per Employee $11.4 million

When Lance Armstrong visited Calgary, Alberta, in the fall of 2004 to attend a fund-raising dinner for cancer research, Don Gray outlasted the competition by bidding $50,000 for a new Trek Madone racing bicycle, signed and presented by the seven-time Tour de France champion.

The bicycle spoke volumes about Gray's personal and business philosophy. His idea of a vacation is slugging up a mountain, emulating his hero in the Tour de France stages. And in business, as chief executive of Peyto Energy Trust, Gray prefers to wear the yellow jersey, leading in every possible metric.

Since the company was founded in 1998, Peyto has become one of the most successful in the oil and gas exploration business. Daily production has surged from 111 barrels of oil equivalent at the end of 1999 (Peyto primarily produces natural gas, which is measured in barrels of oil equivalent—the amount of energy contained in one barrel of crude oil) to 21,511 barrels of oil equivalent per day in the most recent quarter, a compound annual growth rate of 184%.

Here's the kicker: The company has just 24 employees. With a run rate of about $290 million in annual revenue, Peyto achieves a remarkable $12 million in revenue per employee. That tops its 2004 record of $11.4 million per employee.

It would be easy to dismiss this achievement as a product of skyrocketing prices, but the fact is that Peyto stands out even in the heady oil and gas business.

Peyto's operating costs per barrel—at a time when oil companies are battling for land and competing to secure drilling rigs to capitalize on $66-a-barrel crude (as of Sept. 19)—have actually fallen from about $7.30 per barrel of oil equivalent in 1999 to $1.80 today. Peyto achieves these results through a combination of business smarts, outsourcing and sophisticated software that allows the company's engineers to more quickly and accurately determine the best spots to drill for oil and natural gas.

"My philosophy has always been to keep the people and functions that create value in-house, and outsource everything else," Gray says. "The more you complicate the business, the harder it is to repeat the same success."

This article was originally published on 2005-10-01
Contributing Editor
Mel Duvall is a veteran business and technology journalist, having written for a variety of daily newspapers and magazines for 17 years. Most recently he was the Business Commerce Editor for Interactive Week, and previously served as a senior business writer for The Financial Post.

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