Fast-forward to today, and Rusty’s company, DGO, now owns more than 60,000 gas and oil wells across West Virginia, Pennsylvania, Ohio, Kentucky, Virginia and Tennessee, a region called the Appalachia. Employing 925 people it has annual revenues of more than $500m. Some 90% of its operation is natural gas, with 10% oil.
The company’s business model is a very specific one – it doesn’t do any drilling to find new oil and gas reserves. Instead it buys up old oil and gas wells that bigger producers no longer want, because the initial large flow levels have fallen to low volumes.
“They don’t want these old wells, but the average remaining life on most of these wells is 50 years,” he says. “So we can come in, run them very efficiently, and make money.”
Rusty says that DGO has been greatly helped by the so-called “dash for shale” in the US over the past decade, whereby oil and gas firms gave up traditional oil and gas wells to switch to fracking instead.
In very simple terms, unlike traditional wells where oil and gas is sucked up, fracking involves first injecting a high pressure mixture of water, sand and chemicals into shale rock. This fractures the rock, and allows the removal of vast quantities of oil and gas that wasn’t previously accessible.
Rusty says the industry-wide move to fracking, and its higher production volumes, meant that DGO has been able to buy thousands of old, but still productive, traditional wells cheaply, and rapidly expand the business.
