Legendary Investor/Trader T. Boone Pickens Visits TIGER 21, Speaks His Mind on the Future of Oil and Gas – and Wind and Water, too
Texas oilman, turned world commodities trader, philanthropist and conservationist, says he has survived and prospered because he knows when to change with the times
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NEW YORK (April 19, 2007) – If T. Boone Pickens’ favorite presidential candidate, Rudolph Giuliani, asked him to lead a committee to formulate a new national energy policy, what would his recommendations be?
The question was posed to the legendary Texas oilman and investor during a recent meeting with TIGER 21, the peer-to-peer learning group of high net worth investors. TIGER 21’s monthly gatherings frequently feature prominent names from business and finance, and Pickens more than fit the bill, as he expounded on oil and gas, philanthropy, the global market for water, and his own environmental streak.
Pickens, who for more than 30 years has been one of the most recognized shareholder activists and risk takers in the oil and gas industry, reflected first on what his energy recommendations would not be.
“More drilling isn’t the answer,” he said. “I hate it when candidates get up and say we are going to be energy independent.”
“The answer is not offshore,” continued Pickens, who turns 79 next month. “It’s not at home. The big fields are gone. The oil’s been found.”
He dismissed the contention that the hotly contested Arctic National Wildlife Refuge holds the answer; its 2 million barrel-a-day capacity would represent a drop in the bucket of America’s 21 million barrel-a-day oil habit.
So, how will future U.S. energy needs be satisfied?
Pickens estimates there are 200 billion barrels locked up in the oil sands of Alberta, Canada – site of his heaviest single oil investment – more than in Saudi Arabia, long the world’s largest oil exporter. He dismissed the Saudi claim of 255 billion barrels of reserves. Shale deposits in the U.S. Rocky Mountains hold promise – if we could get to it; the technology, Pickens conceded, isn’t there yet.
His fuel plan for the next presidential administration would include ethanol and liquefied natural gas; his 10-year-old company, Clean Energy, is North America’s largest provider of vehicular natural gas. Pickens still believes in coal stocks, but the unsung portion of his plan is nuclear technology, in which he has actively investigated deals.
“We’re going to need everything,” he told TIGER 21 members. “Costs of nuclear are insignificant compared to what we’re paying now for power.”
Safety concerns should be viewed in perspective. “No one in the US was ever hurt or killed in a nuclear accident.”
Pickens wouldn’t hesitate to “tax up gasoline to $5 a gallon” – offsetting this by decreasing taxes elsewhere. Historically, Americans have paid lower prices, and Europeans much higher: “There’s a global oil price. There’s not a global gasoline price. You’ve got to bring gasoline around the world to parity.” He predicted that higher prices at the pump are here to stay, and that a recession lurks somewhere in the future.
“This is the exactly the kind of insight and straight shooting we expected from Boone Pickens, who gave our members plenty of both,” said TIGER 21 founder and chair Michael Sonnenfeldt.
“What Boone knows about energy – its past, present and future – is as big as all Texas. Market fluctuations in energy in all its forms affect every kind of business and investment, and our members knew they couldn’t go to a more respected and knowledgeable source than Boone Pickens. Few people have had careers filled with as much challenge and adventure, and fewer still have had as much impact on their industry and on American business. Needless to say, our members were totally engaged in his presentation.”
Here are some of the other snippets from Pickens’ visit to TIGER 21:
On philanthropy: Pickens, who in recent years has become known for his philanthropy, remarked that he enjoys giving money away almost as much as he likes making it. Overall, he has given away half a billion dollars, often to medical, athletic and academic institutions, and last year established the T. Boone Pickens Foundation.
In 2005 he made two record-setting gifts: $165 million to his alma mater, Oklahoma State University, the largest ever devoted to collegiate athletics; and $7 million to the American Red Cross, the biggest single contribution in its history. His philosophy on giving, he told TIGER 21, is simple: he identifies good places that need help, makes gifts, and follows up; if the money is being used intelligently, he gives more.
He explained why he isn’t leaving philanthropy to his executors. “I want to see what happens to it,” he said. Plus, one reaps what one sows: “The more I give,” Pickens said, “the more I make.”
His sentiments about giving plainly resonated with TIGER 21 members, who were recently surveyed about their own habits and beliefs regarding philanthropy. Most agreed with the notion of substantial giving while the donor is still alive and, like Pickens, based the lion’s share of their giving on personal values; educational institutions were the preferred beneficiaries TIGER 21 members.
On environmentalism and water rights: People often act surprised that Pickens calls himself a conservationist, to which he says, “You can be an environmentalist and be in any business.” After he allowed drillers to look for oil on parts of his West Texas ranch, he insisted they restore the landscape to its original condition.
The owner of more water rights than any other individual in the country, through his company Mesa Water, he plans to start selling it to four upper Panhandle counties – although a pipeline to large cities such as Dallas is also not out of the question. He shares rights to the Ogallala Aquifer with residents of his home county.
“Water is shallow,” said Pickens. “You’re not going to find fresh water deep.”
If a proposed wind farm on his property goes through, Pickens said, he is considering using the water pipeline right of way to transmit wind-generated electricity as well. He estimates he could transport up to 4,000 megawatts of power.
On finding oil and gas: As a geologist, “You’ve got to be optimistic, because you dig a lot of dry holes. Most oil and gas fields have been found by luck.” Pickens said he drilled more than 5,000 holes between his start in 1956 and 1996, the year he left Mesa Petroleum, the company he had founded; along the way he pumped 3 trillion cubic feet of gas and 150 million barrels of oil. He said three-dimensional imaging, a computerized method of prospecting, has meant less time wasted drilling dry holes but hasn’t proved better than other methods at actually locating oil.
On taking advice from others: Pickens said he listens to the advice of others only if they meet three criteria: they are smart, they love him, and they have no conflict of interest.
On rolling with the commodities markets: There’s bigger bang for the buck in commodities than in direct oil and gas investment, Pickens said, but investors must be able to stomach the volatility. His 22-member firm makes all its decisions in-house. After a bad day, he asks himself and his staff whether their business fundamentals are still solid; if he’s satisfied that the fundamentals remain unchanged, then he has confidence they will recover.
On changing with the times: When he graduated from Oklahoma State with a degree in geology in 1951, U.S. oil exploration had already peaked, and was becoming an increasingly tough business. Thirty years later, it was that much tougher.
Pickens saw the “writing on the well” and walked away from the never-ending search for the next great strike. He could have retired to a “sorry” game of golf, or his favorite card game, gin rummy, but he still loved to work, so he brought his knowledge of the energy field to operating commodity and equity funds at the firm he runs, BP Capital.