Mr. Simpson: The company was started in 1986 by three individuals myself, Steve Palko and Jon Brumley. We came from Southland Royalty Company, which was taken over in 1985 by Burlington Northern and then spunoff as Burlington Resources, another E&P company. We brought to the company the best of the philosophy we learned at Southland, which is to buy quality production and make it better. We started with six folks and no reserves, and we've used that strategy to build the company to what it is today a buyer of long-lived, quality properties in areas we understand. We then make the properties better. On average, we've enhanced the property reserves by 50% since their acquisition.
TWST: When you look at the industry today and the marketplace, what are
the key trends or issues that impact you as you go about setting your
own goals and strategies for the next two- to three-year time frame?
Mr. Simpson: Obviously we had a significant setback this past year in
terms of commodity prices, but during that period we were okay. We have
a quality base of reserves and as soon as things turned this spring, we
came out of the chute bucking as high as ever. We've spent about 480
million this year on acquisitions, mainly in the Arkoma Basin. We're now
the largest producer in Arkansas. It's an exciting time for Cross
Timbers. Again, our basic strategy is to buy quality and make it better.
Since the majors are going through consolidation, I would be hard-
pressed to think of a better scenario to serve our strategy because they
will be divesting assets once again. There was a wave of divestitures
from 1986 through 1990 when we started our company. So this is sort of a
second wave, probably a larger wave, of property disgorgement from them;
and therefore, a larger opportunity for us than ever before. The major
oil companies will be selling assets, that in the food chain just don't
deserve their focus. Of course, they are intelligent organizations doing
what is logical for their strategy focusing their best people on their
main assets. Ironically, this is what we do on a step-down basis. What
was considered a small project with junior talent at a major will be a
major project with major-league talent at Cross Timbers. We're excited
because the opportunity is probably going to be larger and more prolific
than any witnessed in the last 50 years.
Tickers included in this excerpt: XTO
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