Forget About the Future | A Profile of Highrock Energy’s Craig Borgland
For Craig Borgland, long-term success in the oilpatch is all about the short-term plan
by Paul Matwychuk
No modest man ever did or ever will make a fortune, according to the old saying. And that can seem especially true in the oil industry, which has always cultivated a reputation for itself as the territory of flamboyant tycoons, men with big dreams, big desks and very big egos.
But then there are people like Craig Borgland, who in 2008 sold off his private company Landex Petroleum for $310 million, just five years after he started it – five years marked by prudence, careful planning, decisiveness, humility, a readiness to share credit and a disinclination towards swagger. That old saying is probably ready to be retired, but it’ll be a long time before the same can be said of Borgland. He’s only 35.
Borgland, who started up his thriving second company, Calgary-based Highrock Energy Ltd., in July of 2008, just three months after the Landex sale, lets out an embarrassed chuckle when he begins talking about himself, as if loath to single himself out for attention.
“Look. There are some phenomenal young people in the industry,” says the president and CEO. “I think it comes down to having good mentorship early on in your career. If you’re given that foundation, you can be very successful at a pretty young age.”
Borgland’s mentorship started earlier than most: his father Hugh Borgland has worked for more than four decades in the oil and gas industry as a landman in Alberta and Saskatchewan. Hugh began in the late ’60s with Sun Oil but left it in 1973 to strike out on his own, a departure that occurred much quicker than for most resource entrepreneurs, notes Craig.
Borgland gained plenty of practical knowledge about the nature of the oil business and spotting opportunities from his father, but he says the key lesson was simply watching Hugh take control of his own fate. Surround yourself with good people and hammer out a solid business plan and you have a good shot at achieving success, no matter how modest your company’s origins. You can grow the complexity of your business, Borgland likes to say, but it doesn’t have to start out as something complicated.
Take Borgland’s first company, which began as a comparatively modest exploration concern called Market Energy. Market would build up an inventory of prospects and allow outside drillers access to its land. After six years of this, however, the company decided to begin drilling on its own. To do that, it needed additional capital.
As it happened, at around the same time, Borgland became aware that the head of a company named Landex Exploration was interested in stepping away from day-to-day operations and moving into more of a boardroom role. (To be fair, it would have been pretty hard for Borgland not to pick up on this corporate gossip; the man in question at Landex was Hugh Borgland.) With that, Landex Exploration was sold and father and son joined forces, rolling Market’s assets into a new, larger company called Landex Petroleum, with Craig as president. Initial production in late 2002 was focused on southeast Saskatchewan and yielded about 75 barrels per day, but in five years’ time, when the company was sold, the Borglands had increased its daily output to about 4,500 barrels.
“I’d been playing a very small game before,” Borgland says, “but I soon stepped into a different league.” Indeed: in 2008, he also joined the board of Shelter Bay Energy Inc., a privately owned oil and gas company spun out from Crescent Point Energy Corp. that’s raised close to a billion dollars from investors.
But Borgland’s business plan remains, at heart, as modest as he is. So far, he’s strictly limited his field of operations to the pool of light, sweet crude oil in southeast Saskatchewan’s Bakken formation. And there’s a limit to the life of his companies as well. Borgland’s strategy is to “de-risk” plays: develop them enough to reveal their financial potential and then sell off the assets while there’s still “enough meat on the bone for someone else to chew on.” If the oil business is a casino, Borgland is not only the guy who always walks away with more chips than he started out with; he also convinces the next guy that the slot machine is just warming up for a jackpot.
Actually, that’s a lousy analogy. Borgland is the opposite of a gambler. If anything, he likes doing business this way because it keeps the variables to a minimum. “It’s easier to be short-sighted,” he says. “It’s tough to know what the oil markets are going to do in 20 years. I mean, it’s tough enough to know what they’re going to do next year. Ultimately, though, the shorter the plan, the better vision you can have. If you’re focused on gas, you’d better believe that by the end of the time frame in which you’re running your business, gas is going to be strong.”
Keeping focused on the short term, he continues, “also helps in terms of liquidity. If you’ve been the founder or president of a public entity for 25 years, it’s very difficult to liquidate your position without sending out a signal to the market that you no longer believe in your own company.”
But overall, for Borgland, the key to success is being able to control his destiny – or at least to control the capital he’s spending. “It’s the same principle as if you’re an investor,” he says. “Who are you going to trust the most? Is it going to be some broker, or is it going to be a situation where you invest in yourself, and know that the more hours you put in, the more – hopefully – you’re going to get out at the end of the day.”
Borgland once believed he got into this business at the worst possible time, back when oil was about $10 a barrel. But he’s come around to the idea that maybe he actually got in at the best time. “I had to really focus on making things work in a difficult environment,” he says. “And since that time, I’ve seen the polar opposite: I’ve seen $140 a barrel. I’ve seen the low of the low and I’ve seen the high of the high. And we’re seeing another low now, so maybe I’ve seen one full cycle run through. If I can use an analogy, after you’ve had a small car accident, you tend to drive a little more conservatively. Now, what we went through economically was no small accident – it was a major collision. And that’s going to have an effect on how businesses are run, on debt, on raising capital, and on the consumer as well. So is that a period of three months? Six months? I don’t know.”
If Borgland’s comparative youth gives him any kind of advantage, he feels, it’s precisely during these periods of uncertainty and market fluctuations when it becomes apparent. Call it a willingness to see temporary setbacks as just that: temporary. For those with a couple of extra decades under their belts, the more dry holes they drill, the more their willingness to entertain new ideas tends to diminish. Not so with Borgland.
“If you’ve just drilled a dry hole,” he says, “the last person you want to hear from is some geologist telling you there might actually be oil there. But there might be. In this business, every dry hole sets up a new play. There’s always some angle.”
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