The Okotoks Dawgs train on their diamond at the Seaman Stadium. Mike Rose who used to own Duvernay Oil is a big baseball fan and is putting some money into the team.Chris Bolin
Just south of Calgary, in the foothills town of Okotoks, a baseball oasis is rising out of the rolling grassland, seeded by two generations of Alberta oil money.
It all started with a ball field, Seaman Stadium, home of the Okotoks Dawgs, a summer team for college-age players - and named for the late Doc Seaman and his brother Don, legends in the oil patch over the past 50 years.
Now a new legend is putting his imprint onto this hardball magnet, through Duvernay Fieldhouse, a high-tech, indoor training facility, and Tourmaline Field, a diamond being erected to develop high-school players.
This will be the house that Rose built: Mike Rose, the hottest star in the energy business and an incurable fan of the Boston Red Sox. The names reflect both his remarkable track record - he sold Duvernay Oil Corp. to Royal Dutch Shell for $5.9-billion at the peak of the energy boom in 2008 - and his huge ambition. Tourmaline Oil Co., his new private company, has raised more than $1.23-billion since being founded two years ago, and is expected to go public some time soon.
In the oil patch today, everyone wants to be Mike Rose, in the way that everyone in Silicon Valley wants to be Google's Sergey Brin and Larry Page. He has proven that in oil and gas, as in baseball fiction, if you build it, they will come - and Mr. Rose, 53 this year, has built three companies, and investors have come in droves, giving him some of the lowest-cost capital in the industry.
"Mike is golden," says veteran oilman Grant Bartlett, who has watched Mr. Rose since the 1970s when Mr. Bartlett was a professor in the Queen's University geology department and Mr. Rose was his star student.
What's more, the Rose factor is contagious. "There are a few companies out there that trade at big valuations because of Mike Rose," says Don Gray, the maverick oilman who counts Mr. Rose as one of the small group of other operators he truly admires. "People think someone like Shell will step up and pay an amazing amount for them."
While baseball is a big part of Mr. Rose's life, his field of dreams actually lies hundreds of kilometres due north of Okotoks, in the tight gas plays of Alberta's Deep Basin and in northeastern B.C., where he has made huge money for himself, his family and his backers.
Yet Mr. Rose remains the titan nobody knows, outside the square mile of downtown Calgary. There are other talented energy company builders - Canadian Natural Resources' Murray Edwards is a savvy financier, Suncor's Rick George is a smart manager, and Encana's Randy Eresman is a great operator - but Mike Rose is, above all, a working geologist.
He is a hero to thousands of rock hounds exploring the prairie and foothills who believe they can ride to riches on a drill bit and a seismic test. These dreamers believe that if you focus on the right geology, if you buy property around it, and drill some good holes, you too can hit pay dirt, and maybe sell out to one of the majors, leveraging the proceeds into bigger and bigger plays.
A number of Albertans have followed this path to million-dollar homes on B.C.'s Lake Windermere and golf dates in Palm Springs. Mr. Rose has done it twice for $7.5-billion, first by selling Berkley Petroleum Corp. to Anadarko Petroleum Corp. for $1.6-billion in 2001 and Duvernay to Shell for $5.9-billion in 2008. Now he plans to do it with Tourmaline, whose share values, based on escalating proceeds from private placements, have tripled in two years - and are up six times for insiders who got in at the beginning.
Yet Mr. Rose remains very private, and he is often underestimated because he married into the royal family of the Canadian energy industry, the Riddells, who have backed his ventures financially, but are not involved in the operations.
His wife, Susan Riddell Rose, is a force in her own right, as CEO of Perpetual Energy Inc., a family oil company recently converted from an income trust. Her brother Jim heads another family company, Paramount Resources. Overseeing it all is their billionaire father, Clay Riddell, 73, another geologist who parlayed shrewd oil and gas plays into a network of companies, real estate holdings, restaurants and a piece of the NHL's Calgary Flames.
At one time, it was assumed Mr. Rose was riding on the coattails of his father-in-law, but now the view has flipped - that Mr. Riddell was lucky to have a brilliant son-in-law. Duvernay made money for a lot of people, but none more so than Clay Riddell, who walked away from the Shell deal with a payday of more than $300-million.
The Riddells' support helped in the early going and probably accelerated the execution of Mr. Rose's game plan, according to Brett Wilson, a Calgary entrepreneur who, as a former investment banker, has known Mr. Rose for years. "Did they have fireside conversations around these kinds of things? Was there pillow talk? One could only hope. When you have that kind of brain trust, it would be a shame not to use it."
But Mr. Rose's marriage is largely irrelevant to his overall success, insists Toronto investor Joseph Rotman, who has made money backing both Mr. Rose and Clay Riddell. He sees Mr. Rose as an independent thinker whose great gift is visualizing the company he can build, who works long hours, and attracts and holds smart people who will follow him anywhere.
The path to riches
There was some indication in Mike Rose's early life that he was destined for geology greatness. He was born in Montreal to a family of English Quebeckers, who joined the throngs of Quebeckers who flocked to the Maine Coast each summer. That's where, as a boy, he cultivated his love of the Boston Red Sox and his enmity to their traditional rivals, the New York Yankees. His father, who worked in pharmaceuticals, was transferred to Ontario and Mike grew up in Streetsville, just west of Toronto. "I was a rock hound when I was little," he once said in an interview, "and my interest in rocks and minerals went on from there."
He followed that interest to Queen's University for geology and ended up in the class of Mr. Bartlett, a young academic with entrepreneurial aspirations. Mr. Bartlett kept a list of smart young students who he felt would succeed, and Mr. Rose's name was at the top. "He was always low-key but he had insight into issues and problems, says Mr. Bartlett, who has been building oil companies in Calgary since the early 1980s. "He was a good geologist and mature beyond his years."
Queen's geology classes were magnets for corporate recruiters, and Shell Canada led the parade to the Kingston campus. Mr. Rose signed on and went west to work in Shell Canada's exploration arm. There he forged the relationships that guided his life, for Shell was a great training ground and hotbed of entrepreneurial ambitions - and frustrations.
At Shell, he met Susan Riddell, another bright Queen's graduate. While she became a partner in life, other Shell types became partners for business. It is another classic oil patch theme: You build friendships in the big companies, where you find kindred spirits with the same vision - in this case, that there was a lot of life left in the Western Canada Sedimentary Basin.
Mr. Rose's co-conspirators at Shell included Bob Yurkovich, an exploration genius out of Northern Ontario, and Paul Lennon, a smart all-rounder. In Mr. Yurkovich particularly, Mr. Rose found the hands-on explorer to complement his ability to sell his vision to investors.
When Shell seemed too big and bureaucratic, the trio struck out in 1993 to form Berkley Petroleum. It was successful, but also a learning experience. Berkley was part of a consortium that drilled for gas at the East Lost Hills area near Los Angles, where it was hit by a spectacular blowout that required the intervention of oil field firefighter Red Adair.
According to friends and former colleagues, Mr. Rose learned two key lessons at Berkley. He needed a better control on expenses, and he needed to manage expectations on the Street. Berkley was notorious for missing production targets. Mr. Rose learned to estimate on the low end of probability rather than shooting for the moon on every projection.
Berkley was forced into play by U.S. major Hunt Oil Co., but Mr. Rose found a white knight in Anadarko, and shareholders, some of whom came in for $1 or less, walked away with a takeout price of $11.40. The Mike Rose mystique was born, but he was not done. "There's still lots of oil and gas to be found in Western Canada," he told an interviewer, as he moved his team over to a new venture called Duvernay.
When he met Mike Rose, Joseph Rotman already had a reputation as one of Canada's sharpest investors and a lot of that profile came from energy. At one time, he built his own oil and gas companies, and sold one of them, Tarragon Oil & Gas Ltd., to Marathon Oil for $1-billion (Canadian) in 1998. But for the past 15 years he has put his bets on rising prospects and one of his best finds was Mike Rose.
As Duvernay was being formed, Mr. Rotman met the young geologist, and as he heard Mr. Rose's plans, he realized he was dealing with not just a buyer of properties, or a collector of barrels of production. "To start Duvernay was almost like creating a painting in his mind," Mr. Rotman says. "He saw it as a picture of a geography and a geology. That is a talent that is very unique."
Mr. Rose's strong team was another plus. Western Canada was considered an exhausted gas field until new technology opened up resource plays. Mr. Rose was in the vanguard of the revolution that deployed multiple fracturing (or fracking) of rock to unlock hitherto trapped gas, and applying the technology to vertical and, later, horizontal drilling.
It paid off for Mr. Rose, who built excitement around his new venture. He is a master of Power Point presentations, unleashing a torrent of compelling detail to investors. It also alerted his old employers at Shell, who came calling with a spectacular buyout offer.
The deal proved a bonanza for Mr. Rotman, who had bought his early shares for about $3 and sold out for $83. It came at the top of the market in summer, 2008, just before the oil price tumbled from more than $140 (U.S.) a barrel to the mid-$30s, taking the Alberta economy down with it. Shell was eager to get in on the Montney shale gas play, and Mr. Rose's team of old Shell hands savoured the irony of selling the business to their old employer. The timing was not great for Shell, but sweet for the Duvernay team.
The team then moved over to Tourmaline, and deployed the same formula - acquiring land, raising capital, building expectations in the familiar Deep Basin, and bringing former Berkley and Duvernay investors on board. Mr. Rotman, for example, bought as many shares as he could put his hands on.
Investors were impressed that Mr. Rose has been able to transport the whole Duvernay management team to Tourmaline, even though every senior member had clearly made enough money to retire. "They came lock, stock and barrel and put $200-million of their own money into Tourmaline," one investor says.
The lure was loyalty to Mr. Rose but also confidence that there is still money to be made. "What I like is he's an owner, not a manager," Mr. Rotman says. "He invests his own money, he gets his managers to invest their own money and they don't take huge salaries and options."
Through it all, Mr. Rose remains a normal family guy. He and Ms. Riddell Rose have three sons, and the parents show up for hockey and baseball games. Ms. Riddell Rose has a high profile in the energy industry, and was front and centre in the bitter battle over Ottawa's crackdown on income trusts. Mr. Rose just runs his companies.
In spring and summer, he can be found down at Okotoks, where the boys are enrolled in baseball programs. He is occasionally heard to complain when some gas deal takes time away from watching and coaching baseball. "Mike has an appetite and interest in baseball. It's not a recreational kind of thing, of pretending you are a baseball guy, but it's about competing at the highest level," says Calgary lawyer John Ircandia, founder and managing partner of the Okotoks Dawgs.
Those are clearly the heights to which Mr. Rose aspires in business too, and with Tourmaline, he is on his way again. It took only 18 months for Tourmaline to reach about the same size as it took Duvernay in six years. Tourmaline yields gas production of more than 20,000 barrels of oil equivalent a day, and Mr. Rose has told investors that, based on current land holdings, it could realistically move to 50,000 barrels.
But the pace of growth would depend on the price of natural gas, he has pointed out. That underlines the one big uncertainty in Mr. Rose's world. The commodity price is low and volatile, and the global economy remains very choppy, which may affect his timing on going public. But an IPO would give many more people a chance to own a piece of Mike Rose, and, based on past experience, that still looks like one of the best bets in the Alberta energy ballpark.
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THE ROYAL RIDDELLS
Clay Riddell, 73, the son of a farmer who lost everything in the Depression and ended up as a Winnipeg mailman. Armed with a geology degree from the University of Manitoba, Clay started Paramount Resources in 1976 and rode it through a series of successful oil and gas plays. Has owned a number of high-end restaurants in Calgary over the years, including Catch and Bonterra. His wealth is estimated at $1.3-billion (U.S.) by Forbes magazine. he recently gave $15-million to Carleton University for a masters program in training ministerial aides.
Quote: "I have no idea how many times I bet the entire company and my whole net worth on something that either really worked or at least worked enough so it didn't break you. And we've used leverage way more than people would advise."
Susan Riddell Rose: At 45, the public face of the energy industry on big issues, as well as a big player in the family business. Her public profile soared in 2003, as she led gas producers in a regulatory battle when their production was shut in because of their proximity to rich bitumen deposits in the oil sands. Later, she took on the feds in the income trust faceoff. Along with husband Mike Rose, she gives back to Queen's geology, including support of a field studies program.
Jim Riddell: At 44, as president and chief operating officer of Paramount Resources, he is a lower-profile player in the energy industry, but is well known in the Calgary scene of energy-focused investment bankers and CEOs. Another geologist in a rock-hound family, he graduated from Arizona State University with a bachelor's degree and from the University of Alberta with a master's degree, both in geology.
Gordon Pitts