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Don Gray, president of Gray Capital Partners, relaxes by working on a go-cart from his son in his Calgary home, Thursday, July 15, 2010.

Jeff McIntosh for The Globe and Mail/jeff mcintosh The Globe and Mail

Don Gray's new house is 15,000 square feet of Old World grandeur, perched on a gusty bluff west of Calgary with a breathtaking panorama of the mountains.

A tour through its rooms and corridors reveals a fitness centre, a games room for his five children, a theatre, a 25-metre pool in the basement, and, outside, a courtyard for shelter from the wind.

Next to his family and Peyto Energy the company that made him rich, this house is his masterpiece. Its design and construction have occupied the past 3½ years when he has been on semi-hiatus from the industry he both loves and deplores.

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The family moved in last fall, and Mr. Gray, the former enfant terrible of the oil patch, has shifted his focus back to energy.

He has a new company, a new geological focus, and, at 45, a new attitude - a little mellower, but not exactly a pussycat yet.

"We're all judgmental when we're younger, no question about it," said Mr. Gray, whose judgments have included dismissing other energy executives as "clowns," and portraying energy analysts as hopelessly compromised by working for investment banks.

"One of the reasons I stepped back was I spent too much time being the sheriff of this industry, policing and watching what other guys are doing," he said. "It was really nice to be somewhat ignorant about what all the others were doing."

But the habits of the industry still vex him. "It bothers a person like me when I see people being rewarded handsomely for actually losing money for people."

Mr. Gray has, in fact, made a lot of money for himself and other people. Peyto, a growth-oriented trust, has delivered a 60-per-cent compound annual return in distributions and total appreciation over the past decade, by focusing on extracting natural gas from Alberta's Deep Basin.

Mr. Gray, born in Saskatchewan and the son of an energy services executive, remains Peyto's chairman and still owns four million trust units, worth about $60-million.

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His new baby is Gear Energy Ltd., a private company run by a veteran team that he has let loose in the heavy oil fields of eastern Alberta. Mr. Gray likes the steady economics of heavy oil, and feels he has the patience to wait for the payoff. He also feels it is important not to do too many things at once.

"What we want to be is an expert in something, as opposed to just mediocre in everything," he said. Other companies may sound as if they have a focus, "but if you dig a little deeper, that story is a small percentage of their entire assets. They don't have a geographic focus and they dilute their expertise right out of the chute."

One reason Mr. Gray has failed to win friends in the oil patch is that he is very analytical and quantitative, and constantly compares how his companies stack up against their peers. He freely quotes these comparisons, which, in truth, do make others look bad, and that doesn't win him popularity contests.

Now, he sees himself as a strategic adviser, serving as chairman of both Peyto and Gear. He is also building his venture capital arm, Gray Capital Partners, as a vehicle to back emerging energy companies.

His head office these days is his home office, which helps explain why he built a bigger house - he was tired of running his companies from the kitchen counter in his old home. From his new abode, he can easily escape for long bicycle rides, his other consuming passion.

Otherwise, he insists he has not changed that much in his three-year quiet period. He is still the brash young maverick.

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His frustration these days is directed at financial engineering, not only in the oil patch but everywhere in investment banking. "You are transferring massive amounts of wealth to people who are not creating anything."

It is particularly prevalent on Wall Street, where financial game-players have turned markets into casinos. "It's the thing that will ultimately kill the United States."

So does he count investment bankers among his friends? "I do, I do. I deal with them and they do serve a purpose. I just think you get the cart ahead of the horse."

He has more respect for oil and gas bankers than their counterparts in other sectors, and he credits the dealers for selling his company's story to investors. But "when you get the analysts and investment bankers working too tightly together, it's a very fine line." As he has often argued in the past, the investment banking relationship often clouds analysts' judgment.

Mr. Gray has also said he didn't need to go public with Gear - he could use his own capital. But recently he has had second thoughts, largely because energy is so capital-intensive, he has other partners to consider, and he has already invested a lot of personal money.

Meanwhile, "I still support Peyto and I don't see selling that just to put it into [Gear] I think there is merit in having two pistons firing."

Gear reunites Mr. Gray with former neighbour Rick Braund, an oil-and-gas land man who helped him build Peyto. He credits Mr. Braund with helping draw him out of semi-isolation and back into the Calgary energy scene.

Mr. Braund is the idea man, while Mr. Gray sees himself as the filter who figures out which ideas they should pursue. Mr. Braund is linked into Calgary's energy networks, Mr. Gray explained: "I was well known but I've not networked. I didn't hobnob with the other CEOs."

Does he still see them as clowns? He laughs, saying, "To be honest, with a lot of the players out there, I wonder what they are doing. … There aren't many of them that you would describe as 'What a great business!' or 'What great innovators!'"

Another interest these days is politics. He likes the upstart Wildrose Alliance and its charismatic leader Danielle Smith, who has drawn support away from the ruling Conservative Party in Alberta.

Mr. Gray would love to see a new party rising in Alberta because, he said, the Conservatives are not true conservatives. "They don't even understand what those principles are."

As with the energy industry, he is not sure anything much ever changes in politics. "Most politicians are the same. It is hard to believe [Ms. Smith] will end up any different. If she does, she will be the exception. The reality is politicians succumb to power, and they are just not as principled."

Mr. Gray sees himself as a classical liberal, who believes in the liberty of the individual and who wouldn't have government running anything in anyone's life ("not what church you go to, or what you do in your bedroom"). In the same vein, "the economy is far better off if the people who make the money decide where that money gets distributed."

Until he finds the perfect political party - and the perfect oil patch - Mr. Gray will no doubt keep issuing broadsides from his windy bluff outside Calgary. In that sense, he has not mellowed at all.

Don Gray

Title: Chairman, Peyto Energy Trust; also chairman, Gear Energy Ltd., Calgary.

Personal: 45 years old. Born in Oxbow, Sask. Married, with five children.

Education: 1988: BSc in petroleum engineering, Texas A&M University.


1988-1998: Petroleum engineer in the oil patch; employers included J.C. Anderson and Pinnacle Resources.

1998: Co-founder, with Rick Braund, of Peyto Energy Exploration and Development Corp. (named in honour of legendary 19th-century Banff-area outfitter, guide and park warden Wild Bill Peyto). Served as Peyto's CEO and president.

2003: Converted company to an income trust.

2006: Stepped aside as head of Peyto Energy Trust, remaining as a director.

2007: President of Gray Capital Partners, a private capital management firm.

2009: Chairman of Peyto.

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About the Author
Senior Writer, Report on Business

Gordon Pitts is an author, public speaker and business journalist, with a focus on management, strategy, and leadership. He was the 2009 winner of Canada's National Business Book Award for his fifth book, Stampede: The Rise of the West and Canada's New Power Elite. More

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