San Antonio oil company owner Richard Monroy has launched a new venture as the financial arm of an operation becoming more vertically integrated, while reducing its insurance costs significantly.
Monroy started Millennium Exploration Company LLC more than 12 years ago, specializing in vertical oil wells along the Coastal Bend. The company handled oil field prospects, raised money from investors and oversaw field operations of wells.
All that changed in January when Monroy created Millennium PetroCapital Corp. to handle the financial side of the business. Under the new organizational model, Millennium PetroCapital will be the managing venture, while Millennium Exploration will do the physical work in the oil field — drilling and production.
Essentially, Millennium Exploration will have one client — Millennium PetroCapital.
“We’re not contract operators,” Monroy said about Millennium Exploration. “We don’t operate wells that we haven’t funded or that we don’t own the majority of ourselves. … Millennium PetroCapital ensures that our investors’ goals are our top priority.”
The idea for the organizational change started with a visit to Millennium Exploration’s insurance carrier early last year when the premium for the company’s general liability policy was approaching six figures.
“We’ve got 15 employees, but only two or three of them work in the field, while the others are office employees. But I was paying insurance for those guys as if they were dodging wrenches and wearing hard hats,” Monroy said.
Under the new structure, office employees are insured under Millennium PetroCapital while field employees are insured under Millennium Exploration, resulting in savings that can be invested in the oil field. In another behind-the-scenes move, Monroy established Monroy Energy Group Inc. in February 2017 to be a holding company for working interests in oil and natural gas projects.
Over its 12-year history, Millennium Exploration has drilled six oil wells of its own. The company recently filed a drilling permit for a new vertical oil well on its J.P. Heard lease in Refugio County, where drilling is expected to start the first week of March. Millennium Exploration produced more than 12,000 barrels of oil and 153 million cubic feet of natural gas from January 2017 to November 2017, production data from the Railroad Commission of Texas shows.
Looking ahead, Monroy said Millennium PetroCapital plans to market a two-well prospect for a pair of vertical wells in 2018. Millennium Exploration will drill using money from those investors and its own funds.
“When you’ve got that dynamic in place, the decisions are made differently and with different priorities in mind,” Monroy said. “It’s the pride of ownership. You’re not going to drive a rental car the same as you would your baby in the garage. Because Millennium Exploration has only one client to impress and work for, then it’s going to do everything that it can to treat it like its baby.”