The Core club in Manhattan is quiet on this summer morning, with just a handful of members filling tables in the wood-paneled restaurant. Hedge fund managers and real estate billionaires and high-powered sports executives pay a $50,000 initiation fee and $15,000 in annual dues for access to the club’s amenities—the spa and salon, the Zoomtion fitness center—and the privacy afforded so they can talk big business without worry of prying ears.
Farid Guindo is sitting at a corner table with a view onto East 55th Street. In a casual navy blazer, open-collared oxford and jeans, he seems more ready to trade movie scripts than stock portfolios. Don’t let the casual attire mislead. He has his sights set on someday, and someday soon, being a master of the universe just like many of his fellow Core club members.
In 2011, he was just two years out of McGill University when Ospraie Management, run by the renowned hedge fund manager Dwight Anderson, hired Guindo away from the energy desk at Barclays to its Park Avenue headquarters as a portfolio analyst. He was 23—23—and working for one of the men he had been lionizing since he first picked up Market Wizards as a teenager. And yet he was already planning ahead. “I always wanted to be an investor,” he says between bites of breakfast, scrambled eggs garnished with salmon. He envisioned being the next Dwight Anderson, not working for him. Over the next 22 months, Guindo—impatient, laser-focused—made the needed connections, spotted the target of his future fortunes and, more important, cultivated the money that would get him to where he wanted to go.
A good portion of that seed money, he says, came about when, in 2012, he took a bet on a company called Africa Oil Corporation. A fellow analyst had put him on to the stock. Having worked on several billion-dollar deals while with Barclays, Guindo already had an affinity for the oil and gas area. He crunched the numbers on Africa Oil and liked what he saw. He pitched the stock as an option for the Ospraie portfolio but got rebuffed. Through a slight chuckle, Guindo ticks off the reasons his boss rejected it: “Small oil and gas company, sub-billion-dollar market cap. A hard sell. Plus, I was a junior. I was eight or nine months in.”
Guindo still liked Africa Oil. He put $100,000 of his own cash in the stock as a personal investment. “The downside,” he says, “was that they drill a couple of wells and it doesn’t work. The downside is, it goes from $1.50 to $1.20 (per share).” He pauses. “The upside is, it goes through the roof.”
Africa Oil went through the roof. Guindo sold when the stock had climbed to around $9. He grossed close to a million dollars. And his confidence as an investor—an investor in oil and gas—soared. “I felt comfortable in my own shoes to say, What is out there?” he recalls. “How do you actually make money?” A few months later, he left Ospraie. He took his money and looked beyond New York City. For something even bigger.
He thinks he has found it—in Appalachia of all places, in an Ohio town with fewer than 3,300 residents, in a town where the most popular restaurant, Donna’s Deli, closes after the noontime rush. In a town of five streetlights and with a mayor who’s also a minister and who sometimes preaches on Sundays about the virtue of frugality. In a town that knows poverty and is only now trying to figure out wealth. In a town without hedge funds, or a Core club.
What does it have? It has, the locals only recently realized, oil and natural gas, and lots of it—and everything that comes with an oil boom, including dreamers like Farid Guindo.
Spurred by hydraulic fracturing, which over the past decade has unearthed once-unknown oil and natural gas reserves deep underground, America’s energy industry is now pumping at historic levels. Experts predict that the United States will be the world’s largest producer of oil by 2015 and that by 2040 50 percent of the country’s natural gas will come from the shale-rock formations igniting the current surge.
This energy craze has touched all regions of the country, producing a rush to profit from it—and to debate its merits. Previously off-the-beaten-path locales like Williston, North Dakota, and Moundsville, West Virginia, now rival traditional oil cities in Texas, Louisiana and Oklahoma as boomtowns, with scores of locals suddenly made rich through the leasing of their land to drillers. But wealth at what cost, some wonder. Seismologists are now researching whether fracking (as the drilling process is commonly called) is the cause for the series of earthquakes shaking Oklahoma. Environmentalists and health advocates rail against fracking and what else it might do: contaminate water tables, pockmark landscapes and increase the likelihood of lower birth weights.
What can’t be debated, though, is that the boom has created a new wave of speculators and entrepreneurs and businesspeople, each hoping to be, if not a new oil baron in the tradition of John D. Rockefeller, then just richer when the dust settles, whenever that will be. Yes, the Exxons, the ConocoPhillips, the Chevrons still dominate the upper tier of the energy landscape. And a glance through their annual reports display upper-management portraits with seemingly xeroxed profiles: CEOs in their fifties and sixties with 25-plus years of experience, all male, all white.
But booms produce more than oil. They produce fresh faces.
Guindo looks nothing like J.R. Ewing. He’s outwardly reserved, he’s young, he’s the son of a U.N. diplomat from Mali and, well, he’s black. And he feels confident that in today’s energy play—a business that continues to expand, evolve, relocate, drive dreamers—he has a formula that will let him strike it rich.
Drill Capital is the name of his company. Sounds like it will be pumping crude from sunrise to sundown. Not so, or at least not right now. Guindo saw a different way to make money on the oil boom, and Drill Capital—his nascent asset management firm—is his vehicle. And Carrollton, Ohio, the county seat of rural Carroll County, is his first stop.
It’s in Carrollton, a few blocks from Donna’s Deli and near a Chevrolet dealership, that Guindo has recently opened an 80-room extended-stay hotel, the Microtel Inn & Suites by Wyndham. For $115 a night, visitors get a bed, a TV, a cup of coffee and a hot breakfast. His market is the 1,000 or so workers—drillers, pipeline fitters, construction crews—transplanted to Carroll County because of the oil play. In Guindo’s plan, a good number of these transient folks will make the Wyndham home—for three, six, nine months, whatever it takes to keep the county’s 235 wells (the most in all of Ohio, with 423 permits approved statewide) pumping.
Compared with the billions of dollars oil drillers like Chesapeake Energy and Rex Oil are pumping into Carroll County, Guindo’s $5 million investment is a drop in the oil bucket. But $5 million is a lot when you’re just 26 years old and you’ve asked family members and well-funded friends to bankroll your dream to be a player in the oil business. “The psychological burden of putting that much money at risk, both personally and from investors, and hoping your thesis comes true, is huge,” Guindo says. “A huge burden.”
Why take it then when you could be working at Ospraie, enjoying year-end bonuses, enjoying the big city? And why Carrollton, Ohio, a speck somewhere between Pittsburgh and Akron, where 0.3 percent of the population is black, where the town has done fine with just a Days Inn for years and where, until recently, most people earned on average just $30,000 a year and unemployment was as high as 14.9 percent?
For one, Guindo says, there is money to be made in the Utica Shale, a geologic formation of sedimentary rock containing oil and natural gas that only recently has been tapped with relative ease through fracking. The Utica can be as thick as 1,000 feet, and it extends from Quebec through New York state and eastern Ohio and on to eastern Tennessee. Already, locals in Carroll County gossip that between 500 and 1,000 area folk—many of them farmers—have made at least $1 million by leasing land to the oil companies. And there’s talk that a new power plant is coming to the region that will pump more millions into the economy and create upwards of 500 new construction jobs—and likely more demand for hotel beds.
But more so than the desire to make a buck (or several), Guindo says he’s entered the Utica play to prove to himself that he has the skills and the stomach to make it as an investor. He admits his strategy is somewhat conservative—essentially, he is investing in real estate and in the hotel business versus a single oil rig that can cost several million dollars to construct and comes with no guarantee of hitting its intended mark. Yet like the drillers, Guindo has done his research, and success in Carrollton will legitimize his oil expertise—and his prospects for future success. “What drives me is being right,” Guindo says. “The feeling of being right is an overwhelming feeling of accomplishment.”
The oil and gas business has always seemed to attract entrepreneurs, risk-takers, speculators. In 1959, when Ruth Sheldon Knowles published The Greatest Gamblers, a look at the early American oil explorers, she wrote: “The greater the gamble, the more it inflames the imagination and the more helpless the explorer is to resist it. He knows the rewards for success are in proportion to the risk involved.” The same holds true today. While Guindo stakes claims in Ohio, other oil investors seek similar riches elsewhere. Like Chris Faulkner.
Faulkner has a roundish face and a scruffy beard. He’s also only 37, a relative kid in the oil business. In so many words, he’s been told, he doesn’t fit the profile of an oil company CEO. He won’t listen. Faulkner started a technology company in 2000 that provided drillers with 3D seismic imaging software. Using the software, drillers would have a more accurate subterranean picture. The more Faulkner worked with oil companies, the more intrigued he became with that side of the business. Eventually he decided to get into the action as well.
In 2004 he leased land north of Dallas and had a rig constructed. The day the drill cut through the ground, bound for pay dirt, Faulkner stood atop it and heard the news no budding oil baron wants to hear: “It’s dry.” But he hit with his next well, and today Faulkner’s company, Breitling Energy, has drill sites dotted around Oklahoma, Texas, Kansas and North Dakota. Revenues last year came in at $26 million, double those of 2012.
On paper it sounds like Faulkner is a player in the business. But the reminders come all too often of what it takes to be recognized as one. A couple of months ago he took his mother, Carole, to lunch at the Dallas Petroleum Club, a Core club of sorts for oil titans in Big D. Lunch had barely been served when Mrs. Faulkner looked around and then said to her son, “You do realize these people are twice your age.” More recently, a Wall Street analyst told Faulkner that his bank would stop following his company (whose stock price has hovered below $1 a share for much of the past year) until he hired “someone who was older” to work with him. “I was taken aback,” Faulkner says. “Shit, when I was in [high tech], I had guys ten times as smart as me who were 14 years old.” So what did he tell the analyst? “Basically, we’re going to [manage] our way. If you don’t want to cover us, that’s fine with me.”
Such confidence—such youthful cockiness, as it were—is essential to making it in the oil and gas business. Faulkner admits he has his sleepless nights, and he won’t forget that dry well from years ago. But the vagaries of the field feed his risk-taking nature. “Money is nice, I get that. If anyone tells you this is not about the money, they are a liar,” Faulkner says when asked about his personal motivation. He takes a sip of a late-morning espresso. Then, in his next breath, he drills deeper. “It is about success. It is about the challenge. This space feels a lot like what technology did back in the ’90s. You got guys who are rolling the dice, pushing the boulder up the hill, which is not easy to do.”
So even though Chris Faulkner has never met Farid Guindo, he can understand his drive to be right. Told that Guindo is 26 and trying to start a hotel business in rural Ohio, Faulkner shakes his head. Then he says, “He may have challenges, but I hope he is successful. We need more of him, more of me, and less cigar-smoking 60-year-old guys at the Dallas Petroleum Club.”
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