Interview with Mr. Mark McLane

//Interview with Mr. Mark McLane

Interview with Mr. Mark McLane

Interview with Mr. Mark McLane

Interviewed By: Sriniketh Sukumar and Raj Gautham Viswaprabakaran

“Don’t close any doors shut. You never know what opportunities may open up to you.”

Mark A. McLane is a Partner in the international consulting firm of Rose & Associates, LLP.

He has a diverse technical and business background spanning more than 25 years in the petroleum industry. He joined Rose & Associates in January 2000 after three years with Pioneer Natural Resources and 17 Years with Exxon Company, U.S.A. He has co-authored several technical papers, served on the Professional Ethics/Registration Panel at the 2003 SPE ATCE in Denver, Colorado, and was a Distinguished Lecturer of the Society of Petroleum Engineers on the topic of “Reserve Overbooking – An Issue of Professional Ethics” in 2004 and 2005. He has taught courses for the SPE, AAPG, EAGE, and the Houston Geological Society.

He holds a BSc with Honors in Petroleum Engineering from The University of Texas at Austin.

“Oh you are causing me to have to go back a long way. [Laughter] Honestly, the toughest classes I took were probably the most impactful. Sometimes we have this tendency to want to avoid the classes that are either optional or have the reputation of being particularly tough. Those classes I have found to be the most beneficial. They were stretching, no doubt, but I would encourage anybody in the engineering curriculum to not shy away from challenges because you will be facing them when you graduate.

I also learned about the value of establishing good habits early on. I actually started out at Purdue University. I didn’t have a car, and it was a rural environment; so, I didn’t go anywhere outside West Lafayette. As such, I ended up developing really good study habits in particular with the fundamental courses. Just learning some basic things like going to class, doing all your homework, and getting help early really make a huge difference. You shouldn’t let things that you don’t understand slide by because those things are only going to build on in the future.

The other thing that is really important is the value of building relationship with professors, instructors, and fellow students. A lot of engineers are scientists by nature and that’s one of the biggest challenges they end up experiencing when they start working. When you move into the business world, you are in an environment where you constantly talk to people. College is a great place to learn and develop these skills and to have the opportunity to put them in practice. Here you have the ability to focus on other people, serve them, build relationships, and learn more about your professors and your fellow students. These traits stay with you long past college.

The final thing that I thought about is the value of the classes that I took that forced me to think and write. In fact, I took some of my non-technical electives in business (oil and gas law in particular) as well as some communication courses. They were helpful for me because I had to do a lot of reading and thinking on my feet. In regards to required courses like history and government, I transferred to Texas as a junior and actually took some upper level history courses.  These classes were small and were taught by knowledgeable professors. I didn’t realize it at the time but those classes had an inordinate amount of reading involved and required me to write a number of research papers. Those classes challenged me beyond the technical parts of my education.  The ability to communicate when you get into the business world can make the difference between your ideas being accepted or not.

“I hope so! [Laughter]. I think that continuing to be involved in the lives of people is crucial. I have a family so that’s built into that; but also, I’ve been very involved with our church and community. We live in Midland and have been there for almost 40 years so we have developed some deep roots. One of things that is interesting about our current culture is that the technology we have allows us to be connected but at the same time it also allows us to hide and be isolated. Putting down the iPhone and actually engaging and talking to a person without texting is becoming more and more challenging. By doing so, you are able to learn so much about a person through their non-verbal cues. I took courses in verbal and non-verbal communication and plenty of things that are just in written form can be easily misunderstood.

“That’s a loaded question and I have thought carefully about my response to that. Let me just start of by saying that what I’m doing now was not on my radar in terms of professional scope when I was in college. As a matter fact, I had a bias of going into any sort of consulting. I was so focused on getting into the operational side of things and working for an oil and gas company. I graduated in 1980 and started working for Exxon as a drilling engineer. I had interned with Exxon the prior summer and I loved it. I worked with some amazing people and worked on some challenging projects. I had the opportunity during my 17 years with Exxon to work on just about anything from shallow heavy oil in California to deep sour gas in Texas and Wyoming to EOR projects in Texas. All the different facets of engineering (drilling, reservoir, production etc.) gave me a wealth of experience.

During that time, I developed some strong connections in Midland. My wife and I both grew up in Houston and went to school in Austin. When we first moved to Midland, we didn’t imagine that we were going to stay there as long as we have. However, I ended up loving the environment there and the people. Growing up in Houston, I liked the drier climate of West Texas. [Chuckles]. So there was a personal element involved for us there. When you are working for a large company and you make the personal decision to not move to different places, you have to understand that it’s going to limit the opportunities for you. When I made that decision, I knew that it was going to potentially limit the opportunities I had. However, I don’t think it really did for me in terms of what I learned from an operations and technical perspective.

With regards to the transition from Exxon to Pioneer, it was in part motivated by the fact that we knew that Exxon was going to be closing its office in Midland. So I had to make a decision of whether I wanted to move my young family to a new place or try to find a new job in a familiar community we really enjoyed. I didn’t want to close the door on anything, but for us, we decided that if I could find a job in Midland, we would prefer to take it. I want to be careful to say that I’m not being critical of anyone that makes the decision to move; it can be quite an adventure. But, for us at that time, it was the right thing to do.

That’s when the opportunity from Pioneer came along. Going from a very large company to a much smaller company was very refreshing to me. It was organizationally very different. I was able to draw from all I had learned from Exxon and put it into practice at Pioneer. My emphasis at Exxon was on operations and technology, at Pioneer it was on the business side as I worked on commercial projects and transactions. It was at Pioneer that I was introduced to a gentleman named Peter Rose who, coincidentally, founded our firm. A course he and Ed Capen taught back in 1997 on risk analysis profoundly changed the way I looked at our business. That course taught me how to finally deal with uncertainty and risk within our business. At the time I was exposed to those concepts, Pioneer was implementing some of the principles, which was challenging and plenty of fun. I was able to do that for about three years or so. When Pioneer moved from Midland to Las Colinas in Irving and they graciously allowed me to continue to work in Midland and commute as needed to Las Colinas.

That opportunity was probably going to go away eventually and I needed to make a decision once again of whether I wanted to move my family. By that time, we had been in Midland for 25 years and our kids were growing up. Also, Dr. Rose’s business had started to grow around that time and I had gotten to know him much better. Eventually, he offered me an opportunity to join to his firm and still stay in Midland. One challenging aspect of the decision to join Pete was transitioning from 20 years of a regular paycheck to no salary and being paid as our clients paid their invoices. Without an amazing wife and family, I could not have made that transition so easily. With the reputation that Dr. Rose had, we had the ability to grow even larger. Now, we are still a small company with around 20 people, but we have a global client base that supports all types of operations. I’ve been able to use just about everything I learned with Exxon and Pioneer in the risk analysis training and consulting work I do with Rose and Associates.

There is no doubt that larger firms will offer a broader spectrum of opportunities. The definition of what constitutes a larger company has expanded. When I graduated, you had the majors and the independents. The majors were the companies that did most, if not all, of the big projects, had offshore operations, had extensive training programs, and did their own research and development. We could tap into the R&D efforts that took place within the company. In fact when I was with Exxon, I was able to work with Exxon Production Research Company and participate in some amazing projects through those joint ventures of applying new technologies in the field. That I think has changed since major producing companies have outsourced a lot of the R&D to service companies. There are some good reasons for this change and some tradeoffs as well.

The big companies will definitely provide a larger universe of opportunities. Companies like Concho and Pioneer, for example, provide tremendous opportunities but they are currently focused on the Permian Basin. Other companies like Chesapeake are primarily focused on on-shore plays. That may not always be true but right now the integrated major companies, and larger independents like Anadarko and Oxy, are the ones with the opportunities overseas that can provide broader experiences. So I think the strategy of going with a large company has some advantages.

There are opportunities with smaller companies that are fantastic. This is definitely different from when I started out. Back then, internships and training programs were largely the domain of big companies. The independents hired people from big companies after they had been trained. What we are seeing now are smaller public and private independent companies that are investing in internship and training programs to build employees from the ground up. I think the primary difference in terms of opportunities with a major company is a potentially larger geographic resource pool to learn from.

I learned early in my career that the real goal of oil and gas business is making a profit for the investors. This is something we really emphasize with our clients – that their company isn’t simply in the oil and gas business; it’s in the business to make a profit. It just so happens that we are pursuing that through the exploration and development of hydrocarbons. The reason that’s an important distinction is because it’s relatively easy to find oil and gas. I could drill just about anywhere in Midland County and find oil. Making a profit doing so is an entirely different matter. Understanding how projects are economically evaluated is really crucial. In order for projects to be evaluated consistently, there has to be a common framework for running economic analysis. Understanding the concepts of cash flow and the impact of things like discount rate on different portfolios becomes really important.

Risk Analysis was something that I was introduced to after I had left Exxon and had gone to work for Pioneer. As I mentioned earlier, I was sent to a 5-day risk analysis course Peter Rose and Ed Capen. That week was the most impactful week of training in my entire career. The reason is because that training course finally gave me a way to systematically deal with uncertainty. I didn’t have that Exxon; at that time I worked for the company, the production department was largely deterministic in that we were usually asked to provide “The Answer”. The problem is that, because of uncertainty, there is no single “The Answer”. With a probabilistic approach, I have the ability to quantify the uncertainty in a qualified range that I can actually measure. I could now consistently evaluate projects by accounting for the inherent uncertainty present within them. That was the probably the big “Aha” moment for me back in early 1997.  At the time, we were beginning to implement systematic risk analysis and portfolio management at Pioneer.  This gave my colleagues and me good experience in learning how to apply these principles in the wide variety of business development projects we were working on.

I then had the opportunity to carry on with that by helping other people do their job by working with Rose and Associates.  Our business is to equip our clients to make better investment decisions so that they can identify the biases in their own estimating processes to make good, informed business decisions. As a decision maker, I don’t want people to give me a one-sided, optimistic case where I’m manipulated to approve a project.  I want to see the full range of possible outcomes.

For most of your academic career, there is no uncertainty. There is a unique answer to every single problem you work and you learn that early on. Hopefully, you are also learning to think critically and how to actually solve the problem.

As far as economic evaluation goes, I would encourage finding and taking good courses in cash flow analysis, specifically, those that are focused on oil and gas project evaluation. I know that one of the textbooks y’all use is Oil and Gas Property Evaluation by John Wright. It’s probably the best reference I know of in regards to economic evaluation. Dr. Wright does a fabulous job of laying out for both the student and the practioner all the steps involved in coming up with asset values. Understanding the mechanics of cash flow models and applying it to the oil and gas business is crucial.

The reason I say that is because while I had a fabulous education in college one of the primary weaknesses of that education was the cash flow economics course that I took. Now, Exxon made up for that with their internal courses on cash flow analysis that I was able to directly put into practice.  Companies are organized in different ways but from my experience, running cash flow models is the responsibility of reservoir engineers. All in all, understanding what the inputs, key drivers, and overall the mechanics of cash flow analysis are important for learning about economic evaluation.

Finally, you need to work hard to make sure that the inputs that you put into any model are as objective as possible. This includes understanding the impact of uncertainty and how to model uncertainty in your cash flow analyses.

Teaching is something that had always been interesting to me. I had a few opportunities to be an instructor early on in my career. What I took on as a challenge was figuring out how to take subjects like drill string design and remedial cementing and make them engaging to students. I studied educational methods and effective teachers and integrated specific components of what I learned in my instruction. I found that I really enjoyed teaching in general. The issues of figuring out how we need to communicate our ideas can be addressed by teaching and through writing papers.

There are often times where you feel incredibly busy and you don’t feel like you have time to write a paper. The first paper that I co-wrote with one of my colleagues from Exxon came about through some applied research regarding optimizing drilling performance in the Rocky Mountain region. Optimization in drilling mechanics, drilling fluids and solids control was what we focused on. We saw big improvements in our drilling performance that happened to parallel results observed by some of our colleagues in other parts of the company. It was a natural lead-in for us to say that this was worth publishing.

The second paper I co-authored shortly after I joined Rose and Associates. Pete and I were concerned about the integrity of reserve evaluations and went so far as to write a paper in 2001 entitled “Reserve Overbooking: The problem no one wants to talk about.” I presented that paper at the 2001 SPE Hydrocarbon Economics and Evaluation Symposium and it was interesting because no one wanted to make any comments publicly during the session. So, in 2001, it kind of got put on the shelf but in 2003, we were approached by SPE about participating in an Ethics panel discussion at the annual meeting. I reformatted the concepts in that paper and put them into a new presentation. In the audience were people on the Distinguished Lecture committee. They heard that presentation and liked what I had to say and invited me to put together a presentation on reserve overbooking with the title, “Reserve Overbooking – An Issue of Professional Ethics”. That was quite sobering for me because I would never have volunteered for a subject like that.

Eventually, I was selected as a member of the 2004-2005 Distinguished Lecture team and had the opportunity to present that lecture domestically and in the Asia-Pacific region. It was a fantastic experience. One of the benefits of the Distinguished Lecture Program is that it enables small SPE sections with limited budgets to hear from professionals with expertise in a broad range of technical areas.

This allows them to be exposed to ideas and concepts that they otherwise would not be exposed to. I especially remember going to a small SPE section in Papua New Guinea. They were so gracious, hospitable and extremely appreciative of my presentation. The program exists to serve smaller chapters like them. Interestingly, I continue to be asked to give that lecture originally prepared in 2004.   I update it at the request of local SPE sections and SPEE chapters because it’s an important subject for us professionals to see how to view our business from an ethical perspective. Being involved with SPE allows us to have connections with a broad audience and realize that our industry is fairly small.

Number one is to have a mindset to be a lifelong learner. Your education does not end when you get your academic degree. That’s really where it should start. Going with that, you need to understand that when you graduate there is going to be a whole lot of stuff that you don’t know. That was one of the biggest lessons I had to learn. When I graduated, I thought I knew a lot! I fortunately worked with some people who had years of experience who told me that I didn’t know nearly as much as I thought I did.

The next thing is to make it a priority to find people who know more than you and ask them questions. Ask them questions to learn how they think and approach problem-solving in general. If you find people that are role models, you should try to understand how they got there. We see people that have been successful in our business and there’s a natural desire in people to emulate that success. But do you understand the “blood, sweat and tears” that they shed to get there? People I know that have built successful businesses spent a lot of sleepless nights thinking about where their next meal was going to come from.  They were investing everything they had back into their businesses. Regardless of the company you work for, I would recommend all professionals to adopt a mindset of post-appraisal. You need to understand that you can’t do anything about what happened yesterday. What I can do is improve upon what I do today and learn from my mistakes.

The other aspect that I really encourage is some basic components of establishing a strong work ethic. Get to work early, stay reasonably late (don’t be the first to leave) and be willing to work hard. Do more than is expected, tell the truth (even if your boss may not like it) and have a mindset of being willing to serve others. The business world can be very competitive, particularly in companies. You don’t want that competition to interfere with that fact that you need to work together and that a lot of your success is based off your relationships with other people. When you get into management, your job changes from being focused on your career to focusing on other people’s careers.

Be in this business because it’s a fun business. I know some people that have gotten into petroleum engineering because of the industry activity and because it tends to pay pretty well. If it’s not fun or enjoyable, it doesn’t matter how much money you are paid. I got into the oil and gas business in the mid 1970’s before oil prices really started to go up. I just thought it was fun. The problems I heard that people had to solve and the mixing of a wide spectrum of engineering disciplines in one industry really intrigued me.

Don’t close any doors shut. You never know what opportunities may open up to you.

I think a lot of it has to do with how I was raised and some integral components of my faith. I have the opportunity to serve other people and be a good steward. If I do those well, any needs that I have will be taken care of in abundance. The understanding that life is a balance in that we were made to work but to spend time with your family as well is incredibly important. At the end of your life, you need to be able to answer the question of “What did I do with my time?” with no regrets. I have been incredibly blessed and fortunate with my career. People ask me how long I’m going to keep working.  Two of my role models are Dr. John Lee and Dr.Peter Rose. These men, who could easily be enjoying the fruits of their labors, are continuing to strive and work which is really encouraging to me. I’ll do the same as long as I have the ability to serve others.


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