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‘We love to explore. That’s what we do’

The Globe and Mail

 ACQUISITION

‘We love to explore. That’s what we do’

July 15, 2008

CALGARY — By definition, geologists are an optimistic bunch. A glass-half-full outlook is virtually a job requirement, given the leap of faith needed to spend millions drilling deep into the earth on an educated bet.

A geologist to the bone, Mike Rose, who yesterday agreed to sell Duvernay Oil Corp. to Royal Dutch Shell for an eye-catching $5.23-billion, typifies the breed. And yet, after spending the better part of a decade building Duvernay, he couldn’t help being a bit gloomy.

“Sure, I’m sad,” said Mr. Rose, 50, Duvernay chief executive.

But it’s not the sale that makes him sad, it’s passing on a chance to find more gas. “We love to explore. That’s what we love to do,” he said.

For the past 15 years, few folks in Canada have done a better job exploring than Mr. Rose, who is widely recognized in Calgary’s oil patch as among the best in the business at finding new reserves. After finishing the sale to Shell, Mr. Rose stands to make at least $250-million from the deal. He holds more than three million shares, according to filings, plus another 215,000 options.

Digging around in the dirt has been in his blood from the beginning.

A rock hound at nine years old, at 19 he was at Queen’s University chasing a geology degree. After graduating in 1979, he started at Shell Canada Ltd., moving through a variety of in-house jobs that taught him the industry. His time there also brought about an introduction to his wife, Sue, then an engineer with Shell.

Now head of Paramount Energy Trust, Ms. Riddell Rose is the daughter of Calgary oil billionaire Clay Riddell. Ready to branch out on his own, Mr. Rose left Shell in 1993 to start Berkley Petroleum Corp., a Western Canadian explorer that took big swings at finding gas in spots scattered from the Middle East to California.

By 1998, Mr. Rose was poised above a golden scenario for a geologist.

Five kilometres below California’s San Joaquin basin, Berkley and its partners struck on a massive natural gas pool. Smack in the middle of one of the world’s largest gas markets, the size of the find, dubbed East Lost Hills, had investors salivating.

Excitement hit a boiling point when a blowout sent flames ripping 50 metres into the sky. But the tricky geology of the East Lost Hills play meant a big day never materialized.

After a roller-coaster ride that included a hostile bid from Hunt Oil Co., Mr. Rose sold Berkley to white knight Anadarko Petroleum Corp.

Picking up quickly, Mr. Rose started Duvernay in 2001, with many of the key players from Berkley. By early 2004, Duvernay, with daily production of 4,500 barrels of oil equivalent, was ready to go public, debuting in a hotly sought after initial offering.

Taking lessons learned at Berkley, Mr. Rose kept Duvernay’s operations tightly focused in western Alberta and northeast B.C., building a land position that includes some of the hottest gas plays in Western Canada.

While other companies struggled to find new reserves, Duvernay, true to form, got down to exploring, boosting output to more than 27,000 boe/d. The feat makes Duvernay an anomaly, given a view the Western Canadian basin is now tired after decades of drilling.

“[Duvernay] has had some challenges, but on the whole, they’ve outclassed a lot of people on the execution front,” said Robert Fitzmartyn, an analyst at FirstEnergy Capital.

With two companies under his belt, Mr. Rose declined to say whether another start-up company is in the cards.

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