Two Aggie engineers finance an unprecedented collaboration between the colleges of business and engineering to ensure that Texas A&M graduates remain leaders in the energy sector.
“I remember having a conference call with 30 people and being the only engineer,” said Graham. “That’s when I thought, `Fluids lab isn’t helping me a whole lot right now. But a finance class would have been nice.’”
It wasn’t just a passing thought. It was confirmation of an idea he and Bahr already had: that in the world’s oil fields, petroleum engineering students could benefit from business training. So as soon as they were financially able, thanks to WildHorse’s spectacular success, Graham and his wife April along with Bahr and his wife Gina got busy responding to the need. Each couple gave $6 million to create a new Petroleum Ventures Program at Texas A&M University, an unprecedented collaboration between Mays Business School and the Harold Vance Department of Petroleum Engineering. The program, set to launch this fall, will not only serve petroleum engineers who want to delve into income statements and private equity, but also business majors who aspire to jobs such as oil industry analysts or energy bankers.
Interdisciplinary study, synergy and real-world experience are buzzwords in higher education, yet rarely a reality. But the Petroleum Ventures Program, combining two of Texas A&M’s well-known strengths, will train students with real world data and benefit both the industry and the Texas economy. Understandably, the deans of both colleges are enthusiastic. “Providing entrepreneurial opportunities for our students is critical in better preparing them for our changing workforce requirements,” said M. Katherine Banks, vice chancellor and dean of the college of engineering. Eli Jones, dean of Mays Business School, described it as “an example of innovation in action.”
Bahr, Graham and others involved with the program are unaware of any other universities offering a framework for such intricate collaboration. “This is way ahead of the curve,” said Cathy Sliva, director of the Petroleum Ventures Program for the engineering school. Added Graham, “It’s a combination of keeping Texas A&M and Aggie petroleum engineers the best in the business as well as adapting to the environment and the industry as it evolves.”
The seeds for the Petroleum Ventures Program were sown in the early 1990s when Bahr and Graham took two undergraduate engineering courses (one in management economics, the other in petroleum evaluation) taught by Billy Pete Huddleston ’57, a petroleum engineering professor of practice who headed his own consulting firm, Huddleston & Co. They said his courses were some of the few that gave them a broader, real-world look at the industry. “Much of the driving force behind why we’re creating the Petroleum Ventures Program is to build upon the spark he ignited in a generation of petroleum engineering students,” said Bahr. “His influence is interwoven throughout the program.”
One of the legendary Junction Boys during his time at Texas A&M, Huddleston said that in his classes, he tried to bridge the gap between two different worlds—engineering and finance. “One speaks English and the other speaks Swahili,” he explained. “I was teaching them the same language.”
Huddleston, who retired in 1998, would influence Graham and Bahr in other ways. Graham worked for Huddleston for four years. An original investor in WildHorse, he also helped the partners create a business plan and obtain private equity.
“I don’t think many engineers graduate knowing what a business plan is,” said Bahr, who earned an MBA at California State University, Bakersfield. “That will change. Students just have to create one business plan in college to learn what it involves: What’s my overhead budget? What’s my strategy? What type of properties am I going to buy? What’s my organizational structure?”
The school of hard knocks—for the most part, that’s where Aggie engineers and business majors have been learning the intricacies of the energy sector, according to Bahr and Graham. The Petroleum Ventures Program curriculum is designed to save students from “stumbling blindly off the edge of a cliff,” at some point in their career, as Bahr termed it.
“The problem is that you don’t know what you don’t know. That’s where you make a lot of mistakes and spend a lot of money correcting them,” said Bahr, who along with Graham is intimately involved in the startup of the program. “In our world, we learned by trial and error, by exposing ourselves to sometimes unnecessary risks. Now students will understand more about what it takes to run a company.”
The concept is not to make engineers experts in accounting or finance majors authorities on calculating reserves. Rather, each major will be exposed to operations on the other side to make them stronger, wiser practitioners who can more confidently start their own firm or offer more to their employer.
With an extra semester of classes, business and engineering undergraduates can earn a certificate from the program. Beginning fall 2016, the goal is to enroll 25 business majors, who will take courses in petroleum project evaluation and reservoir management, and 25 petroleum engineering students, who will have an opportunity to study investment analysis and corporate finance, among other business subjects. Students can begin work toward the certificate starting their sophomore year and in future years, enrollment will expand. For petroleum engineering students who want to become even more proficient in the business field, there are avenues to pursue a master’s degree in financial management, which will offer in-depth exposure to energy economics, acquisition evaluation, business and petroleum law, and commodity risk management. In turn, business majors will have options for a master’s degree in petroleum engineering. Curricula for these master’s programs were undergoing finalization at the time of press.
The centerpiece of the program—for both undergraduates and graduate students—will be the Business Impact Lab, which will collect real data on assets for sale and companies that have been sold. Student teams of both engineering and business majors will form business plans and compete against each other as if they were going to buy the asset or company, based on the collected data. The teams will have to decide how to evaluate and structure the deal, finance the new company and work their way through the due diligence process.
“We really want them going from soup to nuts,” Graham said. Since the data used will be from real-world acquisitions, the teams can compare their plans with what actually happened. “It’s powerful,” Graham said.
“We want engineers and business people talking to each other,” explained Detlef Hallermann, the director of the program at Mays. “But what’s more, we want them networking with each other so that 10 or 15 years from now, if someone has an idea for a business, they’ll know who to contact.”
Future deal making is only one positive implication of the program. The alliance between petroleum engineering and Mays also prepares graduates for a changing industry. Today, more graduates than ever are heading to small companies rather than the major league corporate names. “Because of the number of private equity sponsors, there are many smaller companies doing the work and drilling the wells that the Exxons, Chevrons and BPs of the world used to do 20 years ago,” Bahr said.
Smaller companies demand more versatility from engineering and business graduates. “In small companies, employees are tasked with making more business and risk management decisions early in their careers,” said Bahr. “This is an effort to accelerate that ability to match today’s market.”
At a company of any size, advanced training will help graduates rise higher and faster. “I know of vice presidents with 20 years of experience who still don’t fully understand what other departments in the company do,” said Bahr. “We want to help graduates understand the responsibilities and capabilities of their peers within a company, because it takes an entire company of diverse disciplines to be successful.”
Huddleston noted that many CEOs at large corporations come from the business side, not from engineering. With the Petroleum Ventures Program, he said, “I know that will change.”
In the end, however, Bahr and Graham see the greatest impact for those who want to eventually start their own business. “The program is tilted toward entrepreneurship,” Graham explained. “Of all of the engineering disciplines, petroleum is particularly well-suited for entrepreneurial activities,” said Hallermann. “It’s more common for a petroleum engineer to start his or her own company than say an aerospace engineer.”
Even with their long resumes and decades of experience, Bahr and Graham remember how harrowing the entrepreneurial experience can be. “You know more about the company than anyone,” Bahr recalled about taking their firm public for the first time, “and you still feel lost.” Graham said he worried whether they were getting the right advice from financial professionals. “If they’re not making good decisions for you, you could lose your company or lose value. It’s hard to know whether you have the right skill set to catch mistakes.”
Indeed, many engineers who start their own businesses face such challenges. Huddleston estimated that the odds of success for petroleum engineers launching their own companies is about 20 percent if they don’t understand financial operations. “It goes way up if you can learn the basics,” he said.
That’s particularly important in the boom-and-bust nature of the energy industry. Engineers who can make good business decisions and business graduates who have extra knowledge about the commodity can make smarter decisions to weather downturns, Graham and Bahr believe. “You don’t want to be over-leveraged; you don’t want to have cost structures that are too high,” said Bahr. “Even when oil is at $100 per barrel and natural gas is $4 for a thousand cubic feet, you can’t let your cost structure get out of hand, because when oil is at $38 and gas is at $1.80, you’re the company that will survive.”
Mays and the petroleum engineering department are seeking additional funding to provide up to $50,000 per year in scholarships for students in the program. A gift of $2 million would name the Petroleum Ventures Global Study Program, which would send students abroad and help them understand the complexity of the international petroleum industry.
In addition, the program hopes to create four professors of practice—industry leaders with specific skills and expertise who return to the classroom to prepare the next generation—with an endowment of $1 million each. The Business Impact Lab is seeking petroleum companies to donate data to be used by students, and Hallermann is also seeking donors who could finance a similar interdisciplinary collaboration between the business school and other university departments.
The $12 million donated by the Bahrs and Grahams take the Petroleum Ventures Program well down the road, but there are still opportunities to give that will help it achieve its full potential.