T. Greg Merrion steered family biz through seismic shifts
Premium content from New Mexico Business Weekly by Kevin Robinson-Avila, Senior Reporter
Date: Friday, May 25, 2012, 4:00am MDT
T. Greg Merrion, second-generation president of Merrion Oil and Gas Corp. in Farmington, is accustomed to boom-and-bust cycles in the energy industry.
A petroleum engineer for 30 years, Merrion has led his family-owned business through the dramatic ups and downs of the San Juan Basin, where the company has operated since 1960.
The Four Corners area was hit hard by the recession, and by rock-bottom natural gas prices depressed by oversupply from the nation’s shale-gas boom. With prices down from more than $6 per 1,000 cubic feet before the recession to $2 per mcf this winter, natural gas production in the San Juan Basin has hit a 20-year low.
But Merrion Oil and Gas is doing well, thanks to operational changes implemented under T. Greg Merrion and new strategies he’s pursuing in shale-gas plays in the San Juan Basin and in other states.
“We’re in very good shape,” he said. “I believe we have a bright future.”
Merrion laid the groundwork to navigate downturns 20 years ago. He overhauled business strategy and operations in 1992, when he took over the company from his father, J. Greg Merrion, who started the business in 1960.
Under the senior Merrion, the company operated about 200 wells and employed about 50. The elder Merrion created subsidiary service companies to buy and sell oil and gas from other producers, conduct rig workovers, repair pumping units and market used oilfield equipment. He also launched exploration work to develop wells in underexploited areas.
When T. Greg came in, he sold off all the service businesses, which he said were losing money or earning marginal profits. He ceased exploration activities to focus exclusively on buying proven properties. And he cut the workforce to about 20.
“We became lean and mean,” Merrion said. “Since then, we use contractors and consultants to better deal with boom-and-bust cycles in the business.”
The company still operates about 150 wells, and it has a nonoperating interest in another 150. But focusing on proven properties rather than exploration has helped the company hedge its bets and improved profitability.
“That’s been our hedgehog the entire time I’ve been at the helm,” Merrion said. “It’s worked well.”
The changes helped pull the company through a period of low natural gas prices in the 1990s, Merrion said.
Boom times returned in 2001, when prices climbed from a low of about $2 per mcf to about $6, and to more than $10 by 2005, Merrion said. Then the recession hit.
To navigate today’s bust, Merrion has acquired shale-gas properties in Texas, Louisiana, Pennsylvania, North Dakota and Arkansas. The company doesn’t operate any wells on those holdings.
“We acquire minerals in the shale-gas plays and we lease them to other operators to drill,” Merrion said. “There’s capital outlay to buy the minerals, but that comes back through the leases, and we earn royalties on production. That’s reduced risk a lot.”
The company is applying those strategies this year in the San Juan Basin, where interest is growing in the Mancos Shale formation deep below the basin’s current production zones. Merrion has negotiated a deal with a company whose identity it hasn’t disclosed to open shale beds with fracking, and drill wells on 25,000 acres Merrion controls above the Mancos field. That work will start next fall.
Colleagues say Merrion is a skillful leader.
Merrion Investment Manager George Sharpe said Merrion has the foresight and drive to do what’s necessary.
“He’s not afraid of hard decisions, and he focuses on the right things,” Sharpe said.
The layoffs in 1993 were hard on everybody, Sharpe added, but employees who stayed are still with the company because Merrion treats them well.
“He’s generous almost to a fault in what he’s willing to do for employees,” Sharpe said. “There aren’t many who have left.”
Farmington Mayor Tommy Roberts said Merrion is a “people person” who gives back to the community through the Merrion Family Foundation, which supports education, economic development and social services, and by serving in leadership roles.
Merrion has served as the planning and zoning commissioner in Farmington. He’s headed United Way fundraising drives, and he’s chaired the New Mexico Oil and Gas Association and the Independent Petroleum Association of New Mexico.
He’s a board member of San Juan Regional Medical Center and the San Juan College Foundation.
“He’s a great corporate citizen,” Roberts said.
Merrion, 54, honed his civic leadership and business skills over many years.
He earned a bachelor’s degree in petroleum engineering in 1980 from the Colorado School of Mines.
Merrion worked for five years for Superior Oil Co., which Mobil Corp. (now part of ExxonMobil) acquired in 1984.
He joined the family business in 1985 as a production engineer. He went on to serve as exploration manager before becoming president.
Merrion and his wife, Susan, have four adult children. The oldest, Ryan, earned a petroleum engineering degree in 2010 and is working at Sanjel Corp. in North Dakota’s Bakken Shale formation.
Merrion expects his son to return to Farmington in a few years to work in the family business, paving the way for the company’s eventual transition to a third generation of family ownership.
Company founder J. Greg Merrion passed away in 2002.
When he retires, T. Greg Merrion will continue to manage the Merrion Family Foundation and the Merrion Family Partnership, which invests in stocks and bonds along with hedge and venture-capital funds.
In his spare time, Merrion likes to golf, snowboard, ski and do crossword puzzles.