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Striking it big in Texas gas

Rod Lewis, Lewis EnergyRod Lewis, Lewis Energy
Lewis in a World War II-era Spitfire MarionPhotograph by Jared Moossy

Rod Lewis may not display the 10-gallon swagger you’d expect from a wildcatter. But despite a low-key personality, he’s a risk-taker who has endured the busts of the natural-gas business—and reveled in the booms. Lewis, 60, knew nothing about the industry when he started servicing gas wells in South Texas in 1978 to make enough money to get married. He worked around the clock—even sleeping at one well—but some of his fields were duds, and at one point he could barely afford his mobile home. Today Lewis is a billionaire. His fortunes turned when his company, Lewis Energy, became one of the first to drill for natural gas in Texas’s Eagle Ford Shale, one of the biggest such fields on earth. Lewis Energy now owns and operates 1,700 gas wells. All he’s willing to say about the annual revenues of his private company is that they’re more than $250 million. Along the way he survived throat cancer and became the first gringo to drill for gas in Mexico in three decades. Lewis’s story:

I grew up as an Air Force brat and lived all over the U.S. In 1971 my dad got stationed in Laredo, Texas, so I finished high school there and attended Texas A&M International at Laredo, majoring in criminal justice. I wanted to go into the FBI, but my eyesight wasn’t good enough, so I ended up taking a detour.

I graduated in 1976 and worked on the family ranch for a year and a half. I was planning to get married. But at $300 a month, I wasn’t making enough money. I like taking things apart and have a mechanical ability to fix stuff. So I went to work for Stampede Energy, a Canadian company that was drilling in South Texas.

I didn’t know anything about the oil and gas business, so they trained me to be a gauger, servicing the gas wells to make sure they’re performing optimally. I would drive 200 to 300 miles on dirt roads every day, going from well to well.

“It took me two years to get back on my feet. Back then we were living in a mobile home. We were close to the bone.”
Rod Lewis

In 1979, I moved to another company, then got laid off, which was a shock. There were five gaugers, and one of the guys was an older man with 17 kids. They wanted to make sure he could take care of his family, so they let three of us go. They gave us three months’ notice, so fortunately, I didn’t run out of money. But I didn’t want to get laid off again, so I decided to go into business for myself.

That’s when I met Bill Barkey, a really important mentor in my life. He owned Kasan and was a contract petroleum engineer for Royal Oil and Gas, and I applied for contract gauging jobs there. He was one of the country’s first petroleum engineers and coached me on how to drill a well, set the casing, and all of that. The income I made went to $10,000 a month, so I had some capital.

I saw a lot of waste in those gas fields and thought I could do better, so I incorporated in 1983. Back then you’d find a geologist with an idea to drill, go to investors, and if they believed in you and in the geology, you’d get carried by them: You’d get interest in the deal for free, but you had to do all the work.

Rod Lewis, Lewis Energy, shale gas wellLewis, in 1983, servicing the first well he owned

In 1984 the father of a friend said, “Rod, I want you to sit on this rig and make sure my partners aren’t taking advantage of me.” I said, “But I’m working 14 to 15 hours a day.” He said, “Well, you’re not working at night, so you can live there at night.” So I did that. I bought 8% of the well with my own money, and he carried me for 5%. We got a little gas, but the well never paid out.

It took me two years to get back on my feet. Back then we were living in a mobile home. We were able to make the mortgage payment and the car payment, but that was about it. We were living close to the bone, so all extras beyond food and the basics were out.

During the first 15 years, I was putting everything on the line. If I had lost any money on any of the wells I drilled back then, I would have lost it all. These deals are always calculated risks. In December 1986, I drilled my next well with a bunch of partners. We spent $325,000 to drill, and in 18 months it paid out. Those wells last 30 years-plus, so it was a nice income. That kicked it all off for me.

In 1987, I drilled seven wells and each year kept increasing the number. I was a small-time operator and worked with big service companies like Halliburton and Schlumberger. They were interested in helping me because if I succeeded, it would benefit them. The companies sent me to perforating school, fracking school, blowout schools, and other short courses. I didn’t have an engineering degree, but through osmosis, you learn this stuff.

We focused on South Texas. We wanted to know more than our competitors about everything here. I lived on a ranch and knew all the landowners I was dealing with. In 1993 our annual revenue was $2 million.

I also started collecting airplanes. In the ’80s I bought a 1942 Aeronca Chief, then a Cessna 182 and others. The early planes were all for business. We lived 30 miles north of Laredo, and the only way to get to business meetings was to fly there in my own plane.

In 1995, I was flying with an ex-Navy pilot who convinced me to buy my first war bird, a North American T-28 Trojan. I’m always working on something, renovating it, and making it better. I’ve taken a lot of aircraft from a pile of scrap to restorations that honor the guys who served our country in World War II. I’ve had a lot of flight training, especially on advanced jets. It’s a passion and gives me a break from focusing on my business.

A few years later we started drilling in the Eagle Ford Shale, which trends from the Mexico border into East Texas. A lot of what I do is on instinct. I had a definite feeling the Eagle Ford would be significant, but not to the point where it is today. I was on the well when it hit, which was pretty exciting. You’re measuring the gas flow, burning the gas, and when you see the big flame, you know you’re successful.

It took a few days to unfold, and I was holding everything tight so no one else would know what was going on. Then I went out and had a beer. I don’t think we could have afforded champagne.

I’m proud we recognized that the Eagle Ford would be productive way before others did. We drilled the first horizontal well in 2002, and Eagle Ford has become one of the biggest plays in the world. We owned more than 400,000 acres there, and with the cost of drilling a well up to $7 million, the need for capital came in again. So in 2009, BP bought into the play, partnering with us on 100,000 of the 400,000 acres for a fifty-fifty split. That continues to pay off.

GAS KINGDOMS Eagle Ford, where Lewis drills, is the country's second-most-fecund shale natural-gas field.GAS KINGDOMS Eagle Ford, where Lewis drills, is the country’s second-most-fecund shale natural-gas field.

In 2004, I got a 15-year contract to drill gas wells in Mexico by building a relationship with officials at Pemex [Mexico’s state-owned oil company]. One day I took them for a ride in my helicopter and showed them all the wells Americans were drilling on the border. Basically, in this business, whoever gets it first gets it.

Two days before I signed the Pemex agreement, I was diagnosed with throat cancer. I became worried about debt, which led me to sell much of my Texas pipeline. If anything happened to me, I didn’t want to leave my family or the company in a lot of debt. But I had a lot to live for. I went through radiation and chemo simultaneously and had surgery. I was on a feeding tube for six months. Four months after my treatments ended, I started working again and gradually got back to a regular workday. For me, beating cancer was one more challenge that was going to get done.

We’ve been in Mexico 10 years now. We steered around the violence of the drug war and have had few incursions. The bigger challenge was dealing with services that are not up to date. So we do everything—the drilling, completion, production, and marketing—without having to call service companies, something 98% of other oil and gas companies have to do. Overall, we haven’t found enough gas to make it profitable. But we got our foot in the door and are in negotiations for a new deal.

Lewis Energy now drills about 170 wells a year. Our capital costs this year will run well over $1.2 billion for the Eagle Ford play and some property in Colombia. We’re a natural-gas producer, and oil is a sideline to us. I decided to get into the oil business to have a little balance because gas and oil prices don’t track each other.

The growth of the company has been phenomenal. I’m proud to be able to provide jobs for so many, which also enables me to take care of my family. I seldom took time off in the early years, but surviving cancer taught me the importance of doing the things I want to do. So now I work hard, and I fly every chance I get.

My Advice: Think like a pilot in the boardroom.
Rod Lewis
Founder and CEO, Lewis Energy

PAY ATTENTION TO FEAR, but stay focused on the goal. Fear motivates you to protect yourself, but be ready to act when something bad happens. If an engine quits in a plane, you have to be able to take the heat and not lose your cool.

LOOK AT THE WHOLE PICTURE. World War II pilots had to have great eyesight to see far distances. With the Eagle Ford play, we made one big mistake. We were concentrating on natural gas and missed discovering that above a certain geological trend, the northern part of the land was oily, and the southern part was gas. We could have gotten in on more of the oil, where the money was.

HAVE FAITH. You can’t be overconfident, but you have to believe in your ability to get the job done. I may jump from a 70-year-old plane one day to a two-year-old state-of-the-art business jet the next. All planes fly differently, but there’s a certain faith I have that the plane will take me from point A to point B, as long as I’m doing my job right.

This story is from the December 22, 2014 issue of Fortune.