Breitling Oil and Gas might appear to be "just another US independent" active in unconventional as well as conventional plays. But there is more to the company and its outspoken leader, CEO Chris Faulkner, than meets the eye.

At a time when even major companies have scaled back on R&D, Breitling has invested millions of dollars in new technology, devising such techniques as Geo3D proprietary seismic filtering; COsand fracturing; and EnviroFrac, a program established to determine the environmental friendliness of fracture fluids.

Recently Faulkner talked to E&P about his company's activities.

Chris Faulkner, CEO, Breitling Oil and Gas. (Photos courtesy of Breitling Oil and Gas)

What does the industry need to know about Breitling as an operating company?

Exciting opportunities are unfolding at Breitling Oil and Gas, with some major operated plays that are driving value creation. Our focus on financial stability, assets, and people has allowed substantial progress as we shift from conventional to unconventional assets and build capacity in our organization. Breitling's asset base includes large-scale, long-life resources, including working interests in all the major basins within the US. Our production profile is evenly balanced between crude oil and natural gas, with a reserve life of more than 40 years on a proved-plus-probable basis. We have a substantial inventory of current well locations and an undeveloped land base. Breitling's focus is to develop projects that represent excellent low-cost, low-risk drilling opportunities that will provide reserve replacement for a significant period of time.

What is the company's biggest investment to date?

Our investment into the Bakken shale play has been our most significant capex thus far and holds the biggest potential. We purchased a large acreage position in McKenzie County, N.D., in the summer of 2011.

What types of plays are of most interest to your company?

The core business model of reestablishing production in mature fields will remain our focus for the foreseeable future. Using today's advanced technologies, companies like ours can acquire these plugged fields and breathe life into them, reestablishing production and rejuvenating them while creating excellent returns for our stakeholders. Additionally, we are allocating large capex to unconventional plays in our holding areas within Texas, Louisiana, and Oklahoma.

How significant is the role of technology in your plans to expand E&P?

On some levels, adopting new technology can be viewed as an economic risk. The cost may be higher and the result less certain than existing technology.

However, the payoff from a new technology can be huge, both for the individual company and for national energy security. It is widely acknowledged within the oil and gas industry that technology has reduced the risk of exploration and cut the time required to drill a well. Those advantages alone are critical factors in the decision to adopt technology.

What are some of the company's biggest challenges?

First, uncertainty around energy policy and regulation. Government regulations are constantly evolving, and doing business internationally complicates things even further. This constant change and uncertainty means that oil and gas companies must be ready to change business processes and conform to new standards on an ongoing basis.

Second, price volatility. Like the uncertainty surrounding energy policy, constantly fluctuating prices demand a level of agility that many smaller independent E&P companies do not have.

Third, human capital. With nearly half of the workforce in the oil and gas industry expected to retire in the next 10 years, the "big crew change" should be a major concern for companies in our industry.

Last, aging oil and gas infrastructure and the capital required to upgrade that infrastructure. Keeping up with demand and meeting environmental regulations is becoming more difficult as physical infrastructure ages and breaks down. Oil and gas companies have large amounts of physical capital investments (e.g. refineries, drilling rigs, pipeline, IT systems) that need to be maintained and upgraded over time, representing a huge cost investment for our companies on a continual basis.

Breitling is drilling the Breitling-Big Tex #1 and #2 wells in Gaines County, Texas.

Is Breitling struggling like other oil companies to attract new engineers?

The short answer is yes. I think changing the perception of the oil and gas industry is fundamental in addressing the skills shortage we are currently facing. I firmly believe that in order to attract young talent to our industry, it is crucial that the industry is perceived as the important, innovative, and interesting workplace that it is. We try hard to remove any of the negativity that currently surrounds the argument of peak oil, the downward trend of fossil fuels, the environmental argument surrounding fracing and unconventional resources, and anything else that might cause potential talent to rethink entering the oil and gas industry. This affects incoming talent from the time they are in university.

How are you addressing that challenge?

First, I think that many current students still lack knowledge of and exposure to the oil and gas industry and perceive the industry as a low-tech, manual job. I believe that students are influenced by their university and therefore their faculty, so Breitling works with the faculty in terms of projects, technology, and development partnerships, including internships for students throughout their education. We help drive curriculum if we can and give guidance to the universities on what topics students should be focusing on. We have spent serious time and money building more strategic education partnerships and working with key universities to assist us in identifying the long-term talent pipeline.

How are you progressing in your China negotiations? What has sparked your interest in that country?

We continue to explore joint venture opportunities in China and are making great progress, albeit slower than I would like. I really feel that China, given enough time, is set for a shale gas revolution that will surpass that seen in the United States. The most recent US EIA report in 2011 showed China having 1,275 Tcf of technically recoverable shale gas resources – by far the largest in the world, followed by the United States with 862 Tcf and Argentina with 774 Tcf. China's GDP for 2012, while depressed, is still 8%+, which gives them a robust domestic energy demand and growth rate that most countries with large shale deposits do not have. It's great to have shale gas and shale oil, but you need to h ave a market for the product and infrastructure to get it into the market – something Poland, for example, is currently lacking.

What sorts of E&P investments are planned for 2012?

Most of our E&P investments will be allocated into unconventional basins and will focus on liquids plays. I don't see natural gas rebounding enough to repurpose funds before the end of 2012. We'll continue to plow capex into our drilling programs in the Bakken shale, our midcontinent programs in Kansas and Oklahoma, our positions in Eagle Ford, and the emerging Three Fingers shale while allocating funds to expand into the Monterey shale in California.

What types of projects will Breitling invest in over the next five years?

Hopefully more natural gas projects if we get the commodity uplift that I expect. I still feel that oil will remain strong (above US $90) and will be the major focus for Breitling. I feel confident that we can get LNG exports moving, develop a domestic energy policy around natural gas vehicles in the transportation segment, and reduce our marriage to coal-fired power generation. If we can accomplish just one of these items in the near to mid-term we can get natural gas above $5/Mcf and start making money again.