William Daugherty

If you don’t make any mistakes, then you’re not working hard enough, says William Daugherty. In two decades of running his own business, that philosophy has served Daugherty well, enabling his company, NGAS Resources, Inc., to adapt to new challenges and keep longtime employees in a tight market.

“We want them to be decisionmakers,” he said of his 100 employees. “We want them to have the resources to, first, make sure they understand how important the decision is and, second, to be able to make the right decision.”

Daugherty tells the story of an assistant who made a $20,000 error that could not be recovered. “She immediately brought it to our attention. She alerted the rest of the staff to what she’d done, how she made the mistake, and what she did to correct it. She used it as a training aid to help other people,” Daugherty said. “That was six years ago, and she’s still here.”

What Daugherty has learned over the years is that unpredictable stuff happens, so it’s best to try to turn the surprises into positives. Like the time he was headed to law school but ended up working in the oil and gas industry instead. Or the time, in 1984, when gas prices took a dip and he couldn’t find a job, so he decided to start his own natural gas exploration company instead.

“There was more desperation in starting Daugherty Petroleum than inspiration,” he said with a laugh. “I was getting old. I was almost 30—at least I thought I was old.”

Daugherty Petroleum is now a fully owned subsidiary of NGAS Resources, and Daugherty is still enjoying the surprises his industry has to offer. “I thought it was tremendous fun finding out what’s underground. It’s like going to Vegas,” he joked. “It’s the highest highs and the lowest lows.”

Daugherty’s open attitude fosters an innovative corporate climate that has proved valuable in the up-and-down oil and gas industry. The company controls more than 300,000 gross acres (more than 275,000 of those in the Appalachian Basin) and has identified more than 1,100 drilling locations on its core acreage.

NGAS gas sells at up to 20% more than the market average because of its high heating value and proximity to its market. “What we’re doing is producing a very high-quality natural gas,” Daugherty said. “We go after properties that have been coal mined that haven’t been tapped for their methane.”

The company’s niche is looking for low-risk prospects that have good geology and are nearby known production. “We concentrate on large properties, so that when we find a prospect that’s north of 5,000 acres and has geologic potential, we’ll try to develop a resource there,” Daugherty said.

NGAS relies heavily on the expertise of its staff. “A lot of companies look for prospects that are generated by consulting firms. Although we look at those, we tend to generate from our own inventory and our own people,” Daugherty said.

The next generation
These days, the company directs much of its creative problem-solving power toward two challenges: meeting increased market demand and developing the next generation of industry leaders.

“Our big project now is making sure we drill enough in the right areas to fill up our pipeline to meet demand,” Daugherty said. “We’re accelerating our drilling operations; we’re doing everything we can to increase the size of our pipeline system and our gas production.”

For the past two years, the company has drilled about 155 wells a year, making it the largest driller in the Kentucky region. This year, the company predicts it will drill about 225 wells, and some of those wells will be in other basins. “We’re taking the experience and information we’ve gained into other geologic basins that are similar to what we have here and trying to pick up good properties for a good value,” he explained.

One way the company is trying to reach its production goals is through pinnate drilling, a horizontal technique that is being used in the Arkoma Basin. “We went to the Arkoma Basin (in Arkansas and Oklahoma) and bought a group of wells and some reserves in an area that is technologically advanced when it comes to drilling,” Daugherty said. The pinnate technique involves drilling straight down then turning sideways and fanning out, like the vein pattern on a leaf, to tap a broader area of resources working with their partners in the Arkoma Basin. NGAS’s experts are looking at ways to adapt the technique for use in some of the company’s other prospects.

Daugherty knows the value of bright, innovative thinkers, so he and his core team devote a fair amount of their energy toward participating in industry organizations, such as taking on leadership roles in the Interstate Oil and Gas Compact Commission, Independent Petroleum Association of America and the Kentucky Oil and Gas Association, as well as nurturing the careers of promising young employees.

“The industry has been in turmoil for the last 25 years, and there are not a lot of skilled younger folks coming up,” Daugherty said. “I don’t know what the solution is, but we’ve been making serious efforts to find young talent, educate them, and give them the incentives to stay with the company.”

Trainees are given 60 days in the field with no responsibilities other than to learn from the more experienced hands around them. Young hires are encouraged to think of the company as their own. “We give them shares of stock in the company as part of their compensation,” Daugherty said. “I want them to have a certificate in their hands—I want them to make decisions for the company as they would their own business. NGAS is not just mine; it’s mine and 100 other employees’ and our shareholders’.”

This approach gives people a reason to do things correctly. “If they make a mistake, their second response is to realize what they did and help prescribe the solution,” said Daugherty. Their first response, of course, is to report the error and know they’ll receive support to turn it into a positive experience.

“You know you’re going to get into trouble if you hide a mistake,” Daugherty said. “Everybody needs to be on the same team, and that kind of philosophy seems to be working. It’s done so for 22 years.”

Deborah Geering, This e-mail address is being protected from spam bots, you need JavaScript enabled to view it , is a freelance writer based in Atlanta.