The four wells will be drilled near Nageezi, in the Gallup formation

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FARMINGTON – As oil and gas production in the San Juan Basin appears to be slowly gearing up again, one local company, LOGOS Resources, has not only managed to survive the latest oil and gas downturn, it is planning new drilling operations.

LOGOS Resources was founded by Jay Paul McWilliams who — along with partners Kelly Maxwell, John Bruner and Chris Jeffers — runs its daily operations as company president. He said the company, which focuses on acquiring and developing assets within the San Juan Basin, is preparing to drill four new Basin wells within the next few months.

McWilliams, who says that he's never had to lay off any employees (Logos employs 31 full-timers and six contractors) despite many booms and busts, offered his thoughts on the future of oil and gas production in the San Juan Basin.

"It's still a world-class basin," he said. "It's out of favor right now — folks are focused on the Permian (in west Texas and southeast New Mexico). But I think that's great, because it provides a lot of opportunity."

Today, the company controls approximately 165,000 net acres and 550 oil and gas wells, which produce approximately 40 million cubic feet of natural gas equivalent per day, making Logos one of the largest operators in the San Juan Basin.

Now, McWilliams says, LOGOS is gearing up to start drilling again.

"But we won't be doing a lot of drilling because prices are so low," he said. "The area we're focusing on is about 45 minutes down (Highway) 550 toward Cuba," he said. "It's in the Gallup formation, near Nageezi."

The wells, two horizontal and two vertical, are primarily aimed at finding oil, but may also yield some gas, he said.

"The two verticals are off-trend, but they're a lot cheaper," said McWilliams. "We want to evaluate the reservoir and see if it would be OK for horizontal (drilling)."

Within the next year or two, McWilliams predicts, the exploration situation within the Basin will continue to improve, though he said he doesn't see a "boom" happening in the foreseeable future.

"There are two factors involved," he said. "The first one is prices — gas prices are terrible, and the Basin is primarily natural gas. Secondly, the Basin is behind the technological curve and is not as proven as the Permian Basin. But it does have potential. And that's why I go to investors, because five million dollars for one horizontal well – well, that's expensive."

McWilliams said LOGOS plans to hire additional part-time contract labor for the drilling, which is being serviced by Aztec Well Servicing.

Jason Sandel, executive vice president for Aztec Well, said his company will provide Logos with a mobile double drilling rig for the four wells. Sandel said he appreciates McWilliams and wife, Krista, for coming back to San Juan County.

"These two made the decision to return home and make good on a promise to invest locally," he said. "From my perspective, this is true economic development. In 2012, when there was seemingly no hope for the San Juan (Basin), it was Logos who stepped in and started drilling wells in the oil window of the Mancos. Their investment in our community could not have happened at a better time. From the initial investment in a single lateral well and operating the legacy Energen wells, to putting together a drilling program in 2017, I couldn't be happier for LOGOS. Really, our whole community should be."

McWilliams, 37, grew up in San Juan County, graduating from Aztec High School. After attending San Juan College, he transferred to New Mexico Tech where he received a bachelor's degree in chemical engineering and later an Master of Business Administration from Duke University's Fuqua School of Business.

Prior to founding Logos Capital Management in 2009, McWilliams said he worked for Resolute Energy Corporation and Burlington Resources, then served as lead acquisition engineer at LINN Energy, where he said he led approximately $1 billion in successful transactions.

"From 2009 to 2011, I noticed how technology — fracking and horizontal drilling — was revolutionizing the industry by allowing people to come in and re-work old wells," he said. "I had a friend in Farmington who told me about five old oil wells on the Jicarilla (Apache Reservation), so I took my life savings, put everything into it and made that leap."

The wells were successful and McWilliams turned his attention to acquiring acreage in 2012 and starting by drilling vertical wells. He later transitioned to horizontal drilling in an area off Highway 550.

"In 2014, things were going very well, and people wanted to buy our assets, so I divested properties," he said. "I was very blessed to have done that, because it was right before prices were collapsing."

By early 2016, McWilliams said, conditions for the industry had significantly deteriorated, but when the opportunity came to purchase 140,000 acres from the Alabama-based production company Energen Corp., McWilliams and partners took the chance, buying Energen's San Juan Basin assets and re-forming his company into LOGOS Resources II. The company is housed in the former Energen building on Afton Place in Farmington.

LOGOS found an initial $50 million in investment-backing from Boston-based ArcLight Capital Partners and the investment company has upped that amount to $100 million to help Logos continue with its successful basin operations, he said.

As long as ArcLight continues to commit to backing LOGOS, McWilliams said, he's confident of the company's continued success.

"They love the San Juan Basin, and we have a great relationship with them," he said.

Partnerships with other companies in the county such as Merrion Oil and Gas, M&R Trucking, Serrano's, Weatherford and H&M Chemical have also contributed to LOGOS' success, he said.

Like many in the industry, McWilliams retains a positive outlook, saying things can only get better from here.

"I grew up in the industry," he said. "My great, great uncle helped drill the first well in the San Juan Basin. I've experienced the ups and downs – in fact, I spent a year living in my grandma's basement after the last bust. When I first got out of college, everyone talked about how the Permian was washed out, but now it's the hottest thing. We think that's what the Basin will become. After all, in this business, you have to be pathologically optimistic."

Leigh Black Irvin is the business editor for The Daily Times. She can be reached at 505-564-4621.

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