After spending nearly two years as president and chief executive of Aspect Energy LLC, Denver oilman Don Wolf's role is about to change. Though the veteran company-builder will remain CEO of Aspect, the majority of his time will now be spent with Quantum Resources LP, a newly minted, billion-dollar venture that has Houston-based private-equity provider Quantum Energy Partners and Aspect as general partners. Through Quantum Resources, Wolf and his partners will invest their equity in mature, long-lived fields in North America and internationally. Though Wolf's time with Aspect has primarily been spent using 3-D seismic to generate prospects internally, he has worked on a game plan similar to Quantum's as well. (For more on Aspect, see "Cranberg Today," Oil and Gas Investor, July 2006.) He helped build two public companies from the ground up-General Atlantic Resources Corp., that was started in 1981 and sold to United Meridian in 1994, and Westport Resources Corp., that was started in 1996 and sold to Kerr-McGee Corp. for $3.4 billion in 2004. In addition to his duties with Aspect and Quantum Resources, he is on the boards of MarkWest Hydrocarbons, Denbury Resources Corp. and Enduring Resources LLC. Recently, Wolf visited with Oil and Gas Investor to find out how the idea for Quantum Resources was born, why selling General Atlantic was one of the hardest moments of his career and how he ended up in this business in the first place. Investor How did you get involved with Quantum Resources? Wolf Aspect and Quantum Energy Partners teamed to form this new acquisition company, which is totally separate from Aspect and Quantum Energy Partners. The general partners believe there is an opening in the market for an acquisition company of this magnitude if complemented with the right management team. The principals of Quantum Energy Partners and Aspect have known each other for a long time. Quantum was an investor in Aspect for a period of a couple of years. Alex Cranberg [Aspect's chairman] and I have known each other for 25 years, and when we sold Westport, I joined Aspect as chief executive. Quantum Energy Partners contacted us with the concept of putting together a large acquisition company with a little longer timeframe than the typical small build-and-flip model. We felt that, with the combined backing of Quantum Energy Partners and Aspect, a new start-up could be sufficiently capitalized to do some large acquisitions. We believed in the business model, and we started working on it about a year ago. Investor Does Aspect focus on growing organically? Wolf Yes. We're primarily drillers within the upper Gulf Coast of Texas and South Louisiana. We are also involved in several resource plays. Investor Will the new company have a different strategy? Wolf Quantum Resources is basically an acquisition and exploitation company. It will focus on larger acquisitions in excess of $100 million. By the time we add some leverage to the billion-dollar equity we have now, we'll have buying power that approaches $2 billion. We're going to be opportunity-driven and focus on the best opportunities we can find. We don't have to stay in a specific geographic area. We're looking for larger, more mature oil and gas fields with long life. Investor When do you expect to make your first acquisition? Wolf Our first acquisition was actually five minutes ago, but it's pretty small. We just bought long-term gas assets in the Piceance Basin. They are legacy assets we've known before. Right now we are evaluating three or four rather large packages in excess of $200 million. We never know when we're going to be successful, but we continue to be optimistic and aggressive about the properties we particularly like, so we're hopeful that in about six months we will have a couple hundred million dollars or more invested. Investor What is your view of recently high acquisition prices? Do you think you can still buy assets and make money? Wolf Yes, we do. The acquisition business has changed so much because of the fact that you can lock in your price assumptions through the futures markets; you don't have the price risk that you were faced with 20 years or even 10 years ago. Now we have a long-term futures market with reasonable liquidity. I think it would be difficult to buy on current prices if you didn't have a futures market to mitigate that risk. Although one could argue that acquisition prices are high at this point, technology is always changing and always improving our ability to recover more oil and gas out of existing reservoirs. Acquiring long-life properties provides great optionality for technological improvements, part of which is enabled by higher prices than we have had in the past. Investor What is your commodity-price forecast? Wolf We're pretty neutral, partly because of the ability to hedge. If oil and gas prices go down, it probably is a good buying opportunity longer-term. If prices are stable or higher, then our returns will primarily be derived from acquiring good fields, accelerating production, lowering costs and applying technology to existing properties. We don't consider ourselves any more accurate on price forecasting than anyone else. We're primarily looking at fundamental execution, the quality of the properties, the ability to extract upside from them, and the ability to lower costs to improve margins. We're able to take price forecasts off the table to a large degree because of the futures market. Investor You sold Westport in June 2004. In hindsight, would you have held onto it a little longer? Wolf In hindsight, I think we probably could have received 50% more for Westport had we held it, since prices have been so powerful in the last two years. But we did very well, our shareholders did very well, and of course the buyer is happy as well. Hindsight is always perfect, but we're very happy with the whole outcome of the Westport business model. Investor What is your exit plan for the new company? Wolf We have an arrangement with our investors for an approximately 12-year life for Quantum Resources. We intend to pay dividends along the way. We're going to buy substantial properties. So, as opposed to the traditional smaller private-equity strategy, which involves somewhere between $20- and $100 million of equity, this company involves $1 billion of equity and includes a longer investment scenario. Investor What will Quantum Resources do for personnel? Wolf I think having the right platform is important. People like to be associated with success and with companies that are doing good things. They like to work where there's some upside in place for them. Companies that can create that kind of environment will be able to attract very good people. We're assembling a true dream team. We're hand-picking each candidate and we've been fortunate to attract the top candidates in each of the categories we've recruited. I envision that eventually we will have more than 10,000 wells and employ between 350 and 650 people. Investor Is this where you thought you would be when you started? Wolf No. I had no idea I would be in the oil business when I started out. I had a business degree, so I thought I'd eventually have a small business. I married a Canadian gal and her parents were in Calgary, so I interviewed in Calgary, and my first job ended up being with Sun Oil Co. in the oil fields of Saskatchewan. Things progressed from there. It's been a wonderful career for me, one that I thoroughly love, but somewhat accidental. Investor What has been one of the hardest moments of your career? Wolf I think the biggest struggle I had was in selling General Atlantic Resources, a company in which we had spent more than 15 years building from a $12-million initial equity investment to a New York Stock Exchange-listed company. We spent a lot of time trying to decide whether to sell or continue to build. The first company you sell is always your baby and it's always a difficult decision, but it was a good decision. After the first one, it becomes a little easier. Investor What has been the best experience of your career? Wolf I most enjoy assembling a high-energy, cohesive group of professionals that is motivated and driven to succeed in building the best company they possibly can. I've been fortunate to have been involved in two start-ups that were both begun with a relatively small equity base and were grown into pretty good-size companies, and that was all because of the combined effort of a really good team of people. I get a lot of satisfaction in putting the right people together, keeping our discipline and helping them build the company. Investor How have your experiences prepared you to do what you're doing now? Wolf Years of experience, multiple cycles and serving on several boards have supplied different insights into this business. One of the things I've learned over time is you have to be aggressive enough to make things happen, but you have to know when to stop in order to protect returns. Investors talk about accepting risk, but in the end, they must have returns, so risk has to have boundaries around it. You have to remember you're building value and not just shooting for the stars.