Among the landmen laid off in the 1980s, Steve Antry turned chaos into opportunity by familiarizing himself with oil and gas industry sources of capital. The homework paid off when he founded Beta Oil & Gas Inc. three years ago, and his studious approach continues to work today as the company grows. The Newport Beach, California-based start-up went public in July 1999, one of only two exploration and production company IPOs during the year. Houston-based Spinnaker Exploration Co.'s IPO a couple of months later gathered more attention. But, Beta is on the verge of hitting more radar screens, according to Antry, Beta president and chairman. Portland, Oregon-based Red Chip Review, the research division of RedChip.com, has named Beta among 24 top small-cap stocks for 2000. Red Chip's 22 picks in 1999 finished the year up 43%; in contrast, the benchmark Russell 2000 index of small-cap stocks gained about 20% in the same period. Beta is the only oil and gas company on the 2000 stock list. Red Chip lists Beta's net present value exposure at $24 a share, based on oil prices of $15 a barrel and gas at $2 per thousand cubic feet. At press time, the stock was trading at about $9, up from $6 at which it presold last summer. "Beta is poised to make a name for itself as a diversified natural gas exploration outfit," Red Chip analyst Jeff Martin wrote. Alexander G. Montano, managing director of oil and gas for C.K. Cooper & Co., an Irvine, California, investment banking boutique, describes Beta as "very intriguing," although he has not initiated coverage of the firm yet. "When we first heard the Beta story, it was very conceptual. During the last 12 months, that concept has been transformed into reality," Montano says, adding that if some of Beta's projects turn out as anticipated, the independent would be transformed from an exploration-driven company into a full-fledged E&P firm. Antry foresees 2000 as a landmark year for Beta. He has a three-pronged agenda: moving the company headquarters from Newport Beach to Tulsa concurrent with closing the acquisition of Tulsa-based Red River Energy Inc., monitoring the newly combined company's four projects of high-impact potential, and moving Beta's stock from the Nasdaq SmallCap board to the National Market System. Beta's $9-million IPO followed two $10-million rounds of private placement that Antry orchestrated. The first came when Beta was founded and the second, just before the IPO. One of Beta's advantages is Antry's ability to raise capital. "When I was laid off as a landman, I made a strategic decision to learn the capital side of the business. I recognized that finding oil and gas is obviously important, but that's really only half the equation. The other half, for building a strong company, is to know where the capital is and how to bring it in the right way," he says. Antry's capital-raising formula depends on his proprietary database of money managers, retail brokers, institutional investors and analysts. He spent more than a decade compiling the names and nurturing this group before he founded Beta. "I've built that database to about 6,000 names to draw from to raise capital in various formats," Antry says. Beta has yet to rely on an underwriter or a third party for capital-raising functions. "It's very unusual. I don't know of anybody who has done it this way. All of our capital-raising has just been done internally. "We don't go to an outside firm and ask them to raise money for us. We control the syndicate as well as the size and pace of the deal. The syndicate is comprised of about a dozen regional and boutique broker-dealers." Insiders own about 32% of Beta shares while institutions own about 15%, leaving the rest for public consumption. Antry likes a diversified shareholder base, adding that Beta has a wide distribution of shareholders in Oklahoma as well as in Atlanta, Fresno, Chicago and Europe. "It's a really mixed bag that most companies don't have the luxury of being able to access. We go through a methodical process to constantly maintain that database. We're constantly communicating with them." He now spends about 20% of his time maintaining the database. Steve Fischer, vice president of capital markets, is in charge of all broker and investor relations as well as communicating with analysts. "I still deal with the larger investors and brokers that I've had relationships with during the last 13 years. It is a lot of work. I find less time to do that as we've gotten larger operationally," Antry says. Beta was founded in California because that's where Antry was living, having moved there while working for Houston-based Swift Energy Co. A third-generation Oklahoma oilman, Antry learned about putting syndicates together while working for Swift and then later for Carpinteria, California-based Benton Oil and Gas. Antry helped take Benton from $6 per share to a split-adjusted $74 several years ago. In 1992, Antry founded Beta Capital Group Inc., an investment bank specializing in financial and strategic restructuring of E&P companies. In 1997, he organized Beta Oil & Gas. He calls himself a big fan of small financing. "I think a lot of companies make a strategic error in their early stages with a philosophy of getting all the money they can when it's available. The problem with that methodology is that you are bringing in money that is dilutive to all shareholders. I like to just bring in the amount of money needed at the moment." Acknowledging his just-in-time capital strategy would unnerve many CEOs, Antry is confident he always can raise $5 million to $10 million as needed. "I can bring in the capital just when I need it for a specific purpose, but I don't have to have a big war chest by doing a $40-million IPO just because I can. I raise exactly the amount I need. That allows the stock to actually achieve some value between capital infusions." Beta filed its IPO in December 1998, when oil was $10 a barrel, despite skepticism and disbelief from many industry observers at the time. "I didn't blink. I knew I had the IPO done. It was only a challenge from a regulatory standpoint. It was difficult, with all the Internet deals clogging the Securities and Exchange Commission and Nasdaq, to logistically complete the IPO. The capital-raising was easy. We increased the size of the deal three times." Beta was the first oil and gas company to go public under the SEC's "plain English" requirement. Antry considers the rule change to be positive even though it necessitated several full, prospectus rewrites for Beta. It's his understanding that the SEC gave Spinnaker the Beta prospectus as a model. Antry is not surprised that Spinnaker got all the IPO attention in the oil and gas community last year. "I'm fairly well known from my years with Swift and Benton, but since Beta was formed, we haven't been in the forefront due to our internal way of raising capital. I know the people at Dain Rauscher Wessels, but our IPO was too small for firms like that. So, as a result, what we were doing wasn't really that well known." But Beta's visibility is increasing, judging from the attention received during the annual North American Prospect Expo in Houston, Antry says. "I was getting pulled into lots of subgroups by people at NAPE wondering who we are and how we did this. I certainly felt a lot of positive reinforcement." Beta also expects to gain increasing attention from investors and analysts, once listed on the Nasdaq NMS. Upon the shift this spring, trading volume should double or triple from the current average of 25,000 shares daily, Antry says. "I have many brokers with 50,000-share positions that can't buy any more stock until we get on the NMS. I can think of a dozen who want 500,000-share positions." Many larger broker-dealers cannot buy significant volumes of a small-cap company's stock. Meanwhile on February 23, trading of BETA hit a record of more than 300,000 shares. Antry attributes the stock movement to interest from institutional investors, which came during the same week that Beta was the only oil and gas presenter among numerous Internet, technology, biotechnology and other emerging growth firms at the annual Roth Capital Partners Growth Stock Conference in Laguna Niguel, California. The stock jumped that week from about $7 a share to $9. Antry calls the pending transition to the NMS, "part of the sequence of things that I have on my Boy Scout checklist...I love being a public company. I'm very comfortable in the public markets." Recently, Beta was getting more analyst inquiries than ever, Antry says. "We'll move into dialogues with larger firms this year in anticipation that we'll have a need for an investment banking relationship. We are just now hitting those radar screens. I think on our next funding, we will have an investment bank involved." He expects to access the public markets again next year. Funding of Beta's 2000 exploration program-20 exploration wells and 10 development wells-is well covered. The biggest challenge will be getting drilling projects completed by year-end, Antry says. "We don't have a capital challenge. We're in great shape this year just to drill. We have four major projects we are testing. Those four are higher risk with much higher potential than anything else in our inventory. I'm banking on two of those working, at which point, we will probably have a need for substantial development capital and a relationship with a larger investment banking firm." The vast majority of Beta's drilling projects commenced in 1999. The initial $10-million private equity capital went almost exclusively to fund participation in large 3-D seismic surveys in the Louisiana Transition Zone and in the Yegua and Frio trends in Texas. "When we started the company in 1997, we decided against any drilling for the first year and a half. At the time, I thought drilling costs were just too high," Antry says. "We were completing surveys and building our drilling inventory. It was fortuitous." The cost of drilling had dropped in 1999 in some areas by as much as 75%. Out of 17 wells drilled in 1999, 14 were successful. The drilling program is accelerating, thanks partially to Red River Energy. The privately held Tulsa independent is being acquired in a $23.5-million deal: assumption of about $7.6 million of debt and 2.25 million shares of Beta common. Properties being acquired contain estimated proved producing recoverable reserves totaling 22.5 billion cubic feet of natural gas and 504,000 barrels of oil. The combined companies' interests are primarily in Texas, Louisiana and Oklahoma. "Combined, we're about an $85-million-market-cap company. The move to Tulsa is a very good thing. After two years of existence, we're moving to an oil center because we now operate some 120 wells and have an operations staff, as well as plans to make more acquisitions." The deal reunites Antry and Rolf Hufnagel, who will become a Beta director and continue to run the operating subsidiary. Antry and Hufnagel worked together in the 1980s at Nerco Oil & Gas Co. in Oklahoma. "I was Rolf's land manager. Rolf's forte is acquisitions, operations and banking relationships. I'm stronger on the equity side of the business and exploration. It's a good combination." The Red River Energy acquisition brings Beta a $25-million credit facility with the Bank of Oklahoma, which Antry foresees will be helpful in making future acquisitions. Beta is keeping its Houston-based exploration office, run by R. Tom Fetters, who was exploration-planning manager for Exxon USA. Martin, at Red Chip, says Beta takes a diversified approach to exploration and drilling, classifying potential drill sites as having moderate, high or world-class potential. Beta focuses most of its exploration budget on the moderate class to generate cash quickly, and it forms joint ventures with other companies. "By limiting well interest to 10% to 25%, Beta is able to partake in a variety of drilling sites," Martin says. Current partners include Texoil Inc. and Cheniere Energy Inc., both of Houston, and Dyad Australia Inc. and Parallel Petroleum Corp. of Midland. Antry is most optimistic about Beta's high-impact plays, one of which is with Duke Energy in Western Queensland, Australia. Beta has a 10% interest in the project, estimated to have 5 trillion cubic feet of gas potential. This is currently the company's only international prospect. "We have a high-impact project in Galveston Bay called Greens Lake, a Vicksburg play that we will drill this year. It's on trend with the large TransTexas gas discovery, which has estimated reserves of a trillion cubic feet of gas," he says. "Additionally, in Jackson County, Texas, we have multiple deep Yegua and Wilcox prospects of equal potential. Any of these would greatly change the complexity of our company." But the Red River acquisition brings Beta its most interesting project, the Whelu Field, covering 30,000 acres. It represents nearly 40% of all of Oklahoma's Hunton Lime production. Beta owns almost 100% of it, but has a deal in which Tulsa-based Avalon Exploration Inc. will be technical lead while Beta remains operator. Avalon will apply advanced completion technology below Hunton Lime's gas section into the oil section. Historically, producers have avoided the oil section because of the amounts of water generated. "But in our unit alone, there are 600- to 900 million barrels of oil in place. We believe with Avalon that we can recover 75- to 150 million barrels of that with these new completion techniques," Antry says. A 12-well pilot program is planned this year. "If the pilot program is successful, we have room for 300 new wells in our unit. That would be a major play in the Midcontinent and could possibly dwarf anything else we are doing." Amid all the drilling, the headquarters move, the acquisition and the pending move to the Nasdaq NMS, Antry says he still constantly thinks about the way capital is raised-and also the way it is spent. "It's a constant thought process I go through. It's actually easy to find money. There is money everywhere. There are a lot of sources. The real challenge is to bring the capital in the right way so as to not adversely dilute the shareholders' investment, and not get choked with debt. It's a constant balancing act to continue growth in one's share price." He maintains that oil and gas companies cannot be successful by relying solely on the drillbit. They must weigh various capital factors to grow "the right way."