From the classics to natural gas
Scholar-executive now focuses on Pa. shale.
In the 1960s, Edward E. Cohen, whose family has been a prolific producer of publicly traded companies, including the former JeffBank, started investing in natural-gas production as a tax shelter.
Those investments have evolved into the Atlas America family of energy companies, now among the top natural-gas drillers in the country.
Cohen and family members - his wife, Betsy, and sons Daniel and Jonathan - also cofounded and run several other public companies, including Resource America Inc., RAIT Financial Trust and the Bancorp Inc. Perhaps not what you'd expect from a guy with Ph.D. in classics from Princeton University who has published several scholarly books.
Question: How do you think Pennsylvania regulators are doing with the natural-gas rush in the state?
Answer: Some people might have known that historically, 100 years ago, Pennsylvania had had Oil City and the first oil wells. . . . But now Pennsylvania really isn't prepared. I think they're making efforts to try to get more prepared. But they were totally unprepared for dealing with issues, because there never had been issues. And there's such a variety of authorities that get concerned with this that they haven't really been able, although they're trying to, but they haven't been able yet to coordinate themselves. . . .
Q: How much did you spend on Marcellus Shale acreage in Pennsylvania?
A: We originally had 87,000 acres, approximately, of Marcellus. And we were able to add almost a half-million more at a total cost of approximately $50 million for all that acreage. Now you saw the results of the state leasing program, where people paid $190 million for 74,000 acres. . . .
Q: What did you do when the cost of leasing land soared from $10 an acre not so long ago?
A: When it went to $200 an acre, Rich Weber, the president of the company, and myself - I'm the CEO - thought we should go to our board because they might think that perhaps somebody was pocketing money improperly. Because whoever heard of spending $200 an acre? And, in fact, in the state auction, the reported price . . . was [$2,600] an acre, on average, and that understates the actual cost. . . .
Q: Is there anything that can get in the way of Marcellus Shale development in Pennsylvania?
A: Well, if it can go wrong, it will go wrong. But I don't think there are any environmental problems which can't be dealt with. It's simply a matter that sometimes people aren't willing to spend the money to deal with environmental considerations. . . .
If [natural gas] prices remain where they are today, Pennsylvania will benefit enormously. . . . Literally tens of thousands of wells, maybe hundreds of thousands, have been drilled over 125 years. But almost none of them below 4,000 feet. And the irony is that the Appalachian Basin is the least explored basin in the nation below 4,000 feet. . . .
[Now] they use the same technology that they used down in Texas. Changing it, of course, to deal with the unique problems we're dealing with. So now we have an entirely unexplored basin . . ..
The history of the industry always is the more you explore, generally the more you find. . . . Now you come into a state like Pennsylvania, which has lost so much industry, this has to be fantastic for us to get this additional economic stimulus, which would be fantastic.
Q: What spurred your investing in this?
A: I actually started investing in energy back in the late '60s and early '70s. . . . looking for tax shelter. . . . Even though originally, in my ignorance, I was taken advantage of by people who had more knowledge, prices rose so sharply through the '70s that I made a good bit of money from those investments. . . .
By the late '80s, I felt that prices could not go any lower. . . . And I was wrong. Prices could go lower. . . . Finally, in 1997, my sons were in the business with me by then, Daniel and Jonathan. And they said, "Dad, you really were right. You were just 10 years too early. But now we should really buy." And that's when we expanded our energy holdings substantially.
Q: How did it come about that you and Jonathan work together, and your wife and Daniel work together?
A: Just by chance. . . . Jon and I do energy and Betsy and Daniel do finance. But Betsy and Daniel, as the world knows, really are geniuses. And so they were able to handle the situation in a way that others, apparently, have not been able to. Touch wood.
Q: You used to spend more time writing about the classics.
A: Unfortunately I don't want to be like Nero, if I could use a classical example, who was practicing his music while Rome was burning. . . .
When we did our half-billion-dollar raise for Atlas Energy, I was there on the road show. . . . I find myself reading the agreements, paragraph by paragraph, because it's not covenant light anymore. The covenants they're asking you to sign could really be destructive. . . .
Whereas five years ago I might have asked the CFO, "Have you read this carefully?" And if he said yes, I had confidence in it. I could go back and read my Thucydides. But today my books are getting very dusty. So I hope that things will come back to normal and I'll be able to someday resume my scholarly career.
Edward E. Cohen
Education: Princeton University, Ph.D. in classics.
Family: Wife, Betsy, sons Daniel and Jonathan, all in the family business.
Hobbies: Studying classics, which lately takes a backseat to work: "I don't want to be like Nero . . . practicing his music while Rome was burning."
Sage advice: "Disinformation has historically and traditionally been an essential part of the energy business."
Contact staff writer Harold Brubaker at 215-854-4651 or email@example.com.