Targe Energy, Inc.

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Nothing in the outward appearance of the converted house at 111 Freeport Road in Aspinwall suggests the corporate home of an enterprise that has received the largest venture capital investment of any local company since the bursting of the dot.com bubble. Bill Spence, founding chief executive officer of Targe Energy, likes it that way. "If it was your money, would you want me spending it on a fancy office?" he said. "I'm far more interested in investing capital in people and technology and rigs." The money that he refers to is the $100 million in venture capital received from Carlyle/Riverstone Global Energy and Power Fund III L.P., which announced their investment in Targe last June. And while many people tend to associate the term "venture capital" with high-tech startups in such fields as software or genome research, Mr. Spence's reference to "rigs" gives away the fact that Targe Energy is largely focused on an old-economy resource: coal. It also deals with natural gas and coalbed methane, but at bottom, it all comes down to participating in Pennsylvania's bedrock mining industry. The company, which employs about 100, has three operating units. Targe Energy Coal operates surface mines in northern Appalachia, primarily West Virginia and Pennsylvania; Targe Energy Reclamation reclaims waste coal; and Targe Energy Exploration & Production drills natural gas and coalbed methane gas wells. For Carlyle/Riverstone's general partners, $100 million is barely a drop in the bucket. The Carlyle Group, possibly the world's largest private equity firm, has $51.8 billion under management. Riverstone Holdings LLC, a New York-based energy and power-focused private equity firm, founded in 2000, has $7 billion under management. At present, drilling is the largest part of Targe's business. What distinguishes it from other drilling companies is not what it drills for or where it drills, but how it drills. Mr. Spence and crew are advocates for and practitioners of coiled tube drilling, which Mr. Spence describes as "the Roto-Rooter of drilling." Conventional drilling rigs use drills that are pieced together in 30-foot segments. A coiled-tube drill uses a continuous spool of steel alloy drill pipe, up to 7,000 feet long. Mr. Spence cited two advantages of coiled-tube drilling. The first is speed. At one site, he said, a crew using a coiled-tube drill was able to drill 22 wells, at 2,500 feet each, in 30 days. In 30 days of conventional drilling, he said, a crew would drill "maybe 10" wells. The second advantage is safety. The work of changing drill bits and replacing drill segments commonly causes injuries, including the loss of fingers, he said. One might wonder why all mining companies have not already abandoned conventional drilling for coiled-tube drilling. Company president and Chief Operating Officer Matthew Miller said that it is a matter of the prior investment that mining companies have made in conventional drilling. "They have to live out the life of these rigs," he said.

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