2008 Interview with: Reece Energy Exploration Corp. (RXR-TSXV), Ron Stuckert, CFO - featuring: their active plays in southeast Saskatchewan, including the Crystal Hill, Stoughton, Chandler, Carnduff, Midale, Workman, Hastings, Ingoldsby and other fields.
|Reece Energy Exploration Corp. (RXR-TSXV)|
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Reece Energy Is Focused On Exploring And
Developing Oil And Gas Properties In The Saskatchewan Area Of Canada Where
They Know That There Is Oil
Ron is a businessman with more than 35 years of experience in owning, operating and managing various companies in many fields including construction, real estate and oil & gas. Since earning his B.Com from the University of Alberta, and his C.A. designation from the Alberta Institute, Ron has worked in various accounting and management related roles.
Through his company, Odyssey Entrepreneurial Consulting Ltd., Ron provided business consulting services to companies in the United States, Mexico and Canada. These companies operated in such diverse industries as charter aircraft, hotels and time shares, mail order book services, manufacturing and production testing.
Prior to his appointment as CFO, Ron provided business consulting services to Ganze-Reece Operations Ltd., a private oil & gas company in Medicine Hat which was acquired by Reece.
Currently, Ron also co-owns and
provides business management consulting services to Montessori schools in
Calgary, Red Deer and Airdrie.
Based in Medicine Hat, Alberta, Reece Energy Exploration Corp. (“Reece”) is a junior oil and gas exploration and production company. Formed through the acquisition of three private companies in 2005, Reece’s aggressive growth strategy focuses on a balance of exploration and developmental drilling as well as synergistic acquisitions which complement Reece’s existing assets.
Reece's vision on a going forward basis is to be a strong emerging junior oil and gas exploration and production company focused on shareholder value creation. Its business strategy employs a disciplined approach to exploitation and development in conjunction with a concurrent purchase and acquisition program focused in the provinces of Alberta and Saskatchewan.
Reece strives to create sustainable growth in reserves, production and cash flow per share through the execution of management's growth strategy of acquiring, exploiting and exploring for high quality, long life, light oil, heavy oil and natural gas reserves within its core geographic project areas.
Its robust land position will provide Reece with years of diversified risk/reward organic drilling opportunities. With a total of nearly 45,000 net acres, Reece’s west central Saskatchewan core area represents the majority of its development drilling opportunities. The North Dodsland gas field is Reece’s “bread & butter” play with more than 30 low-risk development infill drilling locations available. Reece’s lands to the south and to the east of Kindersley contain many high-impact, seismically defined natural gas opportunities. The majority of Reece’s production in west central Saskatchewan comes from the Viking Formation.
Reece has interests in many of the active plays in southeast Saskatchewan. These include the Crystal Hill, Stoughton, Chandler, Carnduff, Midale, Workman, Hastings, Ingoldsby and other fields. These fields target high-grade light oil from the Midale, Frobisher, Kisbey, Alida, Tilston, Souris Valley, and Bakken formations.
Mr. Stuckert: “I was hired in May of 2004 to help the company go public and eventually we made ourselves public in May of 2005. I was later hired as CFO. My background is as a chartered accountant, which is like a CPA in United States.”
CEOCFO: What’s the vision for Reece?
Mr. Stuckert: “We are trying to grow an oil and gas company. Our prime focus right now is oil but we are trying to grow a company and we’ve been doing that for quite a few years now. We plan to keep going off into the future. There are opportunities that will come along to sell off the company to bigger players but at the moment we are trying to drive forward with our own resources and our cash flows.”
CEOCFO: What geographic area are you focusing on and why you are there?
Mr. Stuckert: “Our head office is in Alberta but all of our properties are in Saskatchewan in Canada. We have two major core areas around Kindersley in Saskatchewan, which is west central. Up there, we have gas and oil properties. The other area of focus is Southeast Saskatchewan where we have primary oil properties, oil potential and drilling opportunities there.”
CEOCFO: Tell us about your current projects.
Mr. Stuckert: “As you know, the oil price is very good right now and we are drilling for oil. We put our budget primarily to oil drilling for 2008 and in that area near Kindersley; we have a number of prospects there. The essential one is horizontal Viking oil wells. These are wells that are drilled down to about 800 meters and then horizontally for under the ground, for about a mile. We fraced them some times up to 11 stage frac. The oil is already there, we are drilling right between regular vertical wells, so we know the oil is there and we’ve been very successful with this.
We drilled one in December, it came on about 150 barrels of oil a day for what’s called flush the original production and here in May it stabilized around 60 barrels a day. We have just completed six more of these and we are awaiting testing. We expect there will be results as good as that first one and we will keep doing that for the balance of the year. We have potentially more then 20 more of these locations to drill in land we either own or control at the present time.
The other area of interest is in the southeast of Saskatchewan; it is called Bakken. We have a well-established land position with a partner down there and we have just started drilling there. With our partner, we have over 40 sections of land or mineral leases for exploitation there. It is possible to do four wells on every section, assuming that we think the oil is there. Recently, the United States Geological Survey just introduced or released their information on what they call the Bakken field. The bigger part of it is in the North Dakota, Eastern Montana and some of it spills into South Dakota.
They estimated there is half a trillion barrels of oil in the Bakken. In the Bakken, we have spills. This spills over into the southeast Saskatchewan and goes up there perhaps 100 miles or so. All of our properties are right in that area. Those are the two areas of concentration, all for oil and as you see today, oil is about $129 so that would be well worth our effort to hit production there.”
CEOCFO: Do you prefer to do projects with partners is it a project by project decision?
Mr. Stuckert: “It depends on the project. On our Viking wells around Kindersley, we are a 100% operator and we own 100% of the wells there and the opportunities. In the Southeast, when we were going around acquiring mineral leases we were bumping up against this other private company. We knew of them; we were already partnered with them in another conventional oil situation. We talked to them and we agreed that there was no point competing and going against each other to acquire mineral rights. We joined forces and hooked up with them to go exploit this opportunity. They are also right in the area with their office. They have expertise drilling. They have connections to all the services and the things we need down there to drill. They represent a good choice for us to look after our interests there.”
CEOCFO: Tell us about your philosophy at Reece?
Mr. Stuckert: “We are trying to grow and develop. We think we run a good company here. We are proud to make money. We are not embarrassed about that, as some people seem to think in today’s world. We think success is wonderful and we hope to get people to come along with us. We are looking for long-term shareholders that want to grow our company with us and we think they will be well rewarded, if they stay with us.”
CEOCFO: Can you talk about your portfolio approach towards capital expenditures?
Mr. Stuckert: “These two projects represent our big interest at the moment and we are just going to spend our money there. We have a capital budget of about $20 million. Because of our success and the commodity price, we anticipate raising that up to about $30 million, for the future.”
CEOCFO: Could you just touch on the Alberta situation and how that is beneficial for you?
Mr. Stuckert: “While we are in Alberta, we don’t have projects here. In Alberta’s case, they just increased the government’s stakes through the royalties and they damaged a lot of the economics here. We are Saskatchewan because that’s where we came from, We don’t have intentions of going into Alberta at the moment, but things may change as this situation unravels with the government. They may back off and make it more economical to be in Alberta.”
CEOCFO: Tell us a little bit about Reece Geophysical?
Mr. Stuckert: “We started that a couple years ago, the reason for that is two-fold. We could get quick work on our own projects, and if we wanted to drill we could go do a quick line or a quick Geophysical project to help us pick location and that wasn’t available to us too much back then because there was high demand for those services. The second reason, when we go to land sales where the government’s put up land to purchase, often we can go do some seismic work before we bid on the land and it helps us set up the bid price for the bid, and it gets more reliable for us to know what we are doing here. Particularly the last year it started to get more third party work, non Reece energy work.”
CEOCFO: What changes can we expect to the upcoming year or two from Reece?
Mr. Stuckert: “There will probably be no big changes, just more drilling, increased cash flows and we plan to use that cash flow to drill, so as far as we can see right up to the end of 2009 we will just be drilling our horizontal Viking wells up around Kindersley and we will be drilling Bakken wells in the southeast of Saskatchewan.
We don’t think much about any other changes. We look at acquisitions from time to time but we always run into a problem, we are doing better by drilling then acquiring. Who knows, maybe that will show up and we will find something worthwhile doing there.”
CEOCFO: What challenges are ahead for Reece Energy?
Mr. Stuckert: “What happened, because of the Alberta royalty situation, was that more and more oil and gas companies moved over and started looking at drilling and exploring in Saskatchewan. An example of this, we bid at a land sale back in February, a Saskatchewan land sale about $800,000 for approximately forty parts of the land. The year before, no one even bid on these and these were eligible for these horizontal Viking wells, but we bid $800,000 and somebody bid $13 million. What we are seeing now is rising costs of acquiring opportunities, because of more people moving over to Saskatchewan to look and explore.”
CEOCFO: Reece has a lot of land in Saskatchewan to explore already!
Mr. Stuckert: “We’ve got plenty of land and we keep acquiring more, particularly in the Bakken but also in the Dodsland area or Kindersley area. We are finding people who want to let us drill on their properties for just a royalty interest and we are doing fine there and keep acquiring properties for the future.”
CEOCFO: These are exciting times for Reece!
Mr. Stuckert: “Yes, they are exciting times, and because of these new oil wells, our June cash flow is anticipated to be around $1.5 million for the month and that’s double up from March. As we keep hitting those at again of $129 oil or something, we are going to quickly be cash flowing somewhere over the $2 million a month range. That gives us quite a bit of money just from our own operations, for future drilling.”
CEOCFO: Address potential investors; why should people be looking at Reece Energy today?
“There are several reasons. We have these projects and in our scouting
around, looking at acquisitions in the past year, we find lots of companies
that didn’t have much to do. We have lots to do in hand and enough for at
least to the end of 2009 and probably further up from that year.
The second thing is that we had our bank loan increased from $13 million to $20 million and we just recently raised net to about $7 million. We also have the means to exploit our opportunities and again we found when we were looking around at some companies, they were debted up they didn’t have much room. Their cash flows were marginal and as I said earlier they didn’t have many projects. In summary we have lots of projects, mostly oil and although we have gas projects but we are not paying any attention to that right now. We have the means to exploit our opportunities and not all the little companies or the juniors have that kind of potential.”
CEOCFO: Final thoughts; what should people reading about Reece Energy remember most?
“We started with a couple hundred BOEs a day, barrels of oil equivalent
production and we are closing in shortly here on 1,400 barrels a day of
production. We will continue to grow that. That’s the future for us.”
“We drilled one in December, it came on about 150 barrels of oil a day for what’s called flush the original production and here in May it stabilized around 60 barrels a day. We have just completed six more of these and we are awaiting testing. We expect there will be results as good as that first one and we will keep doing that for the balance of the year. We have potentially more then 20 more of these locations to drill in land we either own or control at the present time.” - Ron Stuckert
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