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Cygam Energy’s Large Acreage Position In
Tunisia And Italy Gives Them An Edge In Exploring For Oil And Gas
Energy
Oil & Gas
(CYG-TSXV)
Cygam Energy Inc.
Suite 106, 138 – 18th Avenue S.E.
Calgary, Alberta T2G 5P9
Phone: 403-802-6983
Dario E. Sodero
President, CEO and Director
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
Published – November 9, 2007
BIO:
Dario Sodero is the President and CEO, and Director. He is a geologist with
over 35 years of Canadian and international oil and gas exploration
experience. He is the President of Planaval Resources Ltd., a private
consulting company. From 1969 to 1979 he worked at Canada Cities Service
where he became Geological Manager; from 1980 to 1990 he was Vice President
and President of Atlas Yellowknife Resources, a company listed on the TSX;
in 1992 he co-founded Coachlight Resources Ltd., a company listed on the
Alberta Stock Exchange which was merged with Danoil Energy (later renamed
Acclaim Energy Trust) in 1998; in 1997 he co-founded Sheer Energy Inc., the
predecessor company of Cygam Energy Inc. Mr. Sodero graduated from the
University of Turin, Italy, with a Doctorate in Geological Sciences (Honours)
in 1967.
Company Profile:
Cygam
is a Calgary based exploration company with producing oil and gas properties
in Canada and extensive international exploration concessions. The main
focus of the Corporation is the acquisition, exploration and development of
international oil and gas permits, primarily in Italy, Tunisia and the
Mediterranean basin. Cygam currently holds various interests in five
exploratory concessions in Italy and four exploratory concessions in Tunisia
encompassing approximately 4 million gross acres (approximately 2.7 million
net acres).
CEOCFO: Mr. Sodero, what is the vision
for Cygam Energy?
Mr. Sodero:
“Cygam is a company structured to conduct international exploration; we are
focusing right now on two countries around the Mediterranean Basin. One is
Italy and the other one is Tunisia, in North Africa. We have a total of nine
exploration permits divided between the two countries and we operate eight
of the nine projects, which means that we generated the prospects in-house
and applied for the permits. Our intent is to get partners to participate
with us in the drilling of these prospects on a promoted basis. We have very
large holdings in the two countries as we control about four million gross
acres, which is a large amount of acreage for a junior exploration company.
On a net acreage basis, we control about 2.3 million acres. We have five
prospects in Italy and four in Tunisia, and I would say that, out of the
nine prospects, five or six can be considered as “high impact.”
CEOCFO:
Why are you in those two countries?
Mr. Sodero:
“Most people do not realize that Italy is actually the third largest oil and
natural gas producer in the European Common Market, behind Norway and the
UK. Italy’s current production is approximately 300,000 barrels of oil
equivalent per day. In fact, in the whole of Europe, the largest onshore oil
discovery in the last fifteen years was made in southern Italy. The field is
called Monte Alpi and has about 6 billion barrels of oil in place. That was
one good reason to look at Italy. Italy also offers one of the lowest oil
royalty structures in the world. Tunisia is a country located between
Algeria and Libya which are both rich in crude oil and natural gas; it is a
relatively small country which has been somewhat overlooked by the major
international players but we feel it offers excellent exploration
opportunities. We have an excellent relationship with Tunisian authorities
through one of our wholly owned subsidiaries, Rigo Oil Company Limited. We
also think that the oil royalty structure there is substantially better than
in Algeria and Libya.”
CEOCFO:
Are the governments friendly?
Mr. Sodero:
“Yes, the Italian government is very much pro-industry. Italy is a net
importer of oil and natural gas and therefore the government facilitates
exploration in the country. Tunisia is in the same situation. Of all the
North African countries, I would say that Tunisia is probably the best. It
is a very friendly country and we have an excellent relationship with both
State Oil Company (ETAP) and the Department of Energy. Tunisia is very much
pro-western. Just to make a comparison, before I got involved with Cygam I
spent quite a few years on a project in Iran and I have found that dealing
with the Tunisian authorities is substantially better than operating in
Iran. Iran has a tremendous oil and natural gas exploration potential, but
working in Tunisia is much easier.”
CEOCFO:
Is the infrastructure in place in both counties?
Mr. Sodero:
“Yes, and actually in Tunisia, where we operate three very large permits, we
are extremely well positioned in respect to proximity to large diameter oil
and natural gas pipelines. We will be drilling one high impact well in
Tunisia in early 2008 and we will be within a few kilometers from gas and
oil pipelines which then connect into large diameter crude oil and gas
pipelines coming from the giant El Borma field in southern Tunisia. In
Italy, there is a very extensive natural gas pipeline system, and for oil it
is the same.”
CEOCFO:
How are you able to acquire so much property?
Mr. Sodero:
“In both Italy and Tunisia, any company can apply for an exploration permit
after assessing all the available geological and geophysical data. In both
countries, you do not have to pay a signature bonus, as you would have to do
in Libya, Algeria or Egypt. You just have to submit an exploration program,
which usually consists of seismic review, acquisition of new seismic data,
either 2-D or 3-D, and drilling of one exploratory well.
Now, let me give you some background information on Cygam as this will
explain our initial acreage holdings in Italy and Tunisia. Cygam was formed
through the amalgamation of an existing public company listed on the TSX
Venture Exchange, called Sheer Energy Inc. (“Sheer”), and two private
companies. In 2002, after several years of negotiations, Sheer had signed an
agreement with the National Iranian Oil Company (NIOC) to redevelop a giant
oil field called Masjed-I-Suleyman (MIS) in Iran. However, by 2004, the
company decided to get out of Iran and sold the MIS project to the Chinese
National Petroleum Company. After the sale of the MIS project and the
distribution of proceeds to the shareholders, Sheer commenced negotiations
with two private companies, Rigo Oil Company Limited (“Rigo”) and Vega Oil
S.p.A. (“Vega”) which had some exploration permits in Italy and Tunisia. On
October 12, 2005, the merger of the three companies was completed and the
resulting company was named Cygam Energy Inc. Since the merger, we have
acquired additional permits, both in Italy and Tunisia.”
CEOCFO:
Are you looking to acquire more?
Mr. Sodero:
“Yes we are. We have a pending application for another permit in Italy. We
are also looking at other areas.”
CEOCFO:
How are you funded?
Mr. Sodero:
“At the time of the merger between Sheer and the two private companies, the
president of the two private companies, a gentleman by the name of Fabrizio
Rigo put some of his own money into the company (5 million dollars) in
addition to the exploration permits. He also put into Cygam approximately
200,000 shares of a public Canadian company, called Peyto Energy, which had
been converted into a royalty trust. These shares were worth approximately
Cdn $6 million. At the time of the merger, we also did a non-brokered
private placement and a brokered private placement, which collectively
raised another $ 5.6 million before expenses. In addition to that, in May of
2007 we raised about $10 million gross through a company called Tristone
Capital. Presently we are well funded for our exploration projects and in
the next eighteen months we are going to participate in the drilling of
three or four wells in Tunisia and Italy.”
CEOCFO:
Do you have some producing wells in Canada as well?
Mr. Sodero:
“We do have some Canadian production, which belonged to Sheer. This
production gives us cash flow in the order of $35 thousand a month
approximately, depending on the price of gas and it is all non-operated. We
intend to keep these producing wells because the income will offset some of
our G&A costs. We also still have the Peyto Energy Trust units I was
referring to before. They generate approximately $28 thousand a month in
dividend distributions. Revenues from the Canadian properties, the dividends
and interest on the funds at hand pay for more than half of our G&A. We have
an office in Calgary but we realized that to operate in foreign countries we
would also need an office in those countries. Therefore, we have fully
operational offices in Rome and in Tunis.”
CEOCFO:
Is it difficult or easy to find people to do the work?
Mr. Sodero:
“You need to do lots of preparatory work especially for drilling operations.
In Tunisia, there is a shortage of drilling rigs and a shortage of service
companies. This year we had a commitment to commence drilling one well
before the end of July and we started looking for a drilling rig almost one
year ago. In Tunisia especially, not only do you need to have a drilling rig
committed, you also need to have casing and the wellhead on location before
you start drilling because if you make a discovery and you don’t have all
the necessary completion equipment, you would be in big trouble. It takes
about a year to get these supplies and as long as you know the exploration’s
timeframe, you just have to do your homework and get ready. In Italy
acquiring casing and drilling equipment is easier, but you still have to do
all the preparatory work before you commence drilling operations.”
CEOCFO:
Well it sounds like Cygam has done that!
Mr. Sodero:
“Yes.”
CEOCFO:
What are your programs for the balance of
2007 and for 2008?
Mr. Sodero:
Before the end of the year, we
will be participating in the drilling of one development well in the South
Edson gas field in western Canada. We may also drill a second development
well in the same field early in 2008.
In Tunisia, we
are planning to participate in the drilling of an exploratory well on a
large structure in the Sud Remada block as soon a Canadian drilling rig
becomes available, very likely in February 2008. This will be followed by
another exploratory well on the Bazma permit, which will target Triassic
production similar to the offsetting Tarfa and Baguel fields. For this well,
we plan to use either the Canadian rig, after completion of drilling
operations on the Sud Remada block, or a Tunisian rig. We also have plans to
drill another exploratory well on the Sud Tozeur block after completion of
seismic interpretation currently underway. The three Tunisian wells will all
be “high impact” wells for Cygam. For the Bazma and Sud Tozeur prospects,
which we operate, we have partners that have agreed to participate with us
on a promoted basis. We are also planning to conduct additional geophysical
survey, especially on the Jorf permit, to outline additional drilling
targets.
In Italy, we will continue to conduct geophysical interpretation on all the
five permits we operate and we are planning 2D and possibly 3D surveys on
the two offshore permits. On one of the onshore permits (Montalbano) we have
a commitment to drill one exploratory well prior to October 2008.
You can see that
we are going to be quite busy in the next 14 to 18 months!
Should some of your readers wish to learn more about our prospects, they can
access our website (www.cygamenergyinc.com) for a more detailed
description.”
CEOCFO:
Why should potential investors be interested in Cygam and how do you stand
out from the crowd?
Mr. Sodero:
“What differentiates Cygam from other junior companies, especially juniors
that decide to conduct international exploration, is that we have a very
large number of prospects. Even though these are all exploratory prospects,
we have a good balance between low risk and high risk/high reward with the
potential for substantial discoveries. I would say that five or six of these
prospects could have the potential of discovering a field in the order of
one billion barrels. It would be very difficult to find a field like that
onshore North America. I was in London with our CFO in April and May (2007),
when we were visiting potential investors to raise $10 million for the
company and the comments that we received were “yes, you are different from
other companies because you have several prospects.” If a company just has
one prospect and they drill a dry hole, then it is game over. Here we have a
situation where we have nine prospects at the present time and we plan to
have more in the future, and that is what makes us different.”
CEOCFO:
What should people remember most about Cygam?
Mr. Sodero: “What people should
remember is the fact that we have a very large acreage position for the size
of the company. In addition, they should remember that five or six of the
projects have very high potential, in the order of one billion barrels of
oil in place. Also important is that we are operating in two countries that
have an excellent oil royalty structure so that, if we are successful, the
percentage of oil revenue earned will be much bigger than, say, in Libya.
Another key factor to remember is that we have been very successful in
obtaining permits and partners who will pay a premium to participate in our
permits. For instance, we will be drilling a well on a permit we operate in
Tunisia in early 2008 and we already have four potential partners that
collectively will pay 60% of seismic and well cost to earn 40%. Therefore
Cygam will pay for 40% of seismic and drilling costs but will retain a 60%
interest in the prospect.”
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