Energy
Oil and Gas Exploration
(ASPN-OTC:BB)
Aspen Exploration Corporation
Mailing Address
PO Box 22530
Bakersfield, CA 93390-2530
1601 New Stine Road-Suite205
Bakersfield, CA. 93309
Phone: 661-831-4669
Bob Cohan
President and
Chief Executive Officer
Interview conducted by:
Lynn Fosse, Senior Editor
May 19, 2005
Bob Cohan
President and Chief Executive Officer
Mr. Cohan obtained a Bachelor of Science degree in Geology from the State University College
at Oneonta, NY in 1979. He has approximately 25 years experience in oil and gas
exploration, development, and evaluation including employment with Western Geophysical, H.
K. van Poollen & Assoc., Inc., Universal Oil & Gas, and Tri-Valley Oil & Gas
Co. Mr. Cohan has been employed by Aspen Exploration Corporation for a total of 13 years
and effective May 1, 2003, was appointed President and CEO of Aspen. He is a member of the
Society of Petroleum Engineers (SPE) and the American Association of Petroleum Geologists
(AAPG).
Company Profile:
ASPEN EXPLORATION CORPORATION (OTC: BBASPN), operating primarily in northern California
is engaged in the business of acquiring and developing interests in domestic oil and gas
properties. The Company has a talented staff that allows Aspen to keep overhead costs low
and yet participate in numerous exploration and development drilling deals as well as
production purchases.
Aspen currently has working interests in approximately 61 producing gas wells (46 operated
by Aspen), mostly high BTU natural gas, and has a very active drilling program planned for
2005. In the past 4 years Aspen has successfully completed 21 gas wells out of 24
attempts, which is an 87.5% success ratio, a record virtually unheard of in the oil and
gas exploration business. 3-D seismic data and qualified interpreters are essential for
this exploration. All of the selected drill sites for 2005 have been identified through
the use of 3-D seismic techniques, which have demonstrated great improvement in the
percentages of successful oil and gas discoveries. New and additional drilling locations
for gas wells are constantly sought, based on solid geology in conjunction with 3-D
seismic information. The Sacramento Valley of California, where current activities are
focused, include extensive, nationally important oil and gas production and refining
facilities, thereby allowing quick hook-up and production of gas when a discovery is made.
The Aspen staff and consultants have also found representatives of the State of California
to be very cooperative and it is not difficult to obtain permits for new exploratory wells
or to expand existing production.
CEOCFOinterviews: Mr. Cohan, will you give us a little background on Aspen, please?
Mr. Cohan: "Aspen was
founded in February of 1980, about 25 years ago. In April of 1995, which was approximately
ten years ago, I opened the California office. We are currently engaged in natural gas
exploration in the Sacramento Valley of northern California; operating 46 gas wells and
have other non-operated interests in fifteen additional wells. We are traded under the
symbol ASPN.OB and have offices in Bakersfield, California and Denver, Colorado."
CEOCFOinterviews: What was your
vision a year ago, and how has that played out?
Mr. Cohan: "The vision for 2004 was to continually increase Aspens
gas production, revenues, and share price, in addition to drilling quality gas prospects.
We have done that quite nicely. If you look at an Aspen stock price-chart going back to
April of 2004, we traded at 62 cents per share and today we are currently trading at $2.75 per share, a four-fold increase in 13
months. Aspens net daily production has increased from a very minimal volume to over
1700 MCFPD (two thousand cubic feet of natural gas per day) with Aspens gross
operated production in excess of 8000 MCFPD. The most recent 10-Q for the nine-month
period ended 3/31/05 showed record results. For this period, we had revenues of
approximately $3.138 million, an increase of 149%, as compared to the year earlier period,
and net after tax profit of $1.386 million, an increase of 530% from the year earlier
period. Aspen reported earnings of 21 cents
per diluted share compared with earnings of 4 cents per diluted share for the prior year 9
month period Net income before interest,
depletion, depreciation and taxes was $2.299 million, or 35 cents per share, compared to
$609,000, or 10cents per share for the prior 9 month period.
CEOCFOinterviews: How have you
done this and how do you continue to grow?
Mr. Cohan: "A careful
selection of drilling prospects. For every well that we drill, we probably evaluate twenty
to twenty-five prospects. We use the best geological and geophysical consultants, 3-D
seismic data in addition to well data in identifying our prospects. We drilled ten gas
wells last year out of 10 attempts for a 100% success ratio and I think that demonstrates
our careful drill site selection. For the last four years, we drilled twenty-one gas wells
out of twenty-four attempts, which is an 87.5% success rate. Natural gas prices have
helped us considerably; they are currently in excess of $6.00 per MMBtu. For the six-month
period ended September 30, 2005, we hedged about 40% of our gas at a price of $6.67 per
MMBtu.
CEOCFOinterviews: 87.5% is an
extremely high success rate!
Mr. Cohan: "It is
incredibly high! I would say the industry average is probably 25% - 30%."
CEOCFOinterviews: What is the
secret to your success?
Mr. Cohan: "I do not know
if there are any secrets. We do not drill many super wildcats, so that helps minimize the
risk. I think it just goes back to good basic business. There is no magic formula other
than the things I have previously said such as using quality scientific consultants and
looking at many prospects. The other thing about Aspen is that we will not drill a well
just because we have the money to do so and we can make some money on a prospect fee. Many
companies out there will do that; we will not."
CEOCFOinterviews: What is it
about that particular geographic area which makes it a good place to be?
Mr. Cohan: "What we like
about the Sacramento Valley is that it is a large basin which encompasses about ten
counties in northern California There are multiple producing horizons. Our shallowest well
is 2,000 feet and our deepest well is about 11,500 feet. If the well depth is 7,000 feet
and shallower, the gas really images nicely on 3-D seismic so you can see the AVO
anomalies or bright spots; things of that nature. We know all of the service companies and
other operators that work in this region, and Aspen has established a very good
reputation. We pretty much have found a home up there in the last ten years. There are
many places to drill with multiple horizons."
CEOCFOinterviews: Are there a
set number of properties you would like to acquire?
Mr. Cohan: "It all depends
on the amount of prospects that are available to us at any given time. We have quite a few
in inventory right now. Until last year, we averaged about five wells a year. Last year we
drilled ten wells and this season, May through December 2005, we will probably drill
another ten. We only have two full-time employees; everything else is accomplished with
consultants and service companies.
CEOCFOinterviews: Will you
explain the benefits of working with the outside consultants as opposed to your own
people?
Mr. Cohan: "Working with
outside consultants keeps our overhead costs much lower than if we had a staff of ten or
fifteen people. Many companies with Aspens level of activity have maybe ten or
twelve full-time employees and we have two. The cost of the consultant or service company
is typically part of the well cost, which is shared by Aspen and all the partners in the
various wells."
CEOCFOinterviews: You mentioned
hedging before, is that typical for you?
Mr. Cohan: "We have hedged
four or five times over the last year-and-a-half. We had not hedged before that. I will
get a call from some of our gas purchasers when the market is in a very volatile daily
situation. The traders tend to overreact so they ask if I want to lock in a price for a
certain period-of-time, for a certain volume. I
can pick the gas volume and the time period. The four or five times that I have done that,
I have always exceeded what the actual market has done by one to two dollars per MMBtu. I
dont call the gas purchaser. I wait until there is a bit of a volatile situation in
the market, they will call me, and then I hedge."
CEOCFOinterviews: It seems that
the experience and the steadiness of Aspen is a very important feature for people looking
at the company!
Mr. Cohan: "That is so
true! Most companies Aspens size just have a dream or an idea and no cash flow.
Maybe they are not incredibly honest. Aspen is known to be very solid and very honest. You
get a high level of confidence when you deal with us either in buying our stock or
investing in our wells. Another reason we get to see a lot of drilling prospects is that
the geologists and geophysicists that bring us those prospects know that if Aspen takes
those prospects, they will get paid a prospect fee, the well will be drilled in a timely
manner and if it is successful, they will get their overriding royalty each month. Aspen
is a closer. If you look at our balance sheet, there is essentially no debt, good cash
flow, and good management. It is a very good company to invest in and I think people tend
to sense that."
CEOCFOinterviews: What should
people look for going forward?
Mr. Cohan: "I think
continued growth and success, strong natural gas prices, which coupled with the increased
gas production, will show increased revenues.
CEOCFOinterviews: You mentioned earlier taking advantage of the latest technologies
in terms of deciding what wells you might want; what about on the production end?
Mr. Cohan: "On the
production end, one advantage Aspen has, even though we operate quite a few wells for a
small company, is that I know what every well is doing every morning. I get an email from
the field pumpers, so I can see a production problem as soon as it arises and rectify that
problem. For example, if I see increased water production in a well, I will look at it
that morning and we can choke back or cut back production on the well, therefore possibly
minimizing water production and prolonging the life of the well. We use the best available
technology out there to operate the wells. It is more about caring about the gas wells and
paying attention to the details."
CEOCFOinterviews: What are the
challenges that you see and how are you prepared for potential challenges?
Mr. Cohan: "Our main
challenge is to keep a steady stream of drilling prospects in our inventory. We have been
able to do that thus far and we have more prospects now than at any time in the past. That
is the biggest challenge, to continue to get quality prospects to drill."
CEOCFOinterviews: In closing, what would you like readers to remember about Aspen?
Mr. Cohan: "In closing, I
think Aspen is a wonderful investment opportunity with an honest, solid reputation, good
existing gas properties and cash flow, excellent future drilling prospects, little debt
and a very high gas price environment. Looking forward I see continued growth."
This article contains information that is forward-looking in that it describes
events and conditions which Aspen Exploration Corporation (Aspen) reasonably
expects to occur in the future. Expectations
for the future performance of the business of Aspen are dependent upon a number of
factors, and there can be no assurance that Aspen will achieve the results as contemplated
herein and there can be no assurance that Aspen will be able to conduct its operations or
production from its properties will continue as contemplated herein. Certain statements contained in this report using
the terms may, expects to, and other terms denoting future
possibilities, are forward-looking statements. The
accuracy of these statements cannot be guaranteed as they are subject to a variety of
risks which are beyond the Companys ability to predict or control and which may
cause actual results to differ materially from the projections or estimates contained
herein. These risks include, but are not
limited to: the possibility that the described operations (including any proposed
exploration or development drilling) will not be completed on economic terms, if at all,
or the estimates of reserves may not be accurate. The
exploration for, and development and production of, oil and gas are an enterprises
attendant with high risk, including the risk of fluctuating prices for oil and natural
gas, imports of petroleum products from other countries, the risks of not encountering
adequate resources despite expending large sums of money, and the risk that test results
and reserve estimates may not be accurate, notwithstanding appropriate precautions. Many of these risks are described herein and in Aspens
annual report on Form 10-KSB, and it is important that each person reviewing this report
understand the significant risks attendant to the operations of Aspen. Aspen disclaims any obligation to update any
forward-looking statement made herein.
disclaimers
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