Cover Story
CEOCFO
Interview Index
CEOCFO Current
Issue
Future Features
Analyst Interviews
Corporate
Financials
Archived Interviews
About CEOCFOinterviews.com
Contact
& Ordering |
Long-term
return to shareholders sets St. Mary Land & Exploration Company apart from the
competition
Energy
Oil & Gas Operations
(SM - NYSE)
St. Mary Land & Exploration Company
Mr. Mark A. Hellerstein
Chairman, President & CEO
Interview conducted by:
Lynn Fosse
Senior Editor
CEOCFOinterviews.com
July 2003
St. Mary Land & Exploration Company (NYSE: SM),
founded in 1908 and incorporated in Delaware in 1915 is an independent energy company
engaged in the exploration, development, acquisition and production of natural gas and
crude oil. St. Mary operations are focused in the following five core operating areas in
the United States: the Mid-Continent region in Oklahoma and northern Texas; the ArkLaTex
region that spans northern Louisiana and portions of Arkansas, Mississippi and eastern
Texas; the onshore Gulf Coast and offshore Gulf of Mexico; the Rocky Mountain region
consisting of the Williston Basin in eastern Montana and western North Dakota and the
Powder River, Green River and Wind River Basins in Wyoming; and the Permian Basin in
eastern New Mexico and western Texas.
As of December 31, 2002, St. Mary had estimated proved reserves of approximately 36.1
MMBbls of oil and 274.2 Bcf of natural gas, or a total of 490.9 BCFE, 88% of which were
proved developed and 56% of which were natural gas, with a PV-10 value of $824.8 million.
For the year ended December 31, 2002, the Company produced 55.1 BCFE representing
average daily production of 150.8 MMCFE per day. Mr. Mark A.
Hellerstein, chairman, president and CEO of St. Mary Land & Exploration
discusses the company’s financial strength, “We have
always tried to maintain one of the stronger balance sheets relative to our peers; at the
last quarter’s end, we had about a 33% debt/capital ratio. We put together a new bank
syndicate early this year with a calculated borrowing base at $275 million. We only have
$40 million outstanding on our facility. We have lots of room within our existing
borrowing capacity to make acquisitions if they present themselves. We completed the
Flying J acquisition as well as the FORT Chadbourne acquisition earlier this year. We have
already completed about $78 million of our $90 million budget. Our budget is not a
limit but more of a target. We are opportunistic and with a strong balance sheet, we
could do more if the opportunity presents itself.” Asked about the
geographic reach of St. Mary, Mr. Hellerstein tells us,
“We have been opportunistic about getting into different areas;
we would like to be in areas where we feel we could ultimately be a dominant player and be
one of the best participants there. We tend to select the secondary basins where we can
dominate and as I have mentioned before, be a low cost operator. For example, in the
Williston basin, which is part of the Rockies, we are now one of the top five operators in
that area, and as a result have a competitive advantage when we are looking at
acquisitions and opportunities.” Technology plays a large role in St.
Mary’s success, “Technologies come into play in all areas
of the business; from the geo-science, where the technology is used to improve success
rate and reserve targets for example. 3-D seismic has been very important over the last
ten-plus years. We have used 3-D seismic very effectively in the Williston Basin where we
think that we have a proprietary ability to process and interpret the 3-D. We are the only
ones there that have been able to map porosity development in the Red River formation, and
as a result, have had an 89% success rate since 1991. We also use 3-D seismic for
everything we do in the Gulf Coast and for part of what we do in the Arklatex area, and a
small part of what we do in Oklahoma. Technology comes through in every phase of the
business. New technologies and refinements, allow us to complete wells better than we did
before through stimulation techniques such as hydraulic fracture that allow us to not only
accelerate the recovery of reserves and produce the reserves more quickly, but also
recover the reserves more thoroughly throughout the life of the property. We have done
this very effectively in Oklahoma and it has been a key to our major success at the
Northeast Mayfield area. You also see technology in the way the administrative side
works, and in terms of the systems that you use for accounting and land, and gas
marketing. You really see technology influencing the business from the very beginning to
the end,” explains Mr. Hellerstein. For
potential investors, Mr. Hellerstein offers, “It is very difficult to predict exactly where that next success is
going to come from. However, having very talented people in the field, with decentralized
decision making, permitting them to look for opportunities backed by a strong balance
sheet, plus a disciplined approach to economics, allows each region to hold its own
year-after-year and periodically to achieve a major success. ”
St. Mary focuses resources in selected domestic basins where they believe that their
expertise in geology, geophysics and drilling and completion techniques provides them with
competitive advantages. The Company has assembled a balanced program of
low-to-medium-risk development and exploitation projects to provide the foundation for
steady growth. In addition, St. Mary has a portfolio of higher-potential exploration
projects and non-conventional gas plays in the Rocky Mountain region that they believe
could significantly increase their reserves and production.
From January 1, 2000, through December 31, 2002, St. Mary participated in the drilling or
recompletion of 623 gross wells with an average success rate of 82%. During that
same period the Company added estimated proved reserves of 347 BCFE at an average finding
cost of $1.44 per MCFE. St. Mary’s average annual production replacement was
214% during this three-year period, and production has grown at an average rate of 21% per
year over the same time period. As of December 31, 2002, the Company had an acreage
position of 1,145,507 gross (542,736 net) acres of which 504,873 gross (325,290 net) acres
were undeveloped. For 2003, St. Mary has budgeted capital expenditures of $135
million for ongoing development, exploitation and exploration programs in our core
operating areas and $90 million for acquisitions of oil and gas properties.
Instant Access:
To find out more about:
St.
Mary Land & Exploration Company (SM)
you may order the complete text of our
interview. To view a copy of this highly informative interview, left click here: ViewSM
disclaimer
|
