Tue, 2 Dec 2008|
Automatically Generated Transcript (may not be 100% accurate)
Our last and final was -- -- today -- FX energy. Headquartered in Salt Lake City -- is an independent oil and gas exploration and production company. Joining us today is Thomas -- Good afternoon and thank you for. Sticking around for very last presentation of the day. We're national -- that company symbol -- CNN. Here -- -- in. And about 325 to 350s. Or market cap is closed for 250 million. 200 million that you know about the slide 41 million shares outstanding about 25% institutional interest. And about 7% owned by officers and directors in the first row is Scott Duncan he's our vice president. Investor relations. And secretary. Hopefully. The performance of we have will encourage you to. Look a little bit more deeply -- -- FX energy. Compound annual growth rate -- wizard uses point 6% over the last six years. Peavy came because. Increasing prices has grown at a 58%. Growth rate. We estimate here and proved reserves under the SEC method to be -- 150 million dollars. As used in Europe. Is going to be approximately. 200 million dollars. Our production volumes have also grown at roughly 37%. Compound annual growth rate over the last four years. And revenues about 40%. Are finding costs over this period of averaged. Two dollars and seventeen cents so we've had good success. We're really focused. -- -- structures in our core. Fences concession area in Poland. There we have 80% success ratio have been drilled five -- -- six successful wells. I am going to be making the forward looking statements along cover page. Memorandum that's been passed around -- number of risk factors -- make. What explains our success they're -- several reasons. One is Poland was isolated from the west for fifty years and they had a single company. It was exploring there and didn't have access to -- questions -- We think that Poland is under explored. And has large conventional roosters remained these. It's also supply constrained as as much of weird sorts of different stories than the weather and supply demand. Implications if you're familiar with the US market. The economics are also great because -- Poland. Has been very initiative in -- Attracting direct foreign investment. And therefore it is prepared section terms are very attractive. And -- go through each of these in a little bit more detail. As one looks at this particular slide -- a map of north European Permian Basin. This is a Republicans and desert there was laid down 295. Million years ago in the Permian age. Source from our underlined carbon the first rocks your Coles. And it's sealed by us all so related as all of this area was covered by C news that evaporated. Over time. If you look at the three boxes of the bottom you'll see that total reserves discovered today in the southern North -- have been sixty TC you have. 150 TC. In the Netherlands that includes the -- TC you have -- -- -- largest gas field world. And you look over to Poland you see only five TC. The geology of this -- doesn't stop the border. We thing. There's a tremendous opportunity for. Many more -- users to be hold. Exploring in Poland in the sense is very much like four and then in west Texas. Some fifty years ago. Russia dominates. The gas supply in Europe. Poland imports approximately two thirds of its needs. Some fourteen. Thousand MMC you have today. It's the European Union as the bar chart on the bottom left of this slide shows. Average imports about 50% -- -- so all of Europe is supply constrained. And the photo from the covering economists. Cute and indicates. They're really concerned about that supplied. And hold all of this. It makes for a very attractive price and our -- -- The bottom right you see the gas pipelines and then bush two. -- -- This chart shows a steady increase in gas prices in Poland. Very different picture again then what you see you us. -- Had subsidized prices as old former Soviet Bloc's. -- -- bringing these two a market level and are required to do so as a member of of the year you. The long term growth. Gas consumption in Poland also is very strong. Some 92% of electrical generation Poland is supplied by -- about half black holes a -- night it's. Highly polluted soft cold. And again under European Union regulations. Holes need to begin to eliminate. The problem that's associated with -- -- Coal provides alone over 60% of primary energy and gas is only 13%. Very low compared to most developed countries. I mention the economics of production were very attractive because of fiscal terms. These include a a -- lifting cost because the -- are large with actual rates. But specifically relating to fiscal terms -- -- taxes or are flat at 19% versus 40% here. No royalty is roughly 1% versus approximately 19% here. And and that low low find us so all of this combines to create a margin that's roughly twice of level that the average US and independent receives. -- Six. Compiled by by JPMorgan. The -- showing our price of seven dollars which was price. Existing in. At September 30 since then we've gotten a 11% gas price increase. Effective as November 1 while we've -- US prices decline. Poland is about the size of of New Mexico some 39 million people it's. A wonderful country to to visit -- very friendly to Americans. Poland is one of the US's strongest. Allies. They've had half a dozen elections. Since they -- peaceful revolution. In 1989. And they really believe in and the free market economy and rule of law and keeping an economy. Growing rapidly. Through. Creating. That. Atmosphere and conditions that are conducive to attracting. Direct foreign investment. That's been one of the key drivers for -- We have a very strong team -- a very polish face. Within the country of Poland. Our office. Is in -- so. We have New Jersey -- short. You physicist who got us into Poland initially he is our our exploration manager. He is. Very bright guy who defected in the mid 1970s. Work for gulf war over Kuwait were acquired by Chevron and 89 he went out on zone. And has been working with us in Poland since our inception there. And I think he's one of the most knowledgeable people on all of Poland. In part because under the Soviet system. You as a geologist -- geo physicist didn't talk to and he went down the hall about what was going on hold let -- Holmes Norton west. So we have a very extensive knowledge of Poland. We have an excellent operations staff had advised to be -- our country manager who was head of exploration and production for. Here -- national company. Richard -- is a director in our senior technical adviser. He was. Responsible for rejuvenating the expiration of the southern -- seen in the mid 1980s. Discovered some three major -- aggregated over -- billion barrels of oil and received his commander of British empire award. In the rounds and in 1988. And served as chairman of petroleum engineer's society Great Britain -- -- to society of London. And president of American association of petroleum. Geologists. In Europe so we're parade. Delighted to have that team which is crossed blending. The local expertise in Poland plus the international expertise. From around the world which is really. Combined to give us a very successful results. These have been primarily in our core -- area this map illustrates. In yellow the acreage that we hold. Our fences. Concession areas 850000. Acres this is the key area that were focusing. This is where our growth and reserves and production is occurring. The other blocs. We own a 100% of interest in and working to. -- joint French partners who curious with the initial exploration. Costs in those concession areas. In the fences area we are 49%. When he -- she'd see the national companies the operator. -- 51%. This slide shows are fences concession area. It's roughly forty by sixty miles so it's huge area. We were attracted to this five the -- Bloomfield. Which is in the center of the block. It has. Some 390 BC. You well worth the present value over billion dollars or one found -- today. That attracted us to this particular. Concession area. This field was discovered in the mid 1980s. But -- GC gave up exploring for of Iraq -- -- structural traps. At that time this is the last -- lately pursuit. And they gave up in part because they've had success -- -- -- -- were replay. And -- then seismic technology did not permit them to image the fields. -- deeper -- were roughly 35. Meters here. We are very delighted to come into this concession area and we were promoted them into. We have to pay the first twenty million dollars to earn 49%. Which we completed in 2004. And it is this area where where we've had five six successes. These feels are. Capable. A plateau production of about forty million cubic feet of gas day. There -- producing ten million. At the present time much grows. So. Since our involvement over the last five years we've found five newscast few hundred BC. Gross proved reserves roughly -- 160. BC. Who -- problem. This shows a summary beach of -- wells that I made reference to. -- -- -- -- Well and some 45000. Acres around it. We have only -- 24 and a half percent interest. As we promoted cal energy one of mid America Berkshire Hathaway companies to pay under some -- of this well. For quarter interest. The normal mode is if there -- quarter. We were delighted to have them pay for this world as it's -- world for us some 23 BS reserves has been producing. For the last two and a half years at ten million a day and -- two material balance. Tests that we've made on this world indicate that. It is capable. Achieving that forty BC SP one -- -- -- to have great for me ability and and create porosity. This. Prior slide that I showed just a moment ago was a premier ability. -- -- -- -- -- -- Showing. That -- field and an area where you have over a hundred million dollars hundred million military issues of from the ability to us. -- So this -- -- a key area for us. Our most recent discovery and Roscoe. We have -- approved production rate well gross fifteen million a day. Boasts a -- mission and Roscoe represent. Production rates that are higher than any other wells that produce and whole. Poland had not been exposed to -- -- Pac's and special to the middle -- things you can do it. To have higher production rates and world's -- This summarizes. The the growth rates that I mentioned earlier in our crew. -- reserves. And in our protection. And we think that we world look. C a dramatic increase. In our production. From existing wells. As you look out to 2000. And 2000. This is growing frustrated by -- Mark -- we're of the purple on the bottom is our existing wells. The Roscoe world facility is under construction of that now that should be coming. At the end of the first quarter. And then we have three more wells to hook up which give us. Some twenty million cubic feet -- of net production us. Civil -- in 2010. Just from these wells we should be run -- revenue rate of about fifty million dollars. -- very dramatic. Improvement for us and do. Wonders for our. -- free cash -- Fun day and expanded drilling -- Good purple outline that you see it. Top left of your screen is our first 3-D shoot. We -- probably -- that as a successful well that was our first 3-D well in this area. -- of the wells it drilled. Community. We're really focusing on getting additional production facilities built I mention. -- Leach is under way and should be done by march when we're thinking about getting -- centralized production facility that not only. Hooks up the next three wells but other -- that would be drilling in this particular hurry. The dotted outline of 3-D has been acquired and is in the process. Being interpreted. And that Condit 3-D seismic further to. To this -- -- going down rises. Is under way right now it's about 20% complete -- will be completed this winners so we're we're building a backlog. Potential drilling prospects hopefully as we expand this -- And therefore will be able to increase -- -- momentum. There you go forward to. This is a 3-D. Seismic representation. Map mean control aimed -- -- of graphical map of top of the -- -- structures. The red is a large gas field what we've now identified. -- there are probably should discovery. It shows that this well is -- into our -- before discovery. So this is a long stand to ridge. That. It connects those two ten. -- -- just south structure is currently drilling and that world will be down and in the first. Among through two. 2000 and we also have a well what's really throw this city and this structure we have this math. Is. Very. Deep plummet gene. The steps as you go to the right now on this slide. Need to be pulled him closer for the fall so this well is. It's too far away from the -- -- indicated in the red. Red line. The yellow indicates a couple for the prospects of -- that same sand do ridge was so the city. And two north is a very interest mean -- Everything we've been doing to -- in Poland has been. Convention. We have a large gas tight gas and what he. And our our interest in this. Is is very real because wells have been drilled -- that were. Were were -- -- -- The the well had. Departure. Was drilled in 1984. That's on our concession area. Roughly a hundred meter. And gas column that roughly 3800 meters. And we have a company fortune I believe that's immediately to the north of our concession. That is actively pursuing in this same -- gas -- play. Company's name is a really -- They drove the world called track last year among four or wells. Referred to as a curfew wells were drilled in the seventies and eighties -- role plugged in -- abandoned because they were trying. They've drilled a vertical well there. They could -- it. And tested and were very encouraged by the results. And they've just entering venture partner that they announced in the last few weeks that's -- from them to -- on the world. That they intend to drill here during the first half 2009. That's -- give us some interest in information that we continue to evaluate. The tight gas and play that we have -- It is it is something that could be very very material. In size. We have other high potential expiration. There are summarized as some four point seven million net acres. Subtracting the 850000. Offenses from our core area that's almost four million. -- and before that big new concession areas that we have. We have. Both northwest concession and the Warsaw south concession. Where we have trust new seismic and have some prospects teed up. We were promoting industry. We have been out promoting could now which is -- very deep structure for the very large trip. Structured world and our -- concession. Which we tested recently. Announced the last few weeks we hope to have that. In shape have some specific prospects that to get out of the market. So while we're deploying the major four or fences to conventional oil and gas structural traps. In the right in the -- area. There are other plays. Both within the fences. And outside it. We have. Grundy well and we drilled earlier this year. That confirmed. A series of reefs. That are indicated that blue on the right hand side -- -- it's on your screen. And we build deeper into -- again where we came up with a very long column. And gas. So that it is a play that we're gonna continue to study. And two of south of our acreage. The land indicated by pinch out this is -- -- trapped. -- we're we're continuing to do some work. President mentioned we hope that we will have the northwestern section farm out announced prior to the end of the year. And a world really -- -- -- pitch. Prospect. Possibly -- about march. 2009. This is immediately Norris. Peter GCs. BMV and MLG feels. He's represented some 2525. Million barrels. Oriole and some 500 BC. Gas is discovered these are amongst there there -- two largest feels. And it's an NCAA to replay to so much power that Iran would you play -- -- focusing fences. -- Warsaw south concession. Again almost two million acres we've got a number of prospects that are. And leads that are identified there. Our balance sheet as of September 30. We had some sixteen million in cash. We have a 25 billion dollar revolving bank. Credit facility with the Royal Bank of Scotland. -- and all the credit issues were abounding in months so go world we did draw down the full amount of this -- The cash process revolver. And our discretionary cash flow would give us the funding that we need. To essentially find. A budget similar to what we have this year somewhat larger and that included. Four wells cost of the production facility. And doing both to -- and -- side. -- near term potential is. Roughly 50%. Increase in -- reserves this year 250 million -- can. We have the two worlds -- are drilling now from leeches Alice. And true to city. We are selling essentially. Some -- below or net appraised value. We're gonna have a substantial growth of our revenues as we bring. -- -- worlds of and hooked up the first of which it should become in in the first quarter. So we're we're very excited about where we are in -- when it's taken so called wild two to get this opportunity teed up. To get the right land and have some success so we could build some cash flow and become -- fun. We think they're large resources to be discovered. We think we have a very special position in Poland. We are -- the largest. Foreign land owner the largest producer. We have work card to have a very polish face in the country and to have a close relationship. All the different governments hasn't been in power the year as world is the polish national company. And we think that we're in a supply demand environment that is. Very different from the US and one that's gonna have continuous. Upward pressure. -- gas prices. So I thank you very much for your attention and sticking out the -- this. -- the effects of -- story.