Wed, 10 Dec 2008|
Automatically Generated Transcript (may not be 100% accurate)
Thank you. The first thing I'd like to do if I may is introduced. The folks who came with me these -- Corbett is here from trans energy -- -- -- of our finance and accounting group. And Dan Stewart is here -- is the lead geologist for republic of energy you know. -- -- -- little better as I belong here. You. Some of you may have listened to several of these presentations -- Looking for a way to differentiate. Trans energy from. Other companies that you have listened to. The best way that I can do that is by telling you that -- A very very small company. And we're probably the smallest company. Presenting here at this forum. But. From a technological. Standpoint. We're not small at all we feel like we're right up there with the big boys -- ahead of the big boys in terms of our technological capabilities. And republic. Even though we are as small as real. I get to talk about. Some things that are near and dear to me of course talking about trans energy. That's near and dear to but I also get to talk about West Virginia. And the Marcellus Shale. West Virginia. Is shaped like -- -- that got smashed on the highway by a semi truck. And when I'm in Texas. I like to tell people what our former governor always told people and that is that. If you stepped on West Virginia and planned it out it would be larger than Texas. I'm not too sure about that true true. We took a very very tiny public company. That was doing shallow drilling development. Was not profitable. And starting in 2006. We managed a metamorphosis of some. And that metamorphosis has led us to where we are today. We have approximately 300 -- 30000 acres. -- potential Marcellus Shale reserves. And we continue to grow. After putting together a team. In 2000. And six. Cleaning up the balance sheet we started our growth process. We were at that point in time strictly a shallow oil and gas developer are our deepest wells were. 3504000. Feet there's a series of sand stones. In northern. West Virginia that we were developing. And toward the end of 2006. Is the Marcellus as people began to talk about look at the Marcellus. We started -- consider ourselves. Both -- shell of developer and Marcellus developer. -- being at around 7000 feet in our neck of the woods by the end of 2007. We were we had decided to emphasize development of the Marcellus Shale. He emphasized the -- At this point in our evolution we consider us consider ourselves to be strictly. Marcellus developer. We'll still do some very shallow. Drilling. In order to hold some acreage. But aside from that our capital plan for the next year is almost totally -- to go. We also in 20062007. Decided to emphasize building acreage we went from about 5000 acres at the beginning of 20062. -- Current position of about 30000 acres. And we will continue. To aggressively add acreage. The apple -- -- region has us. A long history of this is that we like to say this is the the place that oil and gas started in America and Pennsylvania and West Virginia argue back and forth. As to where exactly that first. Well was drilled. But the history of the -- -- region is shallow development. Almost. Until a couple of years ago almost all the wells where 5000 feet and less low risk development very long lives. Wells very long -- reserves. And we developed ourselves into becoming a very small share of the supply market. For the United States but I think that's something that could. Change dramatically in the years ahead. Many of you are probably familiar with this picture it's. It's the latest depiction of where. The end of -- and shale reserves are thought to be. Develop all the develop global petroleum reserves are thought to be an -- after. Over the last two years as we as the operators have done more and more drilling we've begun to delineate better delineate where the Marcellus is. It stretches all the way from central New York down through West Virginia. And in so doing it's probably the largest. Of these -- shale reached resource plays that we have in the country. We've also determined that as expected there are some areas that are better than others in terms of the economics involved for various reasons. And we're delighted -- trans energy to have found out over the last couple years that were probably in. One of the best places in the -- -- -- Marcellus play if not perhaps the best places and that is. The northern most part of West Virginia. And that's the case for a number of reasons because. The because of the resources there. And also because of favorable drilling and production conditions. And you all probably are already aware that. -- -- region is good for production because it's so close to the to the northeast heating market. This is what 30000. Acres of Marcellus acreage can mean. Using assumptions that we've learned thus far over the last couple years of development. Under an assumption that we. Develop those 30000 acres of all vertical wells. We'll probably do so using a minimum a minimum forty Acre spacing. Doing that we'd have 750 places out there to go and -- well. The magic of a resource. Place such as Marcellus Shale is that. We firmly believe that every one of those 750. Places is going to be successful Marcellus well production. That results. At twelve and a half percent royalty. In the figures that you're looking at it in in terms of net potential value. And earnings per share we've got currently a little little better than ten million shares. So we get poll. 64 to a modern twentieth 150. Million dollars through the balance sheet over the period of time it takes to develop just that 30000 acres. And of course reverend stop at 3000 make that we still have an aggressive development. Leasing program in place but it would be an option available to us at this point to just develop that -- They actually got -- that leasing. Effort in place to to make sure to assure the long term viability of the company. What -- the risks involved well there they are the risks that you're familiar with that. Each of us -- and the geological -- operations risk. Pipeline capacity issues. And and of course the market. And -- address each one of those as we go here. We spent a lot of time. In our industry. Looking at the different -- -- -- The difference shale plays. In the country. And debating. Which is more attractive which is less attractive and for what reasons the Marcellus as time goes on the Marcellus. Is. Looking more and more like perhaps the most prolific -- most attractive of all of all the resource shale plays in the country. And as I said before sum of the parts of the Marcellus. Are proving themselves to be better than others. And the apple action region in general is a good place today. When you're as small as we are and you shift from shallow drilling. And development to Marcellus program and those Marcellus wells put out. Initially. Million cubic feet today as opposed to drilling wells that without a hundred -- today. It dramatically impacts. Your numbers. Are -- here our reserve report currently shows a 140. -- But only eight of them. Our Marcellus -- The rest. Are the result of our -- development that we've done over the last several years. And as we looked at before. There are potentially 750. Places we can put vertical. Marcellus wells. So in my mind. -- 750 -- minimum their own at 30000 acres. Every time we put down Marcellus well and that virgin territory if you will in in which we have. Shallow -- but we don't have Marcellus because we're creating. One well for vertical well that's about -- BCF. And potentially for. For. I'm sorry one proved producing. And for. Proved producing reserves BC and four -- around. Our development including our Marcellus development I considered to be. Low risk development. We know the area. And we are steadily increasing our gathering system as part of the capital program as we go. There's a balance between. Finishing out the gathering systems which are typically eight inch and ten inch. Pipeline systems and drilling future wells and we keep that in balance so that we don't end up with any. Inventoried and completed Marcellus wells. That we can't -- in line. Very soon after completion. And we have what I consider to be be. A solid well thought out hedging. Policy. We did some hedges during the last year and we look brilliant for doing them at this point in time because the market has softened so. But we did put them on as a matter of policy. And it's our policy to have. Somewhere between a half and two thirds of our future production. -- we use all sorts of tools in order to get there including. Fixing prices. With our market gas marketing companies -- purchase our gas for as much yes. Three and a half years into the future. -- -- briefed by this live but it just basically shows you that the Marcellus is at about 7000 feet. Down to 7500 feet in our area and we're drilling pass some of the horizons that formerly. -- the where are targets. In the region and potentially those would represent. Uphold reserves that we could book and reserves that we could complete later on. I don't know how later on depending on how long live those. Marcellus reserves -- As I mentioned the mark the the -- -- is a great guest market. To produce and market gas. We sell our guests at the interstate connections. And we -- on average about a thirty cent basis positive basis to -- in addition of that you -- that we produces. Typically from 11112100. And -- content. So the conversion factor from from -- -- to -- -- one point 11 point two. -- wells listed on this -- only -- as I mentioned are Marcelus we've built two vertical marks analysis today. We -- we've drilled and completed two vertical Marcellus -- today. We have two more that we've drilled and are. About to complete and will begin we've actually have begun drilling. Our first. Horizontal Marcellus well which we have planned to complete in early January. 2009. Capital plan includes. For vertical and for horizontal and good Marcellus wells and could potentially include. A few more than that. We just filed our third quarter report. And as I said -- early when your small. And you start on. Marcellus development. It can have some a dramatic effects overlooking it. Some pretty large numbers in terms of percentage increase over past performance. That's that's an actual picture of one of our. One of our fractional one -- two Marcellus well. -- West Virginia looks like. Comparing the third quarter results 2008 to third quarter of 2007. Dramatic increase small numbers dramatic increase -- our heads above water. And we're beginning now to generate. Our own free capital flow cash flow to two join him. Two supplement our own capital. Expenditure plan. In addition to some additional borrowing that we'll do during 2009 and generating some of the free cash for ourselves. We intend to do some. Some equity offerings to increase the number shares we have outstanding. Right now we've got. About four million shares the ten. Ten point four million in that that we can consider to float. And considered to be -- healthy thing to put more fears about their will get that done. If we can during 2000. Now that's quite a hockey stick. Obviously. What we're starting small. And we fully intend. To to accomplish this. This is our production growth given the Marcellus wells that we have plan given to that we already. Already practice to that -- about to crack the. Horizontal wells that we intend to real doing during -- nine and we intend to. Somewhere. On the order of double the capital expenditure plan future years ago. If we don't do this. At least on that 30000 acres that we have under our control. As stewards of that acreage. Then we shouldn't be in business we should just sellout to to Chesapeake or two. -- -- -- -- But worship we're we're shooting. In all critical ways to go ahead and follow through on this plan. And the resulting revenue. From that increase production. Around the sometime during 2010. We can. She at all complex that we had in terms of our size. And look to go on a major. Share exchange at that point in time which we intend to do. A look at our reserve report which we did mid year. All Schlumberger is the are the folks who do this for. About two PC. Of those reserves. PDPs is Marcellus. About six BCF of those BBC's. Are. That means that from a Marcellus Shale standpoint. 30000 acres we've got about -- -- 9700. Acres. Free running room out there on which. Schlumberger didn't give us any credit. Four proved reserve. There's very little difference between us in the big guys that I keep all the big guys -- talking about Chesapeake and and ranging and the other companies that also operated in our area. There's there's very little difference between us and those big guys in terms of finding and development costs. But our overhead is miniscule by camcorders we've got 25 people right now and. We are very conservative in terms of of our compensation. You can see we're working ourselves down to. To achieving three and a quarter or so in terms of offer in -- -- So theoretically we could the market could go south considerably from word is and our development -- local arm ourselves would still be profitable. So this is. There's kind of a snapshot of the metamorphosis that I made reference to. I first started talking. Look back to what we were in 2007. -- we are today in what we plan to be in 2010. So as I mentioned we we intend to be on. The major exchange. Production is significantly increased increased we'll have somewhere on the order of twenty or thirty. Marcellus wells by that time. And -- we'll continue to aggressively add acreage. A 100000 acres is is an estimate. To goal. We have water 2000 acres per month through our blocking tackling. Leasing that we do we intend to do some deals during that period of time to add 101000 -- thousand. Acre blocks but those blocks will be near our current area of operations because. We like to we like to do it that way and build out our our gathering system as we go. As we do that we'll probably go from. Somewhere from point five people to about 35 people and home probably nine out of ten of those people will be. Folks out in the field taking care of the well this is what the company organization. Chart looks like it's very simple your -- you're looking at almost every -- except for the the production support group down there's where the where about twelve people -- Our reliance on our partnership with republic energy. Allows us to. Continue to operate. Without adding any of the very expensive technical staff and I think maybe I was remiss in not really describing to you what their relationship is. With them republic energy. -- Stewart is from Republicans -- And our company formed a joint venture and the Marcellus development that we do in Wetzel county. Is done. Under that 5050. Joint venture. And republic energy as some -- you are already aware as twenty plus years experience. In the Barnett shale. So when we decided that we're gonna make the leap from the shallow drilling through the Marcellus drilling. Rather than go through the learning curve that we saw some other companies. In the apple action region going through we decided to. Be successful from the get go which we have been through our partnership. Which Republicans. There are some bios in the in the packets. -- Roll -- them except to say that we we didn't we weren't able to include our drilling so superintendent Jim helmet. Who's got thirty plus. Years' experience as it in in drilling and he's critical part of our team so in conclusion. Trans energy is. Small it's tiny by comparison with most of the companies that have that have been. Up -- speaking as part of this forum but it's an emerging player. Were very glad to be expanding the way we are. Even during the current downturn if you want to call it that we're taking an aggressive stance and we think these the temporary downturn. Present some opportunities for us to get out there be a little more aggressive in terms of looking for acquisitions especially in acreage. We're very glad to have found ourselves in a exciting Marcellus Shale play. We're very focused on that play at this point. We have been leveraging our partnership with republic. And we'll continue to do that and probably expanded outside of the the operations. In which that -- has been operating. We control our destiny by moving our gas through our own gathering systems into the interstate pipelines we intended to continue with that policy. Setting achievable. Goals and then hitting. Now were going to be in the cotton -- room I understand and Lisa and Dan will be with me so we can we can address. Technical questions that you have about the any of the shale plays especially the Marcellus Shale. -- can address our our quarterly report that we've recently put out better for you. And we look forward to to talking with you there. Thank you.