From Pescod's Late EditionThe whole issue today was on Winstar. Can't post the associated images.
AN INTERVIEW WITH BRAD GIBLIN
CFO WITH WINSTAR RESOURCES
(As of December 2, 2010)
We are here today with Brad Giblin, Chief Financial Officer
of Winstar Resources a company I suspect you are going to
start hearing more about in the coming months. Giblin and
his team, have managed to put together a company that is
currently doing almost 2000 barrels a day, despite the fact
they have only issued 35 million shares and the company
has no debt at all.
David Pescod: Brad, that is quite an accomplishment for a
little company, but no one has heard of you!
Brad Giblin: Winstar is a tightly held public company operating
internationally in relatively smaller markets that don’t
generate a great deal of attention. Tunisia, Hungary and
Romania – nothing considered a major oil and gas interest
in the past – Tunisia particularly has experienced some
rapid growth the last five years and that’s particularly been
the southern region of Tunisia where the Silurian play has
been. Winstar has a very large base of long-term shareholders.
Two groups along with the management and the
board, account for almost 60% of the issued and outstanding
common shares. Our ability to fund growth and
exploration through cash flows has allowed us to grow
without dilution to existing shareholders. The consequence
of this being that Winstar does not have a great
deal of liquidity in the market.
DP: I suspect the reason a lot of people might be starting
to follow your story shortly is because of the Silurian Acacus.
It’s a type of formation that has been very prolific in
your area near Tunisia and drilling by Eni and Pioneer has
been heading your way. What is the Silurian Acacus?
BG: The Silurian Acacus is a formation name. The age of
the formation is Silurian, and the name of the formation in
both Libya and Tunisia is the Acacus. The Acacus is made
up of a number of thin sands and shales, which give the
potential for numerous reservoir zones. It’s been very prolific
for the nearby operators ENI, Pioneer and OMV as
well.
DP: To get seismic work done these days takes a long
time. You’ve recently been examining some new 3-D
work that’s taken a year to give you a better idea of what
you might have. What is that seismic telling you?
BG: It is the seismic that’s giving us the ability to explore
for this target, the structure is one of the principal risks
that we have identified and the seismic is the tool to help
mitigate this risk. This 3-D seismic that was shot in 2008
interpreted during 2009 has defined structures which we
believe are analogous to other discoveries in southern
Tunisia in both aerial extent and sub-surface closure.
DP: Now these are fairly expensive wells you are going
to be looking at when you tackle the Silurian, about $12
million to drill and $3 million to test. That’s a big chunk
of dough for a small company and I understand you expect
total depth by December 20th roughly. Is that correct?
BG: Winstar is a small company that’s seeing a big company
high impact play with enormous risk and reward for
Winstar, but our strong G&G and operational teams,
along with prudent cash management throughout the last
while has allowed us to drill these wells with confidence.
We’ve informed the market that the well had spud early
November, we have targeted 60 days to drill and complete,
so the 20th is not a set date, but we are certainly on
track to what we had expected.
DP: The big debate seems to be that Warren Verbonac
and some others are suggesting you have a chance of
hitting 80% success on your 11 wells. That sounds like a
nearly audacious statement in the exploration game. Is
it?
BG: It does seem like an incredibly high chance of success
for this exploration game, but it is what we see in
southern Tunisia from other operators. Once the structure
is identified on 3-D seismic, the chance of success is
found to be this high. OMV just finished a successful 9-
well drilling campaign in the south block adjacent to ours
with 100% success rate. The Adam concession has
drilled 11 fields with no failures to date. The only failures
that our geological team is aware of are those that were
drilled as structures identified off 2-D seismic where no
valid closure could actually be confirmed. We can’t say
we have an 80% chance of success, but with confidence
we can say others around us have been very successful
at this play.
DP: The significance of course here is that if you start hitting wells that can do three to six thousand barrels a day,
your production could be going through the roof.
BG: Other operators indicate test rates of approximately 6000 barrels a day. The average initial production rates
are closer to 3000 barrels a day. The difference between these two rates is primarily related to multi-level sands
that are not all produced at the same time. If we were to drill a crude oil-bearing well, we can expect to use existing
infrastructure and facilities to get this production on in about three to six months. If the well is predominately gas
condensate, then expected production would not commence until 2013 or 2014 when the major ”Gas du Sud” pipeline
project is completed. This is a project led by ETAP, the National Oil Company and three other major companies
in the Silurian play in southern Tunisia. The project is estimated to come on line in 2013 or 2014 and bring another
additional 350 mmcf/d of currently stranded gas to market.
DP: One would assume you are drilling your best targets first. Is that right?
BG: Winstar has identified 11 leads. We have ranked them. This one is identified as one of the larger ones and
also one of the most northerly locations which we believe gives us the highest possibility of encountering predominately
oil sands.
DP: You are working in Tunisia, a country that’s been known to be quite favorable to the oil and gas business.
Anything a person should know about working there?
BG: Tunisia is a great place for a little company; it has very good fiscal regimes, a good pool of human resources,
and a stable government that’s very pro-international investment. There are many good plays which are just too
small for the super-majors and Tunisia is a very safe country.
DP: For work for the year ahead for yourselves, how many of these Silurians do you hope to drill?
BG: Our 2011 budget hasn’t been finalized at this point in time. Once we have identified what we have from this
first well, we will have a much better understanding of what we are able to take on and move to secure the equipment
at that point.
DP: We like to end these interviews with our favorite question, where do you see oil prices for the next year or two
and is there a junior oil out there you would recommend other than your own?
BG: I defer to the experts in commodity prices, but of the scenarios that I have heard, the one the makes the most
sense to me is where prices will continue to bounce around in a relatively tight corridor, maybe $75 to $85. I would
be comfortable in that range for the rest of the year. I reiterate my thoughts on Parex Resources (PXT) from our last
discussion. It had a very strong year so far; it recently announced 2011 guidance that the market seems to be very
excited about. A proven management team and a land positioning in Colombia – one of the more exciting regions
in the world at this time and one that has a lot of qualities that we believe are similar to what we just discussed
about in Tunisia.
DP: Thank you very much Brad!
(We should point out that Brad’s pick of PXT was made some time ago and has moved impressively since he selected
it).
~~~~~~~~~~~~~