Paul Ebdale, CEO and founder of Mitra Energy Inc. (
TSXV:MTE,
Forum), is a happy man.
His company is a pure play Southeast Asian E&P company that landed on the Venture Exchange in April of this year, and while the oil and gas business has been hard work globally over the last twelve months, Ebdale believes that the Asian gas scene has vast untapped potential.
We spoke to him about where Mitra excels, and the opportunity Mitra management believe most of us have missed.
Can you give a bit of background to Mitra?
Mitra was formed in 2005 to exploit the fact that there were a limited number of E&P players dedicated to this region. I managed Exploration and Appraisal for Eastern Hemisphere for Hess Corporation, based out of Kuala Lumpur, Malaysia. Within Hess, we had built a valuable business in the region, but as the company re-focussed towards North America, we stepped out and formed Mitra as we could see space for an expert team located in the region that could move nimbly and beat the mid and large caps to the prime opportunities. We went on to build a significant platform and are backed by great institutional shareholders like Ontario Teachers and Westface Capital. Our business model has been validated by partnerships with TOTAL, ExxonMobil, BHP Billiton, Talisman, KUFPEC, GS Energy and many others. Exploration successes in Vietnam are now being moved towards production and further higher impact (carried) exploration drilling is in the pipeline. In April 2015 we became public and now trade on TSX-V, from which base we hope to grow significantly.
Your stated business goal is to “Build an Asian Gas Champion”. Please explain?
The energy markets in SE Asia are heavily reliant on gas and this will continue to be the case as regional economies expand. Supply significantly lags demand and this situation is aggravated by continued strong GDP growth. Fortunately, the geology of SE Asia is dominated by gas. Moreover, host governments are increasingly inclined towards gas as a cleaner fuel for their economies. Accordingly, the fiscal terms under most Production Sharing Contracts give favourable treatment to gas and, importantly, gas prices have generally become a lot more robust in the last few years. For all of these reasons, we see Asian gas as an excellent business proposition. Hence we do aspire to be an Asian Gas Champion and deliver gas to our host countries – through successful exploration, appraisal, development and production.
Within that context, what are Mitra's core strategies?
We are very much a ‘pure play’ SE Asian E&P company, with a strong belief in the need for indigenous gas to grow the regional economies. We articulate three core strategies. Firstly we will mature the value of the discoveries we have made through to early production; secondly we will continue to be a successful explorer, validated and funded by strong industry partners; and thirdly we will actively pursue opportunities to grow through exploiting the dynamic M&A landscape.
Tell us about the Mitra people.
We have a very capable and tightly knit team of technical and commercial / legal staff that has worked together for a long time, generally from pre-Mitra days. Many of us met in Hess, where I and my team built the SE Asia portfolio that was ultimately sold in 2014. All of the team has extensive industry experience averaging more than 25 years, with Hess but also Conoco, BG, Murphy and others. Our board is equally strong and we’re lucky to have strong supportive shareholders, the two largest of which are Ontario Teachers and Westface Capital.
How should we define or describe Mitra – as an aspiring offshore producer and intrepid explorer?
We are both. The discoveries we have made in Vietnam will be important contributor in meeting that countries energy requirements. They are in shallow water, contain high quality gases in excellent reservoirs and can be developed at manageable cost. So we are on a clearly defined production pathway. As for exploration, we have successfully found most of our resources via the drill-bit. Our philosophy in exploration is all about managing risk. We de-risk via tools such as broadband seismic, through having some of the best G&G staff and through industry farmouts. The last point is important – validation by the industry of our exploration prospects through farmouts reduces our capital exposure significantly. By the same token, we manage our obligations such that if we are unable to farmout a prospect, we will not drill it. This strategy has paid off, and to date we have secured 10 farmouts, to ExxonMobil, TOTAL, BHP Billiton, Talisman and others, mitigating significant capital spend.
What sets Mitra apart from its peers, and which companies do you consider to be your peers?
Mitra is an ancient word of Sanskrit origin that signifies "friend" or “alliance”. We chose the name in recognition of the fact that success in the oil and gas business cannot be achieved in isolation, but rather requires a partnership with host countries, industry peers, staff, investors and all other stakeholders. This is particularly true in Asia, where we rely on classic values of trust, partnership and delivery through hard work. We have had a very strong presence in the region for many years. We understand the geology, the commercial overprint and have long and strong relationships with peers and the host governments we partner with.
In terms of peers, we feel we are a unique investment proposition as a ‘pure play’ Asian player with few real peers. The focus on gas markets along with genuine technical and commercial Asian expertise is unique to Mitra. Companies such as Salamander and Coastal Energy have been bought up. New entities are emerging (Asian conglomerates, Private Equity vehicles etc.), but have different models and different ownership structures that preclude investment by institutions and others interested in this space.
One thing that is noticeable is that Mitra operates most of its wells. Why is that?
Although we are a small company, or maybe because we are a small company, we have been able to drill wells at significantly lower costs than our peers. To date we have drilled 19 wells, 11 operated. In all of the operated wells, we have significantly outperformed industry cost benchmarks. We have not compromised our HSE standards however, and I’m extremely proud to say that in 10 years and 2.5 million man hours of operated activities, Mitra has not had a single Lost Time Incident.
How many years will it take to generate first production?
We have built a significant position in the Malay basin within Vietnam, with three gas discoveries. We plan to have two of these in production in 2018. These lie close to existing pipeline infrastructure with spare capacity and we are about to submit development plans for government approval to do. The gas will be sold domestically in Vietnam to power stations. The country is already short of supply by around 300 mmscfd and that number is expected to rise to around 1.5 bcf/d within a decade. This means we see strong government support for the development of our gas fields.
But aren’t gas prices in Vietnam amongst the lowest in the region?
I’m glad that you asked this question. There is a huge misconception around gas pricing in Vietnam. It is true that associated gas prices from oil production has traditionally been low, but even this is changing. However, for non-associated gas, such as the Mitra fields, Vietnam prices are in line with the rest of the region (i.e. typically $7-9 per mmbtu) and are tending to move upwards, reflective of the strong domestic demand situation. In the Malay-Tho Chu Basin where we have made our discoveries, we anticipate gas prices that make development of these fields a robust investment proposition that will enable us to expedite delivery of gas to Vietnam. Couple this with some of the more attractive fiscal terms in the region and this produces attractive, valuable netbacks.
Where are your main areas of exploration focus?
We have one of the largest Prospective Resource portfolios in the region. We look to fund drilling of exploration through targeted farmouts, something we have been very successful at previously, with 10 farmouts already under our belt. We see this as using industry capital rather than investor capital for wildcat drilling. Of particular interest, we will be drilling a very high impact well with TOTAL in the Philippines, probably in late 2016. TOTAL will carry Mitra through this ultra-deepwater well, targeting a feature known as Halcon. We estimate gross recoverable prospective resources for this well of 6.7 TCF and 170 mmbls in the mid case, with a 12 TCF upside case, and Mitra holds 25%. The Halcon prospect lies near our two existing discoveries (2.5 TCF Gross 3C) in a setting analogous to recent giant discoveries in East Africa. This will be a well that the industry will be watching closely.
We’re also excited about the potential in Indonesia. For example, our Bone PSC, offshore South Sulawesi, has scores of prospective reefs along trend with onshore productive gas fields and adjacent to the Sengkang LNG project currently under construction.
FULL DISCLOSURE: Mitra Energy is a Stockhouse Publishing client.