Advantagewon Oil Corp. (
CSE: C.AOC,
OTC Pink: ANTGF,
Forum) is a Toronto-based oil and gas company with a focus on development opportunities in the State of Texas.
The company has a carefully mapped out strategy aimed at building consistent cash flow from a portfolio of oil prospects located on the LaVernia, Saratoga, and Lema properties.
Advantagewon utilizes specialized expertise to increase oil recovery from 10-15% to up to 75% for each well using up-to-day methods such as frac technology, water flooding and Co2 injection. Once this is achieved, it repeats the process throughout the oil pool to minimize both cost and risk.
The company hopes to achieve a key milestone this year by reaching the cash flow positive stage.
Stockhouse caught up with Advantagewon Chief Executive Officer Paul Haber to get a closer look at what investors can expect from the company now that it has succeeded in growing its land position in Texas.
Advantagewon Oil is an interesting name. Where did it come from?
We choose the name because we believe we have given our investors an…Advantage to Win..
- This is for a number of reasons. In a recent oil price comparison, the West Texas Intermediate oil price was near 40% higher than that of Western Canada Select.
- Drilling costs are approximately half of that for similar depths in Canada.
- Texas is accessible year round and production can commence within days or weeks of drilling.
- We have found under developed oil reservoirs in Texas at depths of less than 2000ft (600m). Texas is predominantly oil prone in areas we have land concentration. Many of the shallow prospects in Canada are heavy oil or gas.
- In summary, there are many advantages for Advantagewon as a small developer and producer in Texas.
The Oil and Gas industry seems to be taking a bit of an upswing with investors this fall, what is the investment case for a company like Advantagewon right now?
Application of current methods and technology and return on investment through risk management. There are the advantages described earlier plus with low drilling cost, a number of wells can be drilled with a relatively low capital expenditure. This provides superior risk management and provides multiple opportunities for success. Another advantage we is that we operate all of our properties, meaning we have control of strategy, methods, costs, timing and priorities. Other companies take minority interests in non-operated properties leaving them with minimal control and subject to follow their operating partners lead.
A few years ago, the catch phrases that a capital markets viewed as essential for a company, including start-ups and small operators to raise money were “horizontal drilling”, “multi-stage fracking” and “resource play”. While these have provided success predominantly for large operators, they are too expensive for the small operator. In many cases well costs will be from one million to ten or more million dollars per well. A company with, for instance, a capital raise of five million dollars might have one or two chances for success. Five million dollars in one of Advantagewon’s Texas shallow sand plays could fund 80-100 wells.
Productivities per well may not compare with that of multimillion dollar horizontal wells, however two $2.5MM wells at 1000 bopd each can be compared with 80 to 100 Texas $50,000 wells at 20 to 25 bopd each. If one of the horizontal wells was a dry hole, for any reason including drilling issues with more the complex horizontal drilling and fracking operation, then development costs per barrel double. The business plan in Texas is to further develop known pools with simple vertical wells and apply enhanced recovery methods. The land can be tested with minimal investment and further development will follow initial success. Horizontal wells can see rapid production declines. Some shallow Texas sands reservoirs produce for decades.
What has moving to the OTC exchange brought to the table?
Moving to the OTC gives Advantagewon a chance to reach a larger investor base and provides us for an opportunity to better use our stock as currency for acquisitions. Many American investors do not have brokerage accounts at large cross boarder firms. Many smaller boutique brokers only trade US listed stocks. By cross listing on the OTC we are better able to take advantage of investor relations activities in the US and hope to see increased trading volume. Also we believe a US stock presence can assist us in using our stock when we want to acquire additional properties in Texas.
You say your major strength is identifying missed opportunities in the oil sector. Can you elaborate on this for investors?
Our strength is a proven track record in executing on this kind of opportunity. We find many don’t do the detailed work required to identify these opportunities. Canadian oil and gas exploration and development is predominantly done by technically trained and experienced individuals working with small to large businesses. Oil and gas (mineral) rights are almost exclusively held by the provinces and in more remote area, the federal government and are independent of the surface land holders. Business is very tightly regulated and surface land owners have little to gain by permitting oil and gas activity. In Texas and the USA in general, surface land owners most often also hold the oil and gas rights, therefore many landowners have wells drilled on their lands.
These are located by closeology (close to the neighbors successful well and to the same depth) or convenience. This leaves room for the technically minded Canadian to bring known methods to bear on established oil pools and find new pools in areas of previous development. A shallow producer may be seen to have additional deeper potential as defined by detail work and application of science. The deeper potential can be tested with the safety of low risk production from the known shallow zone.
Can you give us a bit more colour on the techniques that you are using to increase recoveries from oil wells in Texas?
When we say, we will increase recoveries from oil wells in Texas, we also would say we would increase recoveries from existing oil pools.
Many of the wells operated by families and small operators are drilled and a pump installed and the oil is produced and sold for years from the wells. When the production declines, the wells are shut in, although some are kept on at ½ barrel per day. As oil is produced, reservoir pressure drops and the pressure drop from the pump to the reservoir is too small to move the oil through the pore space in the rock. Many of these wells produce fluid that may be 90% or more water and the water has at times been simply dumped on the surface and at times pumped back down a non-productive well in the area, at times into the same zone and at times into separate zone in the subsurface.
This simple water disposal and does little to increase recoveries. One technique we would use is a designed water flood program. With this method water is re-injected into the reservoir in a number of wells spaced to create a water front that will push the remaining oil towards the producing wells with increased pressure. Other methods used could be injection of carbon dioxide or nitrogen which increases reservoir pressure while combining with the oil flow to enable it to flow through the rock easier.
In the pool case, we may drill infill wells and when applicable, use seismic data to accurately map the subsurface to define the best drilling locations. We have seen cases where oil has been produced for years from a zone at one depth and we see potential above or below that zone. We will re-enter or drill new wells to evaluate other zones. This adds efficiency as with the previous development, much of the required infrastructure to produce is in place and doesn’t require the same level of investment as a completely new pool.
What is your sewing machine approach?
It ties to the concept of a “Resource” play where a company will gather a significant concentrated land inventory, often called running room, drill some wells to prove a reservoir, refine the drilling, completion and production techniques in these wells and then drill out the remainder of the prospective land holdings. This may include multiple rigs drilling in a pattern from one location to the next in rapid succession, similar to a sewing machine.
What are some of the advantages, including pricing, of having operations in Texas?
Canadian oil sells at a deep discount to Texas oil. In September, Western Canada Select was priced 40% lower than West Texas Intermediate. Drilling costs are lower and the land is accessible year round. Landowners often also own the oil rights and are paid by companies for the right to drill on their lands for a period of time and also paid royalties on oil produced and for that reason welcome activity.
Who are the key players on your management team and what do they bring to the table in terms of helping you achieve your strategic goals?
The company is still very small and to limit our day to day G&A expense, staffing has been kept to a minimum, therefore all involved are key players. On the operational side we have Derek Stonehouse who has been a proven oil finder in Canada and the USA. Derek finds opportunity where others don’t. Charles Dove has a background as a geophysicist and ran a successful geophysical company for about 18 years taking care of numerous clients in North America and internationally.
A company where Derek and Charles worked together grew from a start-up with no land or production to 1000 boepd with a reserve value of near $60,000,000 in two years. Charles served as President and COO and Derek was part of the technical team. In Texas we have Nick Uhlig, who handles field operations and handles some land negotiations. He has followed in the footsteps of his father and grandfather who worked in the oil business in our core area for many years. Our Board of Directors in Toronto, all accomplished businessmen are all engaged in the business of the company and offer direction and have been successful in raising capital for the company.
What are some of the key challenges that you face right now? How do you plan to overcome them?
The Texas oil business lacks some of the structure and data availability we have come to expect in Canada. In the Western Provinces, land is surveyed on a one mile by one mile grid and each square mile is further sub-divided into 16 legal sub-divisions. In Texas there are land holdings in any number of configurations without a simple co-ordinate system. In Canada, well and production data is recorded very carefully and following a brief confidentiality period, is available to the industry. In Texas, production data has only been recorded in some detail from 1993 on. .
Much of the drilling in areas we are active is pre 1993 and we have no data on total oil produced for these older wells. Detailed information on wells such as logs, completions and tests, including post 1993 wells is not consistently available or complete. The careful recording and availability of information in Canada allows current work to benefit from past experience. Lacking this detail, a company can find itself duplicating past work and past learning curves. With connections established in our areas and three generations of history with Nick, our operator, we have knowledge and access to data others may not have, plus Derek is pretty good at sourcing any information that can be found. We can be selective in pursuing land where we have adequate information to evaluate potential.
How much oil do you expect to produce this year and next?
The company needs only about 60 bopd to be cash flow positive. We are currently over half way there. In September we frac’d 5 wells and drilled one. These wells are currently recovering frack fluids with some oil and we should have some indication of the rates they will produce at this year. These six operation should take us past the 60 bopd and establish positive cash flow. The conservative goal for 2017 is to be cash flow positive. Once we are there and we can deploy new capital on drilling and property development, we should be able to accelerate growth and be well into the hundreds of barrels of oil per day. With successful purchase of three targeted leases under negotiation in one area, 500 bopd should be achievable next year.
Can you give us a breakdown on where that production will come from?
Our primary land concentration is near San Antonio. In this area we have a number of productive sand reservoirs identified and will be executing on these low cost developments.
You have said that you expect to be cash flow positive by the end of 2017. How will that be accomplished?
We were very active in September with one new drill and 5 existing well completions. These are being brought on to production and will contribute to achieving our positive cash flow goal. We have also purchased some land leases with production which will add to our totals beginning in November.
Does the company have sufficient cash on hand to fund its immediate programs, or does it plan to tap the market for financing?
We have funding for all capital projects planned for this year. Targeted acquisitions and development of these will require additional capital. We are preparing presentation materials to show the business plan and potential. We have identified land which we calculate to have over 75 million barrels of original oil in place. Negotiations for the purchase of these lands is progressing. Oil recoveries to date on these lands using basic primary recovery techniques and limited drilling have totalled only 6% of this oil. Further drilling and secondary recovery methods may increase this to as much as 35% or even higher. A recovery of 35% would add over 20 million barrels, which if we assume $40.00 per barrel netbacks would total $800 million undiscounted value.
Full Disclosure: Advantagewon Oil Corp.
is a paid client of Stockhouse Publishing.