Oil and Gas Exploration
Aspen Exploration Corporation
PO Box 22530
Bakersfield, CA 93390-2530
1601 New Stine Road-Suite205
Bakersfield, CA. 93309
Chief Executive Officer
Interview conducted by:
Lynn Fosse, Senior Editor
May 19, 2005
President and Chief Executive Officer
Mr. Cohan obtained a Bachelor of Science degree in Geology from the State University College
at Oneonta, NY in 1979. He has approximately 25 years experience in oil and gas
exploration, development, and evaluation including employment with Western Geophysical, H.
K. van Poollen & Assoc., Inc., Universal Oil & Gas, and Tri-Valley Oil & Gas
Co. Mr. Cohan has been employed by Aspen Exploration Corporation for a total of 13 years
and effective May 1, 2003, was appointed President and CEO of Aspen. He is a member of the
Society of Petroleum Engineers (SPE) and the American Association of Petroleum Geologists
ASPEN EXPLORATION CORPORATION (OTC: BBASPN), operating primarily in northern California
is engaged in the business of acquiring and developing interests in domestic oil and gas
properties. The Company has a talented staff that allows Aspen to keep overhead costs low
and yet participate in numerous exploration and development drilling deals as well as
Aspen currently has working interests in approximately 61 producing gas wells (46 operated
by Aspen), mostly high BTU natural gas, and has a very active drilling program planned for
2005. In the past 4 years Aspen has successfully completed 21 gas wells out of 24
attempts, which is an 87.5% success ratio, a record virtually unheard of in the oil and
gas exploration business. 3-D seismic data and qualified interpreters are essential for
this exploration. All of the selected drill sites for 2005 have been identified through
the use of 3-D seismic techniques, which have demonstrated great improvement in the
percentages of successful oil and gas discoveries. New and additional drilling locations
for gas wells are constantly sought, based on solid geology in conjunction with 3-D
seismic information. The Sacramento Valley of California, where current activities are
focused, include extensive, nationally important oil and gas production and refining
facilities, thereby allowing quick hook-up and production of gas when a discovery is made.
The Aspen staff and consultants have also found representatives of the State of California
to be very cooperative and it is not difficult to obtain permits for new exploratory wells
or to expand existing production.
CEOCFOinterviews: Mr. Cohan, will you give us a little
background on Aspen, please?
Mr. Cohan: "Aspen was founded in February of 1980, about
25 years ago. In April of 1995, which was approximately ten years ago, I opened the California
office. We are currently engaged in natural gas exploration in the Sacramento Valley of
northern California; operating 46 gas wells and have other non-operated interests in
fifteen additional wells. We are traded under the symbol ASPN.OB and have offices in Bakersfield,
California and Denver, Colorado."
was your vision a year ago, and how has that played out?
Mr. Cohan: "The vision for 2004 was to continually
increase Aspens gas production, revenues, and share price, in addition to drilling
quality gas prospects. We have done that quite nicely. If you look at an Aspen stock
price-chart going back to April of 2004, we traded at 62 cents per share and today we are
currently trading at $2.75 per share, a four-fold increase in 13 months. Aspens
net daily production has increased from a very minimal volume to over 1700 MCFPD (two
thousand cubic feet of natural gas per day) with Aspens gross operated production in
excess of 8000 MCFPD. The most recent 10-Q for the nine-month period ended 3/31/05 showed
record results. For this period, we had revenues of approximately $3.138 million, an
increase of 149%, as compared to the year earlier period, and net after tax profit of
$1.386 million, an increase of 530% from the year earlier period. Aspen reported
earnings of 21 cents per diluted share compared with earnings of 4 cents per diluted share
for the prior year 9 month period Net income before interest, depletion,
depreciation and taxes was $2.299 million, or 35 cents per share, compared to $609,000, or
10cents per share for the prior 9 month period.
have you done this and how do you continue to grow?
Mr. Cohan: "A careful selection of drilling prospects.
For every well that we drill, we probably evaluate twenty to twenty-five prospects. We use
the best geological and geophysical consultants, 3-D seismic data in addition to well data
in identifying our prospects. We drilled ten gas wells last year out of 10 attempts for a
100% success ratio and I think that demonstrates our careful drill site selection. For the
last four years, we drilled twenty-one gas wells out of twenty-four attempts, which is an
87.5% success rate. Natural gas prices have helped us considerably; they are currently in
excess of $6.00 per MMBtu. For the six-month period ended September 30, 2005, we hedged
about 40% of our gas at a price of $6.67 per MMBtu.
is an extremely high success rate!
Mr. Cohan: "It is incredibly high! I would say the
industry average is probably 25% - 30%."
is the secret to your success?
Mr. Cohan: "I do not know if there are any secrets. We
do not drill many super wildcats, so that helps minimize the risk. I think it just goes
back to good basic business. There is no magic formula other than the things I have
previously said such as using quality scientific consultants and looking at many
prospects. The other thing about Aspen is that we will not drill a well just because we
have the money to do so and we can make some money on a prospect fee. Many companies out
there will do that; we will not."
is it about that particular geographic area which makes it a good place to be?
Mr. Cohan: "What we like about the Sacramento Valley is
that it is a large basin which encompasses about ten counties in northern California There
are multiple producing horizons. Our shallowest well is 2,000 feet and our deepest well is
about 11,500 feet. If the well depth is 7,000 feet and shallower, the gas really images
nicely on 3-D seismic so you can see the AVO anomalies or bright spots; things of that
nature. We know all of the service companies and other operators that work in this region,
and Aspen has established a very good reputation. We pretty much have found a home up
there in the last ten years. There are many places to drill with multiple horizons."
there a set number of properties you would like to acquire?
Mr. Cohan: "It all depends on the amount of prospects
that are available to us at any given time. We have quite a few in inventory right now.
Until last year, we averaged about five wells a year. Last year we drilled ten wells and
this season, May through December 2005, we will probably drill another ten. We only have
two full-time employees; everything else is accomplished with consultants and service
you explain the benefits of working with the outside consultants as opposed to your own
Mr. Cohan: "Working with outside consultants keeps our
overhead costs much lower than if we had a staff of ten or fifteen people. Many companies
with Aspens level of activity have maybe ten or twelve full-time employees and we
have two. The cost of the consultant or service company is typically part of the well
cost, which is shared by Aspen and all the partners in the various wells."
mentioned hedging before, is that typical for you?
Mr. Cohan: "We have hedged four or five times over the
last year-and-a-half. We had not hedged before that. I will get a call from some of our
gas purchasers when the market is in a very volatile daily situation. The traders tend to
overreact so they ask if I want to lock in a price for a certain period-of-time, for a
certain volume. I can pick the gas volume and
the time period. The four or five times that I have done that, I have always exceeded what
the actual market has done by one to two dollars per MMBtu. I dont call the gas
purchaser. I wait until there is a bit of a volatile situation in the market, they will
call me, and then I hedge."
seems that the experience and the steadiness of Aspen is a very important feature for
people looking at the company!
Mr. Cohan: "That is so true! Most companies Aspens
size just have a dream or an idea and no cash flow. Maybe they are not incredibly honest. Aspen
is known to be very solid and very honest. You get a high level of confidence when you
deal with us either in buying our stock or investing in our wells. Another reason we get
to see a lot of drilling prospects is that the geologists and geophysicists that bring us
those prospects know that if Aspen takes those prospects, they will get paid a prospect
fee, the well will be drilled in a timely manner and if it is successful, they will get
their overriding royalty each month. Aspen is a closer. If you look at our balance sheet,
there is essentially no debt, good cash flow, and good management. It is a very good
company to invest in and I think people tend to sense that."
should people look for going forward?
Mr. Cohan: "I think continued growth and success, strong
natural gas prices, which coupled with the increased gas production, will show increased
CEOCFOinterviews: You mentioned earlier taking advantage of
the latest technologies in terms of deciding what wells you might want; what about on the
Mr. Cohan: "On the production end, one advantage Aspen
has, even though we operate quite a few wells for a small company, is that I know what
every well is doing every morning. I get an email from the field pumpers, so I can see a
production problem as soon as it arises and rectify that problem. For example, if I see
increased water production in a well, I will look at it that morning and we can choke back
or cut back production on the well, therefore possibly minimizing water production and
prolonging the life of the well. We use the best available technology out there to operate
the wells. It is more about caring about the gas wells and paying attention to the
are the challenges that you see and how are you prepared for potential challenges?
Mr. Cohan: "Our main challenge is to keep a steady
stream of drilling prospects in our inventory. We have been able to do that thus far and
we have more prospects now than at any time in the past. That is the biggest challenge, to
continue to get quality prospects to drill."
CEOCFOinterviews: In closing, what would you like readers to
remember about Aspen?
Mr. Cohan: "In closing, I think Aspen is a wonderful
investment opportunity with an honest, solid reputation, good existing gas properties and
cash flow, excellent future drilling prospects, little debt and a very high gas price
environment. Looking forward I see continued growth."
This article contains information that is forward-looking in that it describes
events and conditions which Aspen Exploration Corporation (Aspen) reasonably
expects to occur in the future. Expectations for the future performance of the
business of Aspen are dependent upon a number of factors, and there can be no assurance
that Aspen will achieve the results as contemplated herein and there can be no assurance
that Aspen will be able to conduct its operations or production from its properties will
continue as contemplated herein. Certain statements contained in this report using
the terms may, expects to, and other terms denoting future
possibilities, are forward-looking statements. The accuracy of these statements
cannot be guaranteed as they are subject to a variety of risks which are beyond the
Companys ability to predict or control and which may cause actual results to differ
materially from the projections or estimates contained herein. These risks include,
but are not limited to: the possibility that the described operations (including any
proposed exploration or development drilling) will not be completed on economic terms, if
at all, or the estimates of reserves may not be accurate. The exploration for, and
development and production of, oil and gas are an enterprises attendant with high risk,
including the risk of fluctuating prices for oil and natural gas, imports of petroleum
products from other countries, the risks of not encountering adequate resources despite
expending large sums of money, and the risk that test results and reserve estimates may
not be accurate, notwithstanding appropriate precautions. Many of these risks are
described herein and in Aspens annual report on Form 10-KSB, and it is important
that each person reviewing this report understand the significant risks attendant to the
operations of Aspen. Aspen disclaims any obligation to update any forward-looking
statement made herein.
Any reproduction or further distribution of this
article without the express written consent of CEOCFOinterviews.com is prohibited.