Blacksteel Energy Inc. (BEY-TSXV)
July 9, 2010 Issue
The Most Powerful Name In Corporate News and Information
With Four Pockets Of Assets In Alberta Ranging From Conventional Natural Gas To Conventional Oil, Unconventional Oil And Oil Sands, Blacksteel Energy Inc. Is Well Positioned With Diverse Assets Suited For The Short-Term, Medium, And Long-Term Growth Of The Company
Blacksteel is a junior oil and gas company. Its
principal business activity is the exploration, exploitation, development
and production of petroleum and natural gas resources in Alberta. The
Company has a 100% working interest in 22 sections of Crown oil sands leases
in the Peace River area of northern Alberta, a working interest in a natural
gas producing property in the Grassland area of Alberta, has farmed in on an
oil exploration play in central Alberta and has a 100% working interest in a
4 section P&NG lease in the Plains Region of Alberta.
Jacques Soroka, P.Eng., MBA
Jacques Soroka is currently President of Blacksteel Energy Inc. He brings nearly 20 years of oil and gas business, project management and plant design experience. He positioned, structured, implemented and managed a new business unit for a mid-sized company. He has also been part of core management teams executing large multi-billion dollar projects and has developed strategic plans for improved business planning and execution. He is a Professional Engineer, has a Bachelor of Applied Science in Chemical Engineering and a Master of Business Administration degree.
Interview conducted by: Lynn Fosse, Senior Editor, CEOCFOinterviews.com, Published – July 9, 2010
Mr. Soroka: The main focus of Blacksteel Energy is to grow our diverse assets in Western Canada. We have assets in the Peace River area, in the Grassland area of Alberta, central Alberta and in southern Alberta along the Montana border. We are targeting what is being dubbed the Alberta Bakken, and we are very excited about those assets as well. There is a producing gas well and interest in that area. We are about to be drilling another well here in the next couple of weeks. On top of all of that, we have partnered in on a well in central Alberta.
CEOCFO: What is special about your various projects, and why did you choose them?
Mr. Soroka: First are our oil sand assets in the Peace River area that we have had since 2007, where we purchased seventeen sections of carbonate based heavy oil as well as five sections of the more traditional type oil sands. These two assets, we view as longer-term assets. As most people know, oil sands assets are capital-intensive. That said, we are bullish on these as there are over 1 billion barrels of oil in place ascribed to these assets, so this is a huge resource base for us. We currently are producing natural gas in the Grassland area of Alberta with a partner. The well is a sweet, shallow gas well, so production costs are relatively low. In fact, we still make money even when gas prices are at $3.50 per thousand cubic feet. Furthermore, we are well positioned to capitalize on recovering gas prices as we have identified a few prospects in our area of mutual interest with our partner.
In central Alberta we have an oil prospect that we are looking at that we
are about to be drilling here in the next couple of weeks with another
partner. We have done a lot of geological and geophysical work to define
what we view as the prospectivity of the play. The costs are relatively low
to drill and complete the well due to its proximity to infrastructure. If
the concept proves up with this first well, we have opportunities for a few
follow-on wells, which add even more upside to this play.
In April, we acquired Petroleum and Natural Gas
rights on four sections of land in a play dubbed the Alberta Bakken. In the
last 8 months, there has been drilling activity south of us in Montana
targeting the Bakken formation. Two of the wells drilled are merely two and
a half miles southeast and southwest of our lands, respectively. We believe
we are in the heart of the play on the Canadian side. Land prices in this
area have more than doubled since we bought our land in the area; that is
helping confirm the play, a play we consider as a short to medium-term
opportunity. The plan for us is to strategically allocate some resources to
developing that area.
We have four pockets of assets in Alberta and they range from conventional natural gas, conventional oil, unconventional oil, and oil sands. We have a very diverse asset base that is well suited for short-term, medium, and long term growth of our company.
CEOCFO: Was diversity planned or was it more opportunistic?
Mr. Soroka: It was very much opportunistic. Back in 2008, we all know what happened with respect to the credit markets, and oil prices collapsing from their highs of about $140 to the lows of $32 dollars a barrel. Capital was very difficult to come by, so as a result the appetite for oil sands projects suffered. We were strategic in that we decided to reallocate our funds to more ‘conventional’ type assets. When we started, the company was an oil sands play. Management and the Board recognized that we needed to do something different, so we allocated some of our costs to more of the conventional side of the business. Gas prices were high at the time, so we partnered and drilled a gas well and entered into this agreement with a third party. We have continued along those lines. It is not that we have forgotten about our oil sands by any means, but we recognize that oil sands, by their very nature, are capital intensive and require a longer time horizon. Therefore, we have pulled back and we are very carefully allocating resources for those assets. We have a great balance sheet, no debt; we are one of the few smaller companies that enjoys this status. We have what we believe are very good short, medium, and long-term assets that we are in a position to exploit.
CEOCFO: Are you looking to pick up additional properties?
Mr. Soroka: We always are looking for properties. The properties in the Del Bonita area, the Alberta Bakken, are going to require exploration and development capital and we would consider further acquisitions in that area if they make strategic sense for us. In the shorter term, we are also looking for some other conventional oil outside of that area. We have to be looking at enhancing our cash flow, so that is going to be our short to medium-term plan.
CEOCFO: Do you prefer to partner on projects, or is it on a case by case basis?
Mr. Soroka: It is on a case by case basis. So far, we have been successful with partnering; that does not preclude us from going it alone if that is what makes the most sense for us.
CEOCFO: What is the financial picture for Blacksteel today?
Mr. Soroka: We have cash in the bank, with no debt. We are not quite cash flow positive yet, but we hope to be there in the next six to twelve months. We are in good shape overall.
CEOCFO: What is your two-minute take on the world energy situation?
Mr. Soroka: I think we are going to see a continued interest in oil. Demand does not seem to be waning very much. With that backdrop, we are going to continue to see prices above $50 or $60 a barrel. At $50 a barrel, there are many profitable conventional oil plays, at least in Western Canada. On the natural gas side, I believe we are going to see depressed prices for at least one more year, but I think longer-term natural gas could very well be a good place to be.
CEOCFO: Why should potential investors pick Blacksteel Energy out of the crowd?
Mr. Soroka: Blacksteel is a nimble company. Because of our financial strength, i.e. no debt, we are able to capitalize on opportunities as they present themselves. We have prospective assets. Our oil sands assets offer investors a longer-term opportunity. We have some producing assets right now. We are participating in a conventional oil short-term cash flow generating opportunity. We are in the center of the Alberta Bakken, which could very well end up being one of the larger oil finds in many years in western Canada. In Blacksteel, investors are essentially purchasing a diverse set of assets that offer plenty of upside over the short, medium and longer term.
CEOCFO: Final thoughts, what should people remember most about Blacksteel Energy?
Blacksteel is a nimble, debt free, diverse energy company with assets that
could prove up over the short, medium and long term time horizons.
Blacksteel is a nimble, debt free, diverse energy company with assets that could prove up over the short, medium and long term time horizons. - Jacques Soroka
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