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Aspen
Exploration's strategy of drilling only quality gas prospects using the best
geological and geophysical consultants and 3-D seismic in conjunction with
well data for evaluation has helped them build a strong revenue base
Energy
Oil/Gas Exploration
(ASPN-OTC: BB)
Aspen Exploration Corporation
Mailing
Address
PO Box 22530
Bakersfield, CA 93390-2530
1601 New Stine Road-suite205
Bakersfield, CA. 93309
Phone: 661-831-4669
Bob Cohan
President and
Chief Executive Officer
Interview conducted by:
Lynn Fosse,
Senior Editor
CEOCFOinterviews.com
February 24, 2005
Bob Cohan
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 (AAPG).
Company Profile:
ASPEN EXPLORATION CORPORATION (OTC: BB–ASPN), 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 production
purchases.
Aspen currently has working interests in approximately 62 producing gas
wells (47 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 47 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."
CEOCFOinterviews: What was your vision a year
ago, and how has that played out?
Mr. Cohan: "The vision for 2004 was to
continually increase Aspen’s 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 at a twenty-five
year high of $3.00, a five-fold increase in 10 months. Aspen’s net daily
production has increased from a very minimal volume to over 2,000 MCFPD (two
thousand cubic feet of natural gas per day) with Aspen’s gross operated
production in excess of 10,000 MCFPD. The most recent 10-Q for the six-month
period ending 12/31/04 showed record results. For this period, we had
revenues of approximately $2 million, which is a 140% increase over the same
prior year period."
CEOCFOinterviews: How 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 this 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 five-month period ending March 31st 2005, we hedged about
40% of our gas at a price of $7.75 per MMBtu.”
CEOCFOinterviews: 87.5% is an extremely high
success rate!
Mr. Cohan: "It is incredibly high! I would say
the industry average is probably 25% - 30%."
CEOCFOinterviews: What 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."
CEOCFOinterviews: What 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."
CEOCFOinterviews: Are 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, April through December 2005,
we will probably drill another ten. We only have two full-time employees;
everything else is accomplished with consultants and service companies.”
CEOCFOinterviews: Will you explain the benefits
of working with the outside consultants as opposed to your own people?
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 Aspen’s 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."
CEOCFOinterviews: You 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 don’t 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."
CEOCFOinterviews: It 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
Aspen’s 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."
CEOCFOinterviews: What 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 revenues.”
CEOCFOinterviews: You mentioned earlier taking
advantage of the latest technologies in terms of deciding what wells you
might want; what about on the production end?
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 details."
CEOCFOinterviews: What 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.
disclaimers
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