Condor Petroleum Inc.
(TSX: CPI)
CEO: Donald Streu
INTERVIEW TRANSCRIPTS:
Juan Costello: Good day from Wall Street. This is Juan Costello, senior analyst with The Wall Street Analyzer. Joining us today is Don Streu, the CEO of Condor Petroleum. The company trades on the Toronto Stock Exchange ticker symbol CPI. Thanks for joining us today, Don.
Don Streu: Yeah, I appreciate it. Thanks for the opportunity, Juan.
Juan Costello: Certainly, good to have you on. Our last interview was a couple of years back. So for some of our listeners that are new to this story, can you give us a history and overview?
Don Streu: Yeah. Well, the company’s initial focus has been in Kazakhstan until recently, literally last month, when we acquired a property in Northwest Turkey, about 30 kilometers from Greece. Within Kazakhstan, so far, we made three oil discoveries in the very prolific Pre-Caspian basin. Two of those oil discoveries are coming into commercial production this year. We’ve also discovered three gas fields in a different field in Kazakhstan. We sold that in 2014 for $88 million U.S. Our near-term focus right now is the Turkish acquisition that we just completed, the proven gas reserves and we expect to be producing 10 to 15 million a day by mid-2017. And I guess in a few minutes we will talk a little bit about the importance of that. I guess, as an overall view of Condor, for those of your listeners and supporters there – that are understanding the North American gold sector, the founders of Condor are also the founders of a Canadian gold company called Osisko Mining and the follow-up Osisko Gold Royalties. Osisko built the largest Canadian operated gold mine. It started up in 2011, since it’s been sold, but obviously that entrepreneurship of those guys is very much inbred in Condor as a couple of the Osisko board members are founders and continue to be board members on Condor. It’s also worth noting that despite the difficult times and all the [rough] patches going through right now, Condor will capitalize with over $40 million in cash and we have no debts so long as we execute our business plan going forward.
Juan Costello: Can you bring us up to speed on that recent Marsa Energy acquisition?
Don Streu: Yeah, there are a number of highlights there. Probably the biggest one is the fact that it exposes Condor to the very strong Turkish gas prices and associated netbacks. The average gas price in Turkey last year was between $9 and $10 U.S. in MCF. So given the favorable gas pricing in addition to the tax and royalty system, we’re seeing peers right now making about $34, $35 BOE netback’s on the production that they’re doing and so it’s very, very intriguing. I think the second highlight is we’ve got a real clear pathway to near term positive cash flow with this discovery that we’re monetizing in Turkey. We’ve done extensive front-end engineering work already and expect to be producing 10 million a day by mid-2017. And assuming the gas price stays in the $9 to $10 in MCF range in Turkey, which we’re not expecting to change, it will generate some very attractive cash flows in the near-term. We’ve also, through the Turkish acquisition, we’ve more than doubled our proven reserves on our balance sheet right now and so obviously the company going forward as in a very strong position.
Juan Costello: So what are the key trends that you’re focusing on right now in the sector and how are you positioning the company to capitalize?
Don Streu: Well, due to the fact that gold and oil prices have remained depressed much longer than most of us anticipated, many companies are now being forced to sell their assets, or face insolvency and so Condor is looking at this as an advantage to turn this into a growth opportunity. And, so, we’re continuing to aggressively evaluate and look for other acquisition opportunities, similar to what we’ve just done in Turkey.
Juan Costello: So what are some of the factors that make the company unique from some of the other players in the sector?
Don Streu: Well, a few things come to mind. Probably, first and foremost, is the people, the management and technical staff are very well versed in operating internationally, having over 250 years of combined oil and gas experience. The management team has worked together in other places; West Africa, North Africa, South Africa, Eastern Europe, Central Asia and even Southeast Asia. So we’re truly a very internationally focused company. I guess the second point, which relates to the first, is the continuity of the management group. The senior management team has been together since we started Condor back in 2008, and that’s something we generally don’t see in juniors. I think another factor that really sets us apart right now, of course, is the company’s financial planning and accountability with shareholders. We still have over $40 million Canadian in cash and no debt and this clearly sets us apart from most of our peers in the sector.
Juan Costello: So, what are some of the key goals and milestones that you’re hoping to accomplish over the course of the next 6 to 12 months?
Don Streu: Well this quarter we will be initiating a six oil drilling campaign in Turkey, two exploration wells and four development wells. And, so, we’ll start to see some news flow from that. Within the next year, we expect the facilities in Turkey the $10 to $15 million a day processing facilities, pipelines, et cetera, we’ll have that about 80% to 90% completed construction-wise and be commissioning next summer. We’re also commencing with commercial oil production in Kazakhstan this summer and, so that’s going to provide the company with positive cash flows on a go-forward basis. And in addition, we’re drilling an additional horizontal well in Kazakhstan and expect to exit this year at 800 to 900 barrels a day from the Kazakh property. We’re also expecting to complete another acquisition or so within the next 12 months.
Juan Costello: And perhaps you can talk a little bit about your background and experience, Don, and the management team for some of our listeners that didn’t catch the last interview.
Don Streu: Sure, as I pointed out the management team has been, together, very internationally focused. I’ve been with Condor now eight years. And prior to that, I was with Chevron for 22 years. I lived and worked in Angola, Nigeria, and Indonesia with my family and so I’ve been exposed to some interesting environments. Our COO and our VP operations also worked for Chevron and Texaco for many years. They worked with me in Nigeria and then I also worked in Kazakhstan and Turkmenistan beforehand. Our managing director currently overseeing the Kazakh operations and other Canadian operations, he’s been in Kazakhstan for over 22 years, so a very well diverse team that’s been together now for coming on eight years.
Juan Costello: And what are some of the key drivers that you wish perhaps investors better understood or better had a grasp on about your company or sector?
Don Streu: Well the company continues to evolve and it may not be that all the shareholders are aware of some of the recent events. With Condor’s recent acquisition in Turkey and the corresponding exposure to the strong Turkish gas demand and pricing, we’re clearly on a defined and achievable growth trajectory. Our oil company may be small in terms of market capitalization, we believe that Condor has the three key elements needed for a successful, sustainable future, and that’s what sets us apart. We’ve got access to capital, and that’s reflected in our strong balance sheet and having no debt. We’ve got world-class assets both in Turkey and in Kazakhstan and a strong leadership team that really understands working in the international space and how to grow a business successfully.
Juan Costello: Certainly, so once again, joining us today is Don Streu the CEO of Condor Petroleum Incorporated, which trades on the Toronto Stock Exchange, ticker symbol CPI. And before we conclude, Don, to recap some of your key points, why do you believe investors should consider the company as a good investment opportunity of today?
Don Streu: Well, the company offers a number of near-term material catalysts that we believe will continue to enhance our value going forward. Now we’re drilling an exploration well very soon, it’s about a mile and a half to the north of the existing 20 BCF discovery. We’ve got a number of development wells and the current proven reserves we have identified and with the independent reserves we’ve always had, we have a good chance of increasing, starting commercial production in Kazakhstan this summer. That will be a strong thing. And then, of course, mid-next year, bringing on the gas out of Turkey and taking advantage of the very high gas prices.
Juan Costello: Well, we certainly look forward to continuing to track the company’s growth and report on your upcoming progress. And we’d like to thank you for taking this time to join us today, Don, and update our investor audience. It was great to have you on again.
Don Streu: Yeah, thanks again for the opportunity, Juan. Take care.
