Reabold Resources PLC (LON:RBD) Chief Executive Officer Sachin Oza caught up with DirectorsTalk for an exclusive interview to discuss it’s recent California update.
Q1: I wanted to talk to you about your strategy for California, can you give us a bit of an overview of that?
A1: Yes, certainly and what I’ll do is also tie it into the Reabold Resources strategy more broadly. So, Stephen and myself, my co-Chief Executive Officer, set up the company with a very specific strategy in mind and that strategy was designed to target upstream oil and gas projects with low technical where the capital that the company provided helps unlock the project through near-term drilling and then on success, there is a quick pathway to monetisation soon thereafter.
Very specifically how that fits within California is precisely each of the points we mentioned which is the low technical risk and the fact that the capital we provide leads to near-term activity and we can demonstrable show that has already been the case in California.
The final point on monetisation is that the region allows the assets that we drill and projects that we drill really to be put on production very soon after successful drilling. It’s that putting on production which is the monetisation event for the California assets and the payback starts extremely quick on the capital we provide for near-term drilling.
Q2: Why is California such an attractive area for the company?
A2: Again, for the reasons we discussed, it’s this fact that there’s this quick cycle time to monetisation after you’re able to have successful drilling and the return characteristics as I said are extremely attractive.
There are a couple of other reasons why California is a very attractive region for us, the first point is, and to lay some content and background, we entered the region in July of last year and we’ve managed in that time period to carry out a full well workover programme, drill 2 new wells, one of which is on production and the other one shortly to be on production and we’ve spotted our third well which we hope to hear the results of soon and similarly will also be put into production quite quickly. So, what that’s indicating to you is just a high level of activity that can take place in a very compressed period of time.
The other point, just about California, is it’s got this unique dynamic within North America and the unique dynamic is one where generally because fracking isn’t really allowed over there, you don’t get that intense level of competition from larger oil and gas companies. Really, it gets missed out for conventional oil and gas projects which is what our company is interested in allowing us to enter into these projects at extremely low cost.
Q3: Can you talk us through the importance of the Burnett 2 well that you recently spud at Monroe Swell?
A3: Absolutely, so just again a little bit of background, the activity that we’ve carried out so far to date across our asset package in California has been the well workover programme, the 2 new wells and the one that we spud which is on Burnett which is on the Monroe Swell area and Burnett specifically.
That activity covers two key licence areas, the 2 successful wells were drilled on West Brentwood and, as I said, they’re on production and there is some more running room on West Brentwood no doubt, however, the Burnett area has a lot more running room than is the case for West Brentwood. The reason is it’s just much more aerially extensive in terms of the pool sizes that we’re going for for the oil and gas reserves that we believe are available.
So, the importance of drilling that well is not only the success in and of itself but it really unlocks the potential beyond that to carry out quite an active campaign say up to 10 barrels to really pursue these larger resource potential at Monroe Swell.
Now, the well workover programme that we carried out initially really helped de-risk elements of the geology associated with that which is why we’re so excited about the Burnett opportunity and Monroe Swell more broadly.
Q4: What other success have you had in California to date?
A4: As previously discussed, we’ve had quite a bit of activity and success associated with the well workover programme at Monroe Swell and then at the West Brentwood field with the 2 wells that have been drilled.
I just wanted to highlight though a couple of points on West Brentwood, we drilled the VG-3 and the VG-4 well, the VG-4 well most recently, and I think what’s most exciting about that is we’ve managed to get production rates much higher than our highest expectations; VG-4 specifically tested at over 1,000 barrels a day before being choked back and then averaging over 480 barrels a day.
These rates of production are not only in and of themselves very exciting in terms of the potential that future reserves have in the region but also because it means we get quick payback associated with the capital we initially deployed, that it is some of the most attractive economics we see anywhere globally for upstream projects.
Q5: What else can investors expect to see from Reabold Resources California over the coming months?
A5: As I’d indicated, what we’ve found so far is that just on West Brentwood there has been more running room than we initially anticipated, that will definitely also be the case for Monroe Swell.
So, Monroe Swell, we have the Burnett well drilling now, we fully anticipate that the result is coming shortly and based on that, we have a lot of running room and further activity that we can fill the drill portfolio with for 2019 and for 2020.
We also have a third licence area called Grizzly Island and Grizzly Island is a gassed opportunity, it’s slightly more exploration in nature but has a bigger upside than the other assets do, and we’ll be drilling that later this year as well.
So, there’s just a lot of activity and a lot of value creation that has already taken place and it’s likely to take place in the future in California but beyond that, because of the success that we’ve already had, we see a lot more potential to bring assets into the fold within the California projects and activity that we currently have.
It’s not only activity within the existing portfolio, it’s also other opportunities outside that that we believe display very similar characteristics and now that we’ve got the footprint there, we can really start to exploit those.