This interview was given in 2011 and let me point out that a lot of things were priced a lot higher (and not just our gold stocks!!!) then. Regardless, 2011. I think it is notable that it wasn't until 2012 that CWV acquired for about 36 or so million shares of CWV valued at .80 and $10m cash that they bought the assets of Antrim Argentina, in a transaction valued at about $56m or so. These Antrim assets gave them the 51% of CLL that they didn't own and 100% of their TDF concession! Please note that some of the assets this fellow was speaking about namely Elle Valle were written down in a $10m charge to the income statement in 2013. No activity is planned for the latter until q3/14 but who cares. Its all about CLL and TDF.
It is worth noting that since the time of this article they have added less than 1 million shares to their share count. Not bad. By my reckoning I've missed 2 years of stock price decline. :) Today's cap is now a little more than when i first started to write about it. Nudging .50 for about a $52.5 m cap.
TER: In addition to all of the action in Canada, one of your research reports compared Argentina favorably with Colombia and stated that Argentina could be the next hot market for oil and gas. Can you tell us about that?
KS: Yes. Argentina is one of the next potential hot beds on the international circuit right now, sitting on a huge untapped conventional reservoirs and massive upside potential in unconventional shale plays for both gas and oil. It’s really largely been underexploited, and the large companies—the majors around the world—have not really gone after them as of yet until now.
Historically, foreign direct investment in Argentina had been suppressed by government-controlled pricing caps in a lot of the gas production agreements. Of late, a couple of noteworthy things are happening on the macro side in Argentina, which is a net importer of gas. In the last several years, Argentina has sold gas domestically anywhere from $0.50 to $2 per million cubic feet (MCF), yet paying about $9 per MCF to import LNG from places like Bolivia. It’s an unsustainable situation.
And Argentina controlled oil pricing, too. Those controls have been easing, and we’re now seeing some higher realized sale prices on oil of $52/barrel and more. In addition, the government now gives exporters that are currently in the country an incentive tax credit that tacks another $5 to $11/barrel on top of those prices. So netbacks on Argentina’s oil are now on par with the average in Canada. Some of the other operating costs in the country are low, and royalties are also low compared to other countries.
A lot of positive things are happening in Argentina. For example, they used to sell all their gas at around $2 per MCF. They have now approved contracts for unconventional and tight gas plays to go to $5 and $6 and more per MCF, which is huge. As a net importer, they have a situation they’re trying to address; they have to spark more foreign direct investment, which also involves encouraging companies that are already in-country to ramp up activities. It’s a win-win for Argentina, for the government and for the operators.
TER: What are some companies with favorable gas and oil exploration blocks there?
KS: Over the last three or four months, Apache Corporation (NYSE:APA) has ramped up activities in a big way. Repsol-YPF S.A. (OTCPK:REPYY) and Pan American Energy [privately owned] are big players in Argentina but of late, Exxon Mobil Corp. (NYSE:XOM)and Total (NYSE:TOT) have entered the space along with Petrobras (NYSE:PBR). They’re not only focusing on conventional O&G exploration and development but also heavily on the unconventional side for both gas and oil, and starting to apply horizontal multistage frac technology through Halliburton Co. (NYSE:HAL), the BJ Services Company, which is now part of Baker Hughes Inc. (NYSE:BHI), and others. Unconventional shale plays in Argentina have the potential for 200+ trillion cubic feet (TCF) on the gas side alone and are just starting to be tested with horizontal technology.
YPF, for example, announced in December a new shale gas discovery of approximately 4.5 TCF in one of the big predominant zones of interest, the Vaca Muerta Shale zone. That was just one discovery YPF has delineated and announced; many others throughout the Argentina basins could be brought to light through exploration and delineation of this widespread shale. A second potential prolific shale zone is the Molles Formation, which has huge potential like the Vaca Muerta in Argentina.
The majors are going there for a reason. They can make an awful lot of money at $5 to $6 per MCF—actually, there’s more money in gas in Argentina than in North America currently.
TER: How about some smaller players?
KS: One of the small caps is Madalena Ventures Inc. (TSX.V:MVN), which is partnered with Apache drilling an unconventional play on one block. In partnership with another key company, Apco Oil & Gas International Inc. (NASDAQ:APAGF), Madalena will be drilling some unconventional shale oil and gas. As well, Madalena is drilling a number of high-impact targets with potential recovery of 60 million to 70 million barrels on the conventional oil side. Madalena will be doing three to four potentially game-changing wells over the next two or three months. One of those has to hit to drive the company forward, but it has enough optionality to make a very interesting story. So, lots going on with Madalena.
TER: Any others you’d like to talk about?
KS: Crown Point Ventures Ltd. (TSX.V:CWV) has just come to the table over the last 12 months in Argentina. It has a market cap of just over $75 million. In a very short period of time, Crown Point has put together four key blocks and is spudding a drilling program within a week or so, focused on low- to medium-risk conventional oil development to ramp production and cashflow.
Crown Point also has solid management, similar to Madalena. Based in Calgary, Crown Point is headed by Murray McCartney, who has teamed up with Mateo Turic in Argentina to run the operations there. Mateo Turic headed YPF’s exploration and production department in Argentina, so he’s very well connected, knows everyone in Argentina, and is a key strength for the company to go forward.
Crown Point is a very cheap stock currently. It is producing about 400 to 500 barrels of oil a day and has two low-to-medium risk development blocks in conventional oil, multizone type targets. It’s recently cashed up, with about $30 million in its jeans and no debt to drill probably 15 to 16 wells over the next 12 or so months. Crown Point also plans to drill some high-impact exploration wells, probably later this year. They’re talking three to four potentially game-changing exploration wells, the same type of stuff Madalena is drilling now. So, Crown Point is one to definitely watch, and it’s just coming out of the gates in Argentina.
TER: That’s a great story.
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