For a company that does not expect to be generating a profit until 2009 and has yet to produce a commercial barrel of oil or cubic foot of gas, First Calgary Petroleums has taken its shareholders on a wild ride over the last year.
It has soared to the heights, looked over the brink and rebounded.
“A lot of people thought we were done,” CEO Richard Anderson conceded at the company’s annual meeting on May 11. “But our major shareholders stuck with us and they’re happy.”
The happiness does not include those steamed-up investors who forced First Calgary to hire security guards for its 2004 annual meeting after the share price slumped to C$6 from C$25, or those who watched talks with Spain’s Repsol over a possible production alliance fall apart in June, or those whose shares tumbled almost 20 percent in November when the company disclosed it might lose rights to one of its exploration blocks in Algeria.
While many shareholders jumped ship, First Calgary plugged on, determined to find a way to develop about 13 trillion cubic feet of gas and 2.5 billion barrels of oil in the Sahara Desert.
Following the latest annual meeting, Anderson said the company was “probably very premature” in trying to find a buyer or a partner when “no one would pay for the upside.”
At that point, First Calgary took a look at itself and asked: “Do we keep going our way or is there a better way to do this?” he said.
It chose the latter route, resumed drilling and reported it made a prolific discovery in April.
It said one well produced 33.6 million cubic feet of gas a day, 4,665 barrels of natural gas liquids and 8,667 barrels of oil during testing.
Another well in a different region tested at 36.6 million cubic feet of gas and 2,396 barrels of liquids.
Anderson said First Calgary is certain it can “add more shareholder value by doing what we’re doing and drilling a lot of wells.”
But the next big challenge is to raise an estimated US$2 billion to fully develop the blocks and US$650 million to build pipelines and processing facilities to ship production from Algeria to markets in Europe.
The company raised C$174 million it needs for am ambitious drilling program for the second half of 2006, which could require borrowing on international markets, a share sale of a farm-out of interests.
One investor, Jim Sikora, told the annual meeting that First Calgary could get “hot” if tensions between Russia and its European gas customers spills over.
To the “big guys” who scoff at First Calgary’s ability to survive, Anderson has a direct message: “We can … because our reserves really are world class in size.”
—Gary Park
