Tuesday, September 25, 2018Canada's Leading Online Business Magazine

Excelsior Energy

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Robert Bailey and David Winter founded Excelsior Energy in 2005, with a goal to establish an oil and gas company specializing in developing oil and gas reservoirs that were perceived as difficult for production by the industry. Both Winter and Bailey came from a long history of developing problematic and geologically complex reservoirs in a diverse range of operating environments.

Bailey, a chemical engineer, has spent a large part of his career developing, producing and selling heavy oils. He has almost 30 years of international industry experience operating large scale projects with the likes of Saskoil, Neutrino Resources, Yurgraneft and EnCana/Alberta Energy Company. He is the
VP Engineering, COO and Director of Excelsior.

Winter, CEO and Director of the company is a geologist with 24 years of international, multi-discipline industry experience in increasing senior management positions with companies such as British Petroleum, Sun Oil, Nexen and Alberta Energy Company. His international oil and gas field development experience was gained in diverse offshore and onshore operating environments including the UK North Sea, China, Netherlands, S.E. Asia and Yemen.

Excelsior is a company “lean” on personnel but robust with experience. The company will add key personnel as the company grows and its development plans progress. “We are the Officers of the Company but also the workers. Robert and I have managed large scale projects before and in environments far more difficult than we experience in Alberta. With our experience and skill sets together, and with long term relationships with consultants and key contractors, a great deal can be achieved.”

The Alberta Oil Sands

The company entered the Alberta oil sands in January, 2007. Bitumen is difficult hydrocarbon to extract, especially in a very complex geological region. However, the company has developed a strategy where they “focus on areas where the reservoirs are proven and close to infrastructure”, as Winter says, and this strategy is a driver for cycle time to first production and capital efficiency.

Excelsior is listed on the TSX Venture Exchange with the symbol “ELE” and the company has land holdings of 58 sections (27,840 net acres) of prime Athabasca oil sands assets in the Hangingstone and West Surmont areas just to the south of Fort McMurray. They have a very significant resource on their land base, with 1.5 billion barrels of discovered bitumen in place and 119 million barrels of economic contingent resources assigned by a third-party engineering company, with potential to increase that resource to over 450 million barrels, based on management estimates and geological mapping.

By staying within areas near to industry and utilities infrastructure, the company can focus on extraction and exploration at a lower cost. Excelsior went public at the end of 2006, and in the last year has had very successful financings raising around $55 million. The company has deployed those funds into land, seismic and drilling. The operations have been executed on time and on budget which is reflected in low finding cost at $0.47 per best estimate contingent resource barrel.

Winter explains their strategy, and how they keep costs low: “We’re very focused on efficient management of our capital. That is the primary driver for our location close to infrastructure, we are adjacent to a major highway and accompanying power grid, and gas pipelines. We have an extensive mapped water source proven by wells. We’re not out in the periphery of the Athabasca oil sands region, and so we don’t have to spend money on building access and utilities infrastructure into remote areas.”

Excelsior (and its shareholders) own 75% of a subsidiary company – ENS Energy – which has two assets in the North Sea in the U.K. “We’re growing ENS as an independent company, so that Excelsior can focus on oil sands or pure play. We plan to establish ENS as an independent company with a separate management team based in the UK.”

Bad press for oil and gas

With so much experience and confidence, the Excelsior team is able to handle the scrutiny that is being played out in the media with regards to emerging environmental issues facing oil and gas. “Environmental issues have caused what you could call ‘bad press’ for oil and gas companies. In-situ oil sands projects such our Hangingstone SAGD project have a much smaller environmental footprint than the large scale oil sands mining projects. We use far less water and plan to recycle around 95% of our water. The identified water source is saline, and so of little use as a conventional acquifer. The Company follows strict environmental and operating practices to minimise the impact on the environment.”

Despite the new royalty structures in Alberta, Winter is not worried about Excelsior’s prospects in Alberta: “The proposed increases in royalties by the Alberta Government is certainly not an encouragement, however the Alberta royalty regime is still better than many international regimes where Canadian companies are operating.”

He says that there is a heavy focus on juniors coming in to the oil sands, a concern that in order to be competitive in the industry, they need to have billions of barrels of critical mass. Winter is of another opinion: “I don’t subscribe to that view – I think that asset quality is much more important, and proximity to infrastructure driving your capital cost structures and value per barrel. It is a lower risk approach than acquiring a large land base in remote areas of higher geological risk and higher capital risk.”

With regards to the shifting economy, Winter believes that Excelsior’s strategy and efficient business plan will ensure their success. “I believe that short term pain will eventually turn to long term gain. The market will change.” Excelsior is debt-free and has the funds to take them through to the submission of a development plan for a 10,000 barrels of oil per day project on the Hangingstone asset by next summer, and to survive well beyond that if the financial markets remain sour.

“We’re ready to move forward on our project at Hangingstone that in the next few years will ensure our continued growth. We will continue to manage our operations to keep our capital and administration costs low and focus on monetising the value of our high quality Hangingstone asset.”

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