Yoho Resources

Well-positioned for The Future

As nickel mining is to northern Ontarians, oil exploration is to Albertans. At least it was for Brian McLachlan, President and CEO of Yoho Resources Inc., a Calgary-based oil and gas exploration company. McLachlan’s interest in the industry started when he was 10 years old.

“I’m one those rare people that knew what I wanted to do since I was a kid,” he laughs. “I wanted to be a geologist and so I spent half my life traipsing through the mountains, collecting rocks. Obviously being raised in Calgary, the oil patch is everywhere so you certainly get attracted to it very quickly. I worked in the industry before I went to University of Calgary, a school with a great geology program.” Looking back on 30 years in the industry, McLachlan still enjoys his job. When you’re working at Yoho Resources Inc., there’s little reason not to. Yoho Resources Inc. operates within the Western Canadian Sedimentary Basin, focusing on the Peace River Arch and north-eastern British Columbia, doing 85 per cent of its business in natural gas and 15 per cent oil and liquids. Its current production (as of February 2009) is approximately 2,500 barrels of oil equivalent (boe) per day with approximately 200 more boe per day to be added by the end of April 2009. Yoho has a grand total of 12 people on their full-time team, indirectly hiring hundreds of contractors and consultants on the field as needed.

Facing the Market
Like others in the gas and oil industry, Yoho is facing the possibility of slow times this year. They just finished their winter drilling program, but had to cut it short due to the low natural gas prices.

“The natural gas price has fallen dramatically since last summer,” says McLachlan. “It went from $10 per 1000 cubic feet (mcf) to close to $4 per mcf. As you can see, the price has dropped by more than half. Obviously, the stock market has just creamed junior oil and gas companies. Now combine that with the world economy and all the uncertainty that’s arising. It’s not a great scene.”

Having said that, McLachlan doesn’t seem too concerned about the future.

“I’ve been doing this now for three decades years, so I’ve seen a lot of ups and downs. Right now, it’s a matter of being disciplined in our spending practices and knowing where our bank debt is. We all need debt, as most industries do, but you have to be careful how you use that debt and make sure you don’t get off side with the bank.”

Wise words from someone who has seen it all before. One of the measures Yoho has taken is delaying their projects, such as the one this winter. The rest that were not completed have been deferred into the summer. “Fortunately, we’re able to carry projects into the summer due to year-round access, as opposed to some areas in northern BC and Alberta,” explains McLachlan. “So, we were able to defer them and watch the gas prices. If we see gas prices stay where they are, we simply won’t drill our summer program which consists of five or six wells. We’ll have a quieter summer.”

Preparing for the Upswing
Quiet isn’t necessarily a bad thing. In fact, Yoho is taking this down time to get ready for when things cycle back, like they always do. The team wants to be ready to be prepared to the ground running when the market gets back on track.

“We’re still generating prospect ideas,” boasts McLachlan. “Our geologists and geophysicists are working up ideas for strategic land acquisition, corporate transactions and unconventional plays. Right now, we’re posting land. In British Columbia and Alberta, we go to the Crown and ask them to post for lease sales and then we go and buy that lease. That way, we get exclusive rights to explore that land. So, we’re positioning ourselves for when the oil and gas prices return.”
“What’s different about us is that we’re an explorer but we augment our exploration with strategic acquisitions,” continues McLachlan. “We’re always expanding the size of our inventory of things that we can do. We could spend four to five times more of the budget that we do, but we don’t need to. Over the years, we’ve been able to grow Yoho with relatively little capital. Historically, we’ve grown our reserves per share at a rate of 70 per cent per year. For production per share, we’ve grown at an average annual rate of 42 per cent.”

“I think you’re going to continue to see Yoho Resources Inc. grow through the drill bit. We plan everything out, carefully monitoring growth, making sure our costs are in line.”

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