Conventional wisdom says if oil prices prove too volatile, buy stocks of deep water drillers – the reason being those companies are less subject to price fluctuation because of all the time and money they’ve put into off-shore rigs. However, relying on conventional wisdom at best produces conventional results. With oil prices having fallen some 15% year-to-date recently, it’s time to consider something more unique. For unconventional potential, take a look at GeoGlobal Resources.
GGR, through its subsidiaries, is engaged in the exploration for and development of oil and natural gas reserves in India, Israel, and Columbia; admittedly not the first countries that come to mind when thinking about countries that have oil. GGR seeks recognition as a worldwide leader in the exploration for oil and gas in several ways. GGR actively looks for high potential oil fields throughout the world in a safe, environmentally responsible manner. GGR aims to have a positive impact in the communities where it operates and to promote sustainability.
GGR’s current strategy is to prove the existence of reserves and then sell the oil and gas in those reserves to create value for shareholders and its partners. It has target investment cycles of 4 to 6 years with a minimum ownership amount of 25%.
GGR is implementing its strategy by pumping oil in the Tarapur block in India where it has been producing oil since 2009. The company has proved reserves in the block of 251,000 barrels of oil and 197,000 cubic feet of natural gas. Probable reserves of 513,100 barrels of oil and 695,000 cubic feet of natural gas have been verified to a reasonable certainty.
CGR’s other exploration projects in India include the Krishna Godavari Basin offshore and onshore in the State of Andhra Pradesh in south eastern India, the Cambay Basin onshore in the State of Gujarat in western India, the Deccan Syneclise Basin onshore in the State of Maharashtra in west central India, and the Rajasthan Basin onshore in the State of Rajasthan in north western India.
If you don’t feel you can go against conventional wisdom, you can still consider GGR. Back in 2010, GGR commenced exploration activities in Israel by entering into a Joint Operating Agreement with a consortium involved in two existing oil and gas licenses located in deep water off the coast of Israel. GGR has since became the operator of both the Myra and Sara licenses and has completed the processing and interpretation of 1,360 square kilometers of previously acquired 3D seismic data. GGR even has deep-water operations off the coast of India, in the KG Offshore Block in the Deen Dayal West area, where it is drilling development wells.
On May 14, 2012, GGR made several important announcements. GGR said that it had acquired a 3.05% stake in The Israel Land Development Company – Energy Ltd. Also, GGR stated it had received approval from the Israel Petroleum Commissioner’s Office to extend the planned drilling program on the Myra and Sara licenses. The approval was granted on March 27, 2012, and the first drilling date has been extended to June 15, 2012. Drilling of the second well will commence immediately after the completion of the first well. GGR announced that continued progress was being made in the Deen Dayal West development drilling, with the first parts of 4 different wells having been drilled.
GGR’s oil sales are currently based on the spot price to the Nigeria Bonny Light Crude bench mark. To date, none of GeoGlobal’s production has been hedged. All natural gas from its Indian operations is sold to local markets at a firm contract price of $7.00 per Mcf adjusted for rebate or premium depending on the calorific value of the gas.
At March 31, 2012, the company had current assets of $70.2 million and working capital of $1.1 million. Oil and gas sales for the three months ended March 31, 2012 were $122,000. For the three months ended March 31, 2012, general and administrative expenses decreased to $450,000 compared with $1,080,000 for the three months ended March 31, 2011, an impressive decrease of $636,000 given the size of the company.
GGR expects its exploration and development activities pursuant to its production sharing contracts in India will continue through this year in accordance with the terms of the agreements. During 2012, the company expects to complete the drilling of two deepwater exploration wells, one in each of the Myra and Sara licenses. In addition, CGR is expected to complete the processing and interpretation of the recently acquired 43 square kilometers of ocean bottom cable 3D seismic date and commence drilling the first exploration well in the Samuel license, also in Israel.
So regardless of whether or not you believe in the conventional wisdom of investing only in deep-water drillers when oil prices fall, GGR merits a close look. India is a developing economy that needs dependable energy sources. Having an established presence in India with properties known to have oil and gas and that are actually producing oil and gas is a considerable advantage that GGR appears poised to capitalize on for the benefit of its shareholders.
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