Executive Q&A with John McGoldrick, Executive Chairman, Caza (LON:CAZA)
Drake Lawhead (DL) interviews John McGoldrick (JM)
DL: Caza had a busy drilling schedule in 2011. You’ve had a number of successes, but is it fair to say some disappointments as well?
JM: The well on the Arran prospect was a disappointment, but it is important to remember that the data gained from that well is extremely valuable, as it allows us to better correlate our models. Arran tested a new play type and although the result was not what we were hoping for in the short term, it has provided us with a wealth of geological data that is being applied to future efforts. Exploration is a process of pulling together data from various sources, and even though Caza has the benefit of a very large 3D seismic database, there’s no substitute for the real data acquired from drilling wells in a given area.
DL: What are you looking forward to for the rest of the year and into 2012 for Caza?
JM: We are at an interesting point in the evaluation of our projects. Over the summer we have fracced four wells and they are now flowing back. Small E&P companies have to be agile and able to adapt to circumstance. The performance of these wells will help us to refine our efforts and set the direction of the ongoing exploration and development campaign.
Our Louisiana 3D seismic database alone covers approximately 18,000 km2 in some of the most prolific hydrocarbon producing basins in the US. Our current review of this data is progressing well, and I’m looking forward to drilling an exploration well there as early as Q4 2011, with more to follow in 2012.
DL: We’re looking at leadership and corporate governance issues this month in Drillers & Dealers – what, in your opinion, are the most essential qualities an O&G CEO or Chairman ought to possess to manage a successful company?
JM: Resilience. Anyone who has worked in the industry will tell you that exploration has more lows than highs but the aim is to ensure that the cumulative size of the highs is bigger than the costs of the lows. That takes time and perseverance. The other useful quality is being a good communicator, both internally and externally: this includes with staff, with advisors, with host communities, with partners, with counterparties amongst others. It is particularly important that the local communities where you operate understand exactly what it is that you are doing and how your operations will benefit them in the short, medium and long term. With the unfairly negative press surrounding fracture stimulation of wells at the moment, it has become increasingly important that we communicate with the local communities to allay any fears that they might have. In business, as in all walks of life, honesty and integrity are key.
DL: Something else we’re asking this month: Is talent getting any harder to find these days?
JM: Yes. The average age of subsurface geoscientists is getting older. Successful people tend to have done quite well in their careers so the normal motivator, money, doesn’t work as well as it might for younger hungrier talent, so lifestyle aspects and corporate culture are the best ways to attract talent. At Caza we have a small but incredibly talented team of engineers, landmen and geoscientists. We have a very flat corporate structure, which encourages all of the team to think independently and entrepreneurially. For anyone in the oil industry, there can be no greater thrill than identifying a lead and progressing it through to a successful discovery. As a small company, we offer that opportunity in a way that just isn’t possible in a larger organization, and I think that is a major attraction.
DL: Which other oil companies do you admire, and why?
JM: Tullow Oil (LON:TLW) and Rockhopper (LON:RKH) come to mind. Tullow because of its focus in exploring so successfully in a core area. Rockhopper for sticking to its program when others around were failing.
DL: How would you describe Caza’s business model for creating shareholder value to an investor?
JM: We are of the belief that significant value remains to be found in the onshore area of the US through the use of advanced evaluation techniques. Using our seismic database and knowledge of the regional geology, we believe we can sufficiently manage risk and identify value in undiscovered fields and plays that are only now becoming commercially exploitable with the use of modern technology. The onshore US also offers many advantages. It is relatively cheap, has a great deal of existing infrastructure and offers quick hookup of production. It also has relatively low political risk.
DL: Looking at the wider market, where do you see value in today’s oil and gas markets? Which plays do you consider most intriguing/hottest right now?
JM: The Bone Springs play in the Permian, the Bakken and the Woodbine; all plays that have been known about for years but where recent advances in frac technologies and horizontal drilling have raised productivity.
DL: Concerns about the economy and market volatility have returned recently to levels last seen a few years back. What do you think the main effect of that has been, or is, on independent E&P companies?
JM: Obviously it’s not good. The E&P business is very cash intensive and access to the funds in the market is crucial for independents. The E&P sector has been hit particularly hard in the recent stock market sell-offs, and unfairly so, in my opinion. For canny investors it should provide a great buying opportunity as there are undoubtedly some fantastic little companies out there.
DL: How has the deal market been for you and your peers? Is there a shortage or surfeit of good partners for farm-ins/outs?
JM: As yet we have not had any problems in finding partners for our projects. I would like to think that this also reflects well on the quality of our asset base. If Companies continue to become more cash strapped this may become an issue, however, whenever the market place becomes competitive then the quality of the projects is what matters.
DL: What is the most exciting thing(s) about Caza from the point of view of a potential investor?
JM: We target material prospects. As a small company, one or two good finds can have a hugely positive impact on the share price. That is why a shareholder would choose to put their money in our stock as opposed to a supermajor where the discovery of an ‘elephant’ (far rarer than most people appreciate) might only move the stock by a couple of percent.
DL: Finally, when you’re away from work, how do you enjoy spending your spare time?
JM: I learned to fly in 1983 and have been passionate about flying ever since, however more recently I have started to sail. Much slower and cocktails are allowed!
About John McGoldrick:
John Russell McGoldrick is a director and Executive Chairman of Caza and a director and Executive Chairman of Caza Petroleum. From February 2004 to August 2006, John served as Executive President of Falcon Bay. Prior thereto, John was employed by Enterprise Oil from June 1984 to October 2002, serving in a number of positions, including President of Enterprise Oil GoM. from August 2000 to October 2002 and Managing Director of Enterprise Energy Ireland Ltd. from December 1997 to August 2000. John is a graduate of the University of Bradford (Bachelor of Engineering – Chemical Engineering with Management Economics).