Room to grow and the people to make it happen. Large land positions with strong underlying assets are combined with innovative production approaches to maximize potential.
The Board of Directors, the Management team and the Technical team of Buffalo Resources have a wealth of experience, focus and dedication to the oil and gas business, and that experience and expertise will be brought to bear on making Buffalo Resources into the success each of the members of the team believe it can become. More on the People of BFR.
Buffalo Resources large land positions and their underlying assets that have been brought together over the past five or six years (going back to when BFR was still a private company, and building on the merger with Choice Resources in August of 2007), will facilitate year-over-year consistent growth in future. Much of this growth will be funded organically from the substantial cash flows being generated, particularly from the Company’s heavy oil project at Frog Lake, though internal resources will be supplemented by outside financing if the opportunity justifies. More about BFR's Projects.
Two of the Company's current prospects - Frog Lake, a heavy oil play, and Pincher Creek, a natural gas play - could have homerun potential in which a single event could change the face of the Company if capital is judiciously spent on the opportunities the Company has identified. More about BFR's Projects.
Buffalo Resources is focused on generating consistent long-term growth of shareholder value by securing large land positions with strong underlying assets, then maximizing this potential through the application of innovative approaches to heavy oil and natural gas production.
Buffalo Resources currently has production of 4,200 boe/d based on a ratio of 51% gas, 42% heavy oil, 7% light oil & NGLs. The Company is operator for 80% of its production, based on an average 60% Working Interest in its properties. The Company’s business activities are concentrated in the province of Alberta where it has five properties: Frog Lake, a heavy oil project; Pincher Creek, a natural gas project; Whitecourt, a natural gas project; Peace River Arch, oil and gas; and Viking/Killam, oil and gas. The Killam property has recently been sold for $22M. Details on all projects can be found at this link.
Frog Lake (Production)
At Frog Lake, Buffalo acts as the operator and holds a 50% working interest in more than 50 oil wells. Buffalo has farm-in and participation agreements for 40,000 gross acres of undeveloped land with the potential for in excess of 100 low risk drilling opportunities over the next several years. Oil production is from the McLaren, GP and Sparky zones and gas production is from the Colony and Viking zones. Current Production: 1,580 boe/d net; 2008 Program: 50 wells (20 net); Capital Investment: $10.0 million; Production: 60 boe/d per well
Pincher Creek (Production)
66% average working interest in 42 sections. Current Production: 380 boe/d net; 2008 Program: 1 deep Horizontal well, 3 re-entries; Capital Investment: $10 million; Production: 469 boe/d.
Whitecourt (Production)
40% average working interest in 53 sections. Current Production: 510 boe/d net; 2008 Program: 8 wells (3 net); Capital Investment: $2.0 million; Production: 210 boe/d well.
Peace River Arch (Prospective)
Average 80% working interest in 13,000 gross acres of undeveloped land in the Peace River Arch. Several high potential oil and gas prospects have been identified generally targeting zones in the Triassic and Mississippian periods. 2007 Discoveries: Valhalla, Expanse; 2008 Program: 6 welIs (5 net); Capital Investment: $7.4 million; Production: 210 boe/d well.
Viking / Killam (Recently sold for $22M)
80% average working interest in 48 sections. Current Production: 850 boed net
CEO Bill Trickett has participated in and led a number of successful oil and gas ventures over the course of his career. He is a senior executive with 30 years' experience and a proven track record in the energy sector. As CEO, he was instrumental in growing Morgan Hydrocarbons from 700 barrels per day to 25,000 barrels per day, and obtaining a listing on the New York Stock Exchange before the company was successfully sold to Stampeder Resources for $340 million in 1997
Chairman of the Board Richard Shaw, a Senior Partner at McCarthy Tétrault LLP, is one of the top corporate governance lawyers in Canada who lectures at many business schools on the subject.
A. Murray Sinclair, the Company's former Co-chairman, and current Co-chair of Quest Capital of Vancouver, provides valuable capital markets advice
Director Dr. Edward Bogle, Ph.D. Geology, is Vice President Portfolio Management of Nexen Petroleum International Co., with 25 years’ experience as an oil man with an international perspective.
These are just a few of the team at Buffalo Resources that provide advice and a tremendous experience base to draw on. As Bill Trickett points out: “I have worked with (just about) each and every one of them at some time in my career, and that includes most of the directors. It's a great team, we’ve all worked together before, and we all know what the goal is.” Other members of the team can be found at this link.
To build shareholder value, Buffalo Resources plans to take advantage of the new technologies that have been developed to help it increase oil and gas recovery rates. Two of the Company’s projects – Frog Lake, a heavy oil project; and Pincher Creek, a natural gas project - both offer home run potential in which a single event could change the face of the Company if capital is judiciously spent on the opportunities the Company has identified.
Frog Lake is a conventional coal flow heavy oil project that over the next five years is expected to provide the Company with over 150 to 200 potential well locations to drill. As Bill Trickett says: “The nice thing about Frog Lake is that it is low risk and provides the Company with solid growth.” However, the real potential of Frog Lake comes from the opportunity to apply large-scale technologies and techniques developed for use in the Tar Sands to a smaller-scale project like Frog Lake. The Company believes there may be between 300 and 600 million barrels of oil at Frog Lake, of which only a small portion could be recovered by using conventional techniques. However, by applying some of the techniques developed by bigger players for use in the Tar Sands, the Company thinks it could double potential recovery rates of the heavy oil resource underlying Frog Lake, providing shareholders with significant upside potential.
Pincher Creek is a natural gas play where similar application of new technology and techniques could dramatically increase recovery levels. Here the opportunity is to take advantage of a technique called ‘under balanced drilling in deep sour gas’. The trail is being led by a Shell Oil project at Waterton Field that is only 6 or 7 miles from BFR’s Pincher Creek project. With its much larger resources, Shell is doing what BFR is trying to do. When BFR successfully applies the technology, there could be large reserve increases at Pincher Creek.
Bill Trickett sums up: “In both places, we have the land, we have the people, and we know the resource is in place. Now what we have to do is get the technology optimized for effective extraction.”
The Company’s strategy is to manage drilling risk by devoting approximately 80% of its capital expenditure budget to low to medium risk development and exploitation opportunities, while reserving the remaining 20% for high risk, high impact wells. Bill Trickett says: “If we consistently keep hitting singles, every once in a while a homerun should come our way.” The Company maintains a balance between oil and gas to protect itself from price fluctuations in these two commodities. Another operating principle is to manage resources to grow the Company as much as possible through internal growth. Finally, if good opportunities present themselves, the Company will grow through acquisitions, such as the recent merger with Choice Resources in August of 2007. The overall objective guiding activities is to increase production from its current 3,800 boep/d to a level of 10,000 – 20,000 boep/d. It is expected this figure should be reached within a couple of years, if not sooner.
On the financial side, one of this year’s objectives is to be listed on the TSX Main Board before year end. That process is already underway and when completed should bring the Company to the attention of a wider investor base, particularly from the institutional sector.
Buffalo Resources has maintained a solid track record of growth since going public five years ago. Cash flow has doubled each year, production is up 15X, the reserve base has grown 15 – 20X. The Company’s NAV (Net Asset Value) as of December 2007 was $2.25/share on a Fully Diluted Basis, and Net Undeveloped Land is 144,000 acres. Proven and Probable Reserves are 15M boe, and the Reserve Life Index is greater than 10 years. While successfully building reserves at a strong pace, the Company has also managed to keep its Finding, Development and Acquisition costs at a consistent level of $10.70/boe over the past five years. The Company has a line of credit of $75M and has drawn down $53M of that. The Company has also raised additional cash by rationalizing some extraneous assets, such as the recently announced agreement to sell the Killam property for $22M.
The Company's shareholder base is primarily distributed over a diverse group of individual investors rather than institutions. There were over 250 subscription agreements for the recent financing, for example, many of them from individual US Investors. The largest BFR shareholder has about 8% of the Company and is an investor similar in profile to many of the Company’s other shareholders. Management and insiders currently own 15% of the Company. Many of the Company’s shareholders have participated with Bill Trickett and the rest of the BFR team in past projects, and have bought into the Company's long-term strategy of consistently building shareholder value over time.
One of the key investors behind the Company is A. Murray Sinclair, the Company's former co-chairman, who came aboard as a result of the merger with Choice Resources. Murray is a well-respected financier and entrepreneur who has taken an active role in helping BFR see opportunities and finding unique ways to finance. He played a key role in the recent financing which, while it was done at a very difficult time in the capital markets, saw BFR successfully raise $11M in a substantially oversubscribed issue.
On the financial side, the Company has a solid balance sheet and operating fundamentals which provides it with the ability to deliver consistent growth. The Company is particularly encouraged by the growth in cash flow from operations. For example, cash generated in Q1 of this year equalled the cash generated in the whole of last year. As a result, the Company is in the enviable position of having to grow its plan to match the cash resources being generated. In fact, at its present cash flow rate, the Company has the internal resources to grow organically at up to 20% a year without having to seek outside financing. However, should the opportunity of an accretive acquisition present itself, additional outside financing would be sought to capitalize on the opportunity if required. The Company’s current Shares Outstanding stand at 76.7M. The Fully Diluted figure is 96.2M, of which management and insiders own 15%. Market capitalization as of June 20, 2008 closing of $1.35/share was $103.5M.
When this strong operating base is combined with the ‘Home Run’ potential underlying its land assets, and the strength of its people, Buffalo Resources believes it has a winning formula for success.
Frog Lake (Production) 