ASPN 5.50 - great interview with CEO. For those who are looking for a microcap in the oil and gas area, take a look at the record, reputation and prospects here:
Aspen currently has working interests in approximately 68 producing gas wells (53 operated by Aspen), mostly high BTU natural gas, and has a very active drilling program planned for 2006. In the past 5 years, Aspen has successfully completed 30 gas wells out of 34 attempts, which is an 88% success ratio, a record virtually unheard of in the oil and gas exploration business. 3-D seismic data and qualified interpreters are essential for this exploration. All of the selected drill sites for 2006 have been identified through the use of 3-D seismic techniques, which have demonstrated great improvement in the percentages of successful oil and gas discoveries. New and additional drilling locations for gas wells are constantly being sought, based on solid geology in conjunction with 3-D seismic information. The Sacramento Valley of California, where current activities are focused, include extensive, nationally important oil and gas production and refining facilities, thereby allowing quick hook-up and production of gas when a discovery is made. The Aspen staff and consultants have also found representatives of the State of California to be very cooperative and it is not difficult to obtain permits for new exploratory wells or to expand existing production.
CEOCFO: Mr. Cohan, will you give us a little background on Aspen, please? Mr. Cohan: "Aspen was founded in February of 1980, about 26 years ago. In April of 1995, which was approximately eleven years ago, I opened the California office. We are currently engaged in natural gas exploration in the Sacramento Valley of northern California; operating 53 gas wells and have other non-operated interests in fifteen additional wells. We are traded under the symbol ASPN.OB and have offices in Bakersfield, California and Denver, Colorado." CEOCFO: What was your vision a year ago and how has that played out? Mr. Cohan: "The vision for 2005 was to continually increase Aspen’s gas production, revenues, and share price, in addition to drilling quality gas prospects. We have done that quite nicely. If you look at an Aspen stock price-chart going back to April of 2004, we traded at 62 cents per share and today we are currently trading at $5.20 per share, a 739% increase in 22 months. The most recent 10-Q for the three-month period ended 9/30/05 showed record results. For this period, we had revenues of approximately $1.194 million, an increase of 52%, as compared to the year earlier period, and net income of $461,000, an increase of 108% from the year earlier period. Aspen reported earnings of 6 cents per diluted share compared with earnings of 4 cents per diluted share for the prior year 3-month period. Net income before interest, depletion, depreciation and taxes was $896,000, or 13 cents per share, compared to $549,000, or 9 cents per share for the prior 3 month period.”
The most recent 10-K for the twelve-month period ended 6/30/05 also showed record results. For this period, we had revenues of approximately $4.127 million, an increase of 126%, as compared to the year earlier period, and net income of $1,487,000, an increase of 640% from the year earlier period. Aspen reported earnings of 22 cents per diluted share compared with earnings of 3 cents per diluted share for the prior year 12-month period. Net income before interest, depletion, depreciation and taxes was $3.585 million, or 53 cents per share, compared to $953,000, or 14 cents per share for the prior 12 month period.”
CEOCFO: How have you done this and how do you continue to grow?
Mr. Cohan: "A careful selection of drilling prospects. For every well that we drill, we probably evaluate twenty to twenty-five prospects. We use the best geological and geophysical consultants, 3-D seismic data in addition to well data in identifying our prospects. We drilled nine gas wells last year out of 10 attempts for a 90% success ratio and I think that demonstrates our careful drill site selection. For the last five years, we drilled thirty gas wells out of thirty-four attempts, which is an 88% success rate. Natural gas prices have helped us considerably; gas prices have been in the range of $8.00 per MMBTU to $10.50 per MMBTU for the past three months. CEOCFO: 88% is an extremely high success rate!
Mr. Cohan: "It is incredibly high! I would say the industry average is probably 25% - 30%." CEOCFO: What is the secret to your success? Mr. Cohan: "I do not know if there are any secrets. We do not drill many super wildcats, so that helps minimize the risk. I think it just goes back to good basic business. There is no magic formula other than the things I have previously said such as using quality scientific consultants and looking at many prospects. The other thing about Aspen is that we will not drill a well just because we have the money to do so and we can make some money on a prospect fee. Many companies out there will do that; we will not." CEOCFO: What is it about that particular geographic area which makes it a good place to be?
Mr. Cohan: "What we like about the Sacramento Valley is that it is a large basin which encompasses about ten counties in northern California There are multiple producing horizons. Our shallowest well is 2,000 feet and our deepest well is about 11,500 feet. If the well depth is 7,000 feet and shallower, the gas really images nicely on 3-D seismic so you can see the AVO anomalies or bright spots; things of that nature. We know all of the service companies and other operators that work in this region, and Aspen has established a very good reputation. We pretty much have found a home up there in the last eleven years. There are many places to drill with multiple horizons." CEOCFO: Are there a set number of properties you would like to acquire?
Mr. Cohan: "It all depends on the amount of prospects that are available to us at any given time. We have quite a few in inventory right now. Until the last two years, we averaged about five wells a year. For the past two years (2004 & 2005) we drilled ten wells per year and we plan to drill a similar amount in 2006.. We only have two full-time employees; everything else is accomplished with consultants and service companies.” CEOCFO: Will you explain the benefits of working with the outside consultants as opposed to your own people?
Mr. Cohan: "Working with outside consultants keeps our overhead costs much lower than if we had a staff of ten or fifteen people. Many companies with Aspen’s level of activity have maybe ten or twelve full-time employees and we have two. The cost of the consultant or service company is typically part of the well cost, which is shared by Aspen and all the partners in the various wells." CEOCFO: It seems that the experience and the steadiness of Aspen is a very important feature for people looking at the company!
Mr. Cohan: "That is so true! Most companies Aspen’s size just have a dream or an idea and no cash flow. Maybe they are not incredibly honest. Aspen is known to be very solid and very honest. You get a high level of confidence when you deal with us either in buying our stock or investing in our wells. Another reason we get to see a lot of drilling prospects is that the geologists and geophysicists that bring us those prospects know that if Aspen takes those prospects, they will get paid a prospect fee, the well will be drilled in a timely manner and if it is successful, they will get their overriding royalty each month. Aspen is a closer. If you look at our balance sheet, there is essentially no debt, good cash flow, and good management. It is a very good company to invest in and I think people tend to sense that." CEOCFO: What should people look for going forward?
Mr. Cohan: "I think continued growth and success, strong natural gas prices, which coupled with the increased gas production, will show increased revenues.”
CEOCFO: You mentioned earlier taking advantage of the latest technologies in terms of deciding what wells you might want; what about on the production end? Mr. Cohan: "On the production end, one advantage Aspen has, even though we operate quite a few wells for a small company, is that I know what every well is doing every morning. I get an email from the field pumpers, so I can see a production problem as soon as it arises and rectify that problem. For example, if I see increased water production in a well, I will look at it that morning and we can choke back or cut back production on the well, therefore possibly minimizing water production and prolonging the life of the well. We use the best available technology out there to operate the wells. It is more about caring about the gas wells and paying attention to the details." CEOCFO: What are the challenges that you see and how are you prepared for potential challenges?
Mr. Cohan: "Our main challenge is to keep a steady stream of drilling prospects in our inventory. We have been able to do that thus far and we have more prospects now than at any time in the past. That is the biggest challenge, to continue to get quality prospects to drill."
CEOCFO: In closing, what would you like readers to remember about Aspen? Mr. Cohan: "In closing, I think Aspen is a wonderful investment opportunity with an honest, solid reputation, good existing gas properties and cash flow, excellent future drilling prospects, little debt and a very high gas price environment. Looking forward I see continued growth."
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