RANDEEP S. GREWAL - GREKA ENERGY - (GRKA)
CEO Interview - published 10/23/00

DOCUMENT # LAA629

RANDEEP S. GREWAL serves as Chairman of the Board, Chief Executive Officer and President of Greka Energy Corporation. He assumed this responsibility in April 1997 and established the company’s strategies and business plan resulting in consistent growth year after year. He has been involved in various joint ventures, acquisitions, mergers and reorganizations since 1986 in the United States, Europe and the Far East within diversified businesses. Mr. Grewal has a Bachelor of Science degree in Mechanical Engineering from Northrop University.

Sector: Oil & Gas Drilling & Exploration

TWST: Could you start with a background summary, overview and profile of Greka Energy?

Mr. Grewal: When oil prices were at a historical low during 1998 about a year prior to that in 1997, I took over a small Tulsa, Oklahoma based drilling services company that had essentially one key asset. That was a proprietary right on the drilling technology developed in cooperation with BP Amoco. After taking over the drilling services company, I established a business plan that essentially was to capitalize on this technology itself rather than performing drilling services and turning to the production market. On the E&P side of the industry, in terms of drilling, you want to add value through your assets, and not perform standard drilling as a service, and thus become just another drilling services company. In April 1997 when I took over the Horizontal Ventures, Greka Energy was built from three consecutive acquisitions in 1998 and 1999. In March 1999 we formed Greka Energy Corporation. Greka today is global in its scope. We have an extremely well defined business plan that was actually conceptualized in 1997. We’ve stuck to our plan and we’ve far exceeded our internal projections, let alone those projections the analysts had made, whether in terms of performing under any of the market fundamentals, margins or any of the financial ratios.

TWST: Give us some idea of your own involvement and experience with this company. What brought you in and what keeps you in?

Mr. Grewal: What brought me in actually was the venture capital company. There was a venture capital company out of Holland that had invested in the development of the technology. After four years of continued investment, they realized that they were not getting their returns. They asked if I would look at the company and decide if I was interested in taking over. They wanted me to decide what should be done with it. That’s how I ended up looking at Horizontal Ventures and entering this market. What keeps me involved is that this has been a very exciting environment for me. It’s been very rewarding in terms of being able to consolidate, essentially, three defunct companies that had underlying assets that were grossly mismanaged, being able to capitalize on those assets and perform and create a profitable organization going forward. We’re just getting started. We’ve spent the last two years essentially building the company’s foundation. “Working for Profits” are the three words that define what keeps me excited and that’s primarily what each of my employees and I focus on. Being profitable drives every decision we make, hence our company’s slogan “Working for Profits.” Our objective is to keep going forward, to continue to expand the company and to build it into a Major Independent in short course.

TWST: When you look out over the next 12 to 24 months, what accomplishments would make that time frame a success for Greka?

Mr. Grewal: We are a unique company with a strong, stable and consistent cash flow by our division called Integrated Operations. It is stable and consistent because we sell products that are not driven by the oil price curve. Due to that stability in integrated operations, our other two operating divisions, the E&P America and the E&P International end up, essentially, being our calls, or our option on the entire E&P market. I have a stable cash flow on one side, and so when the oil prices are up as they are now, we utilize our consistent cash flow to fund our own cap-X and really capitalize on peaking prices. While in 1998, when oil prices were at the historical lows, that same consistent cash flow was utilized to conduct acquisitions. So we essentially benefit on both. We expect that we’ll go into the first half of 2001 continuing to exploit our existing reserves, of which we have a substantial amount still not on full potential. We’re running consistent and continuous workover programs to increase our production and capitalize on the peaking gas and oil prices in the E&P divisions. Consistent with that, we are in the middle of contacting due diligence on two or three different asset acquisitions. Each one of them would simply or significantly enhance our integrated operations division and be able to expand our price flow base and therefore provide us a bigger option on the E&P market. To summarize, we stick with our business plan that gives us an option on the E&P market, conduct acquisitions and those two items coming together are going to expand Greka into the next level.

TWST: Is cash or capital a limitation as you look at that agenda?

Mr. Grewal: Cash and capital are not limitations in that we generate substantial revenue ourselves, and therefore all of our capital expenditures have been funded by our own cash flow. The operational hedge gives us the stability and can continue to do that going forward. If we are to conduct substantially larger acquisitions, we’ve got current availability based on our assets, in terms of our debt facility, that we’ll be easily able to facilitate the acquisitions without really having to look for other capital through equity.

TWST: When you go through the criteria for mergers and acquisitions today, what are the overriding concerns, limitations or the expectations that you have as you look at that criteria?

Mr. Grewal: It’s rather specific. We’ve got defined core areas of operations in the integrated operations division, which is based in Santa Maria, California. The assets are simply additional oil producing fields adjacent to our refinery. That is a core area for us in the E&P America division. Our core areas are South Louisiana and California. Finally in the international division, it’s China and Colombia. Outside these core areas, we would not look at acquisitions. That’s one criteria. The second criteria is that within these core areas, we are looking for those assets or companies that we can acquire and integrate into our existing operations without a lot of changes because we feel we’ve got a model that’s extremely successful. In addition to that, we look for those assets in which we can apply our proprietary technology and therefore add an additional equity kicker into the acquisition. We are adding specific value to such acquisition, besides the fact that one might have a good project. We feel that in addition to conducting good projects, we have to add equity value to them by bringing our proprietary technology and expertise to the table.

TWST: Do you anticipate any changes or additions at the top levels of management?

Mr. Grewal: I think we have got a strong team that has come together rather well, and the company’s success is clearly a function of the strong team, not only in corporate management but all the way down to the very pumper that goes out to the field. I don’t expect any changes. We’ve had a new addition to the organization in that we hired a Chief Financial Officer, and that completes Greka’s corporate management.

TWST: How can the investment community better understand Greka? What are the misperceptions that analysts, or potential investors carry with them as they come through the door, and that you have to confront or change?

Mr. Grewal: I think that there is an increasing focus on energy stocks in the market. So an investor has thousands of companies to take a look at to determine what energy stock to buy. The reason an investor should buy Greka Energy Corporation is quite simple. It’s the only company I know of in the micro cap environment that provides protection on the downside while providiing a substantial upside potential. What I mean by that is that the cash flow stability of our integrated operations gives the downside potential on oil price moves. In other words, if the oil price was to crash as it did two years ago, we would continue to be profitable, as we’ve demonstrated. Therefore, there is limited downside risk while we have a call option on the entire E&P on the upside. So, you have the speculation kicker for which investor are coming into energy at this point, as well as a downside risk limitation, for which I don’t think there is a comparison out there. What’s the difficulty? The difficulty is actually understanding precisely that. How does Greka and the micro cap environment have such a potential on the downside? Our downside potential is not as a result of having a hedge that one has to pay for. It’s an operational hedge that works rather efficiently. That’s the difficulty that the analysts have to be able to relate to the investors and the investors have to understand.

TWST: What would be the summary or essential message for our investor audience that convinces them to buy in?

Mr. Grewal: Fundamentals. We are a company and a management team that have demonstrated substantial success through the entire curve of oil price. When oil prices were down at $10, we were performing. When oil prices are sitting up at $35, we continue to perform. Looking back at the actual performance, and the profitability of consistency in profitability, the fact that we are trading at a P/E multiple of less than 10. Compared to some of the energy stocks in the micro cap environment that are trading all the way up in the 50 P/E range, we are seriously undervalued. The reason we are undervalued is we actually haven’t gone and done a road show and introduced Greka to the Street. That activity has just started in the last 30 days as a demonstration of that introduction to the market and reflected in our share price at our volume, specifically the volume we used to trade — an average of 5,000. We’re trading on NASDAQ for about 35,000 to 40,000 shares a day. That increased visibility and recognition of the undervalued stock that Greka is provides an investor an opportunity to recognize Greka’s potential going forward and to get involved with the investment.

TWST: Thank you. (DA)

RANDEEP S. GREWAL
 Chairman, President & CEO
 Greka Energy Corporation
 630 Fifth Avenue
 Suite 1501
 New York, NY 10111
 (212) 218-4680
 (212) 218-4679 - FAX
 www.grekaenergy.com

Each Executive who is the featured subject of a TWST Interview is offered the opportunity to include an Investors Brief Or other highlight material to be provided and sponsored by and for the company. This Interview with Randeep S. Grewal, Chairman, President & CEO of Greka Energy Corporation is accompanied by an Investors Brief containing corporate information.

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