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Exclusive CEO Interview: EnerJex Resources, Inc. (ENRJ) - Robert Watson Jr.

February 17, 2012 - The Wall Street Transcript has just published Oil & Gas: Exploration & Production Report offering a timely review of the sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.

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Robert Watson Jr. is the Chief Executive Officer of EnerJex Resources, Inc. He cofounded Black Sable Energy LLC about three years ago and served as its CEO. During his tenure at Black Sable, Mr. Watson was responsible for the company's acquisition and development of two grassroots oil projects in south Texas, both of which have been partnered with larger oil and gas companies on a promoted basis. Before founding Black Sable, he was a Senior Associate at American Capital, Ltd., a publicly traded private equity firm and global asset manager with 18 billion in capital resources under management. Mr. Watson began his career in the energy investment banking group at CIBC World Markets, and subsequently founded and served as the Managing Partner of Centerra Energy Partners.

TWST: Please begin with a brief introduction to EnerJex, including a few highlights from its history and an overview of its primary operations.

Mr. Watson: EnerJex (ENRJ) is a domestic onshore oil company with producing assets located in eastern Kansas and south Texas. My partners and I became substantial shareholders at the beginning of 2011 through a comprehensive transformation of the company that I will walk you through. We completely reconstituted the management team and board of directors, and we completed a series of financial transactions that addressed some balance sheet issues the company was having. For example, we raised 5 million of common equity and we converted 2.7 million of debt into common equity at 0.8 per share.

We also made some acquisitions through the issuance of equity. Following these transactions, we are intensely focused on creating per share value by developing our extensive asset base with minimal dilution to shareholders.In early 2011, we launched an aggressive drilling campaign to develop some of our low-risk oil properties and increase our revenue and cash flow. In addition, we highgraded our asset portfolio by selling 5.5 million of noncore assets. A year ago, I would characterize EnerJex as a turnaround situation. And today, after a tremendous amount of work, I think we've made the turn, and we're positioned for another year of significant growth in 2012. As far as EnerJex's operations, we've got two shallow oil projects in eastern Kansas and one shallow oil project in south Texas, all of which are producing and have considerable room for expansion.

Our Kansas assets consist of both primary and secondary oil production ranging from depths of 600 to 1,800 feet. Primary recovery is the process of producing oil that flows naturally to the bottom of a well due to gravity and natural pressure. On the other hand, secondary recovery is a process in which water is injected into an oil reservoir in order to increase pressure and drive oil to the surrounding production wells. Both of our Kansas projects are characterized by long-lived stable oil production with low decline rates, and we have identified more than 500 low-risk drilling opportunities on these existing properties.We started just over 12 months ago with a turnaround situation, and now we've got the business turned and pointed in the right direction, and we've got a lot of exciting things on the horizon for 2012.

TWST: Would you give us the latest update on the El Toro Project in Texas? What is the value you ultimately expect it to deliver to shareholders?

Mr. Watson: On Friday, we announced positive production results from three new oil wells that we drilled in our El Toro Project in south Texas during 2011. To summarize the results, production from these three wells has stabilized at a rate of approximately 120 barrels of oil per day, which is outstanding given the relatively shallow depth and low cost of these wells, and especially considering our current economic environment with 100 oil. So we're very excited about how those three wells have performed, and one of the reasons is that we tweaked our stimulation design for the third time, and we feel like it performed better than any of the stimulations we've used in the past. So I think we've continued to make improvements on the design, and any improvement we make is going to contribute to the amount we can expand the economics and the limits of this play.

To answer your second question, I think the exciting thing about this play is the potential upside for shareholders. Right now, this project is making about 150 barrels a day from seven wells. I think there is still a lot of things that we can do from a technology standpoint to improve our future wells. We have approximately one dozen locations to drill offsetting our existing producers, but the exciting thing is that we don't yet know where the boundaries of this play are. I believe that we've got significant running room in this play, and the question I think will ultimately become: do we develop it via horizontal wells instead of vertical wells to improve the economics even further? I think we do have the potential for that. That is the trend in the industry for this type of play right now, and another operator has had great success developing this same oil formation in south Texas with horizontal wells. So we're going to continue to evaluate the best methods of completing new wells in this play, and I think the exciting thing is that it has the potential to be very big, and we've proven up a significant amount of acreage already.

TWST: Please tell us about the partnership Enerjex entered into in Kansas in December. How is it structured? What is the latest status? What value do you expect to get out of that project?

The remainder of this 33 page Oil & Gas: Exploration & Production Report can be immediately viewed by purchasing online.


The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 33 page special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online. For the free pdf report of the EnerJex Resources Inc. CEO interview please click here

The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.

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