CEO And Chairman Interview: FieldPoint Petroleum Corporation (FPP) - Ray D. Reaves: Complete Interview Exclusively From The Wall Street Transcript
January 11, 2012 - The Wall Street Transcript has just published Oil & Gas: Refining, Independent and Major Integrated 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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RAY D. REAVES, Chief Executive Officer and Chairman of the board of FieldPoint Petroleum Corporation since 1989, has 24 years of experience in the oil and gas industry. He began his career in 1986 with North American Oil and Gas Inc. In 1989, Mr. Reaves purchased an interest in 10 of their wells and formed Bass Petroleum, Inc. Under his management in the years that followed, Bass Petroleum gained majority control of the 10 original wells and acquired interests in another 60 wells. In 1998, Bass Petroleum merged with Energy Production Corporation, and as a result, FieldPoint Petroleum was formed. FieldPoint has grown to a $20 million asset base with varying interest in more than 300 wells and complete operating control of 60 wells in five states.
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TWST: Please begin with a brief introduction to FieldPoint Petroleum, including some highlights from its history and an overview of its primary business lines.
Mr. Reaves: FieldPoint Petroleum (FPP) is a domestic oil and gas exploration and production company. Our product mix is approximately 70% oil, 30% natural gas, and as you can see, there is an emphasis on oil. We have operations in five states. We are in our ninth consecutive year of profitability and positive cash flow.
TWST: I know it's your goal to continue to expand FieldPoint's reserve base. Please tell us about the characteristics you look for in properties. What geographic areas may you target in 2012 and what level of expansion may we expect to see?
Mr. Reaves: Our goal is to expand our reserves while increasing production. We have a focus on long-life reserves, and that means reserves that have at least 15- to 20-plus years of life remaining. Our focus currently is on southeast New Mexico and west Texas. We plan to drill one or two high-impact wells in that area over the next 12 months.
TWST: Speaking of New Mexico, you mentioned in your Q3 earnings release the drilling of your first horizontal well in that state and you expected it to be completed in late November. What is the latest update on that project?
Mr. Reaves: That release was dated November 14, and we stated that we were down approximately 13,000 feet in total depth. We have now reached total depth on that well, and Cimarex, as you know, is the operator. FieldPoint has approximately 43.75% interest in the well. Cimarex has 37.5% interest in the well, and third parties have the other remaining interest. At this time, we're waiting on completion. The drilling phase is behind us. We are now in the process of setting tanks, laying equipment on location, preparing for the frack. And I believe it would be an eight- to 12-stage frack. Halliburton will handle the fracking. Cimarex will oversee that. Once the fracking is complete, which we think will take between 24 and 48 hours, we will flow back the well and we'll announce the results.
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TWST: FieldPoint's continued ability to expand depends on its ability to raise capital. Would you comment on the overall strength of the company's balance sheet at this time?
Mr. Reaves: As I said earlier, we are in our ninth year of profitability and strong cash flow. The fact that we have been able to generate strong positive cash flow, over the last few years in particular, has led to a very strong balance sheet. Our debt levels for the last couple of years have remained flat to stable, and we've increased cash on hand over that time frame. So we've been able to generate enough cash to pay for this first well that we're drilling with Cimarex. We believe that cash flow model is intact and will sustain itself. We believe that we will have sufficient cash flow to meet all of our capex requirements between the next 12 to 24 months without any problems. We have not been big on hitting the equity markets. That is a consideration. We have recently filed a shelf registration statement, which will allow us access to capital markets if we choose to do so. But right now, at this point, cash flow is king for us, and we don't see any problems meeting any of our budget requirements going forward.
TWST: I've spoken to Analysts who have said the condition of the global economy, and therefore oil prices, hinges on Europe's economic problems. What are your thoughts on that in general and specifically as it pertains to FieldPoint?
Mr. Reaves: I must say we definitely are living in a global economy. And in terms of supply and demand, you've got a number of countries, in particular China, that are going to increase demand for hydrocarbons. India is going to have an increased demand for hydrocarbons, and in the United States alone, there is a big demand for hydrocarbons. As a matter of fact, the United States uses much more than it produces in terms of oil, and we have to import quite a bit of our oil to meet that demand. At this point, FieldPoint's model has factored in 4Q 2011 oil prices bottoming out. We were hedged during the last six months of 2011 with a floor of $85, a ceiling of $102.50. We now believe oil prices have bottomed. We think we're going to see increased demand in spite of some economic weakness on a global scale once again. In the powerhouses of China and the U.S., the demand is intact. We think that as a result, nations such as India and others are going to also see much greater demand for energy. We think this is going to lead to higher energy prices over the next 12 to 24 months. I would not be surprised if we saw $140 oil eclipsing the highs during the summer of 2008. So we are in a position of strength once again. We plan to increase our production. We're drilling wells, i.e., this well that we're completing with Cimarex. We believe projects like this put us in a position to capitalize on higher energy prices. We definitely see higher energy prices in our near-term future, meaning the next 12 months or so.
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