For long-suffering investors in Newbury Park-based oil and gas exploration and drilling company Kolibri Global Energy Inc., could recent developments finally mean a recovery is in sight?
Kolibri Global Energy, which in 2020 changed its name from BNK Petroleum, has one oil field asset: more than 17,000 acres in the Tishomingo Oil Field in rural Oklahoma.
The company has spent much of the past two years exploring recent additions to its oil field and perfecting new drilling technology. Now, according to Chief Executive Wolf Regener, those steps are largely completed, and the company is poised to dramatically expand oil production.
“We’ve done all the exploration and honed the well-drilling techniques and now are in the manufacturing phase,” Regener said.
And none too soon for investors, who have watched the share price tumble nearly 30% in the past year and more than 40% since the most recent peak of $5.48 in January of last year. The stock closed Oct. 16 at $3.46 a share.
Unusual history
Kolibri began in 2008 as a spinoff from Calgary, Alberta-based Bankers Petroleum, which had – and still has – oil field operations in the Eastern European nation of Albania. The spinoff, then known as BNK Petroleum, had a mission of developing shale oil fields in the United States. Bankers Petroleum had acquired a couple of years earlier holdings in the Tishomingo shale oil field in Southern Oklahoma.
BNK Petroleum spent the next few years drilling its first generation of wells in the Tishomingo field. Then, in 2013, the company sold the deeper layers of the shale formation to Exxon Mobil Corp. for $147 million, keeping the upper, shallow layers known as the Caney formation. Proceeds from the sale were used to pay debt and fund more exploration and drilling efforts.
Since then, the company has acquired additional land holdings, bringing the total surface area to 17,100 acres. And in 2019, the Business Journal reported that the company had plans to drill up to 185 new wells on the parcel.
In late 2020, BNK Petroleum changed its name to Kolibri Global Energy, shedding the remainder of its former ties to Bankers Petroleum. The final step in the name change came a year ago, when Kolibri began trading under the symbol KGEI on the Nasdaq.
But by the time the name change took place, the oil markets had changed dramatically for the worse as the Covid-19 pandemic shut down most travel and the price of oil plunged.
Regener said this downturn played out at Kolibri as a faction of the board of directors pushed through a de-facto moratorium on new drilling efforts.
“There were some board members that wanted to continue drilling and some board members that wanted to stop drilling and sell the company,” Regener said. The standoff continued until well into 2022, when he said the board members that wanted to sell stepped down from the board.
He noted that coincided with an upswing in the oil market following Russia’s invasion of Ukraine and the global supply chain crunch.
For the last two years, Regener said, Kolibri has been in expansion mode, drilling exploratory wells in recently acquired portions of its parcel and simultaneously working to improve its horizontal well-drilling techniques.
On the latter front, in September, Kolibri announced the drilling of three new wells to add to the 32 wells already in production mode. But these three wells, which are set to enter production next month, are different: they are the first to use the new drilling techniques to extend their horizontal reach to 1.5 miles instead of the more traditional 1 mile. That puts much more oil within reach of each well, Regener said.
And it’s not just the length of the wells. Regener said the time to drill these new wells fell to just 12 days from the traditional 30-days plus.
“It only took two extra days to do that additional 0.5 mile of drilling,” he said. “That’s a tremendous time and cost saver.”
As a result of the shift to expansion mode, the company’s average daily production rose from 975 barrels of oil equivalent per day in 2021 to 1,640 barrels per day in 2022 and 2,976 barrels per day last year. Regener said adjusted EBITDA (earnings before interest, taxes, deduction and amortization) went from $6.5 million in 2021 to $25 million in 2022 and $39 million last year.
Stock “undervalued,” company says
But Regener said that despite this turnaround, the share price is still undervalued. That makes it more difficult to make additional acquisitions, whether adding on to the Tishomingo holdings or separate oil field acquisitions elsewhere.
To address this, the company has started doing more investor presentations, indicating that with its new well-drilling technique, the company is ready to covert a greater portion of the roughly 32 million barrels of oil equivalent in proven reserves to producing reserves. As of now, that portion stands at nearly 25%.
“We need to show investors that these proved undeveloped reserves are low-risk,” he said.
In addition, Regener said the board last month authorized a share buyback program of up to 1.79 million shares, which he said will be implemented in phases.
Hoping to dodge fracking controversy
Unlike conventional crude oil fields, shale oil is found within shale rock formations and must then be extracted. One common means of extracting the shale oil is through hydraulic fracturing, or fracking, where water, sand and chemicals are poured into the rock at high pressure, opening fractures in the rock and allowing access to the oil buried within.
Regener said that 100% of Kolibri’s oil is extracted through fracking.
But fracking is considered highly controversial, as the chemicals used can contaminate groundwater or pollute the surrounding air. Furthermore, in Oklahoma, some studies have linked the high levels of water injection associated with fracking to increased earthquake activity.
These potentially harmful effects have led to calls to ban fracking in many parts of the country. In California, Gov. Gavin Newsom announced his administration would end fracking permits by this year; the de-facto ban went into effect this month.
But, Regener said he is not concerned about a fracking ban or limits in Oklahoma. “The state here is pretty friendly to fracking,” he said.
Also, he said, most of the company’s oil field holdings are on private lands, making a fracking ban even more remote.
