Taking a Different Approach

Manitok Energy

By 2010, the business was up to about 300 barrels a day and made the decision to go public. “Since then we’ve grown it from 300 barrels a day to about 6,000 BOEPD,” says Massimo M. Geremia, Manitok’s President and CEO. “And we want to go to 20,000 BOEPD in the next three to five years.”

The company is pursuing a contrarian approach to achieve this goal. While most competitors are actively pursuing unconventional opportunities, Manitok is focusing on under developed conventional plays in the Foothills and under-exploited lands in Southeast Alberta.

As the rest of the industry was shifting capital away from the Foothills, Manitok secured 284,600 acres of land there at a much lower cost than was available in more competitive areas of the Western Canadian Sedimentary basin – or in the Foothills prior to 2008. “Our strategy is to be where nobody else is,” Mr. Geremia explains. “After 2008, a lot of the majors had stepped away from the Foothills, largely because of the advent of the unconventional resource [opportunities].”

The lure of big payoffs in newly exploited shale formations acted like a giant magnet, and the larger players walked away from the Foothills completely; some of them even sold their holdings there. “The conventional reservoirs in the Foothills were put on the back burner,” Mr. Geremia recalls. “Prior to 2008 there were more than 15 rigs drilling in the Foothills, then after 2008 there were none basically.” With all the competition abandoning ship, the team recognized that the Foothills offered a huge opportunity for a young company and they swooped in to take full advantage of the situation. “We are the only group really active in the foothills right now. That gives us a competitive advantage.”

In addition, the region’s geology presents both geological and drilling complexities, creating a barrier to entry for many companies – and slashing competition even further. In order to exploit the Foothills successfully, a company must have an expert understanding of its complex geology. Fortunately, Manitok has an experienced technical team that is able to tackle the complexities that come with drilling there.

In October 2013, Manitok launched a new operation in the Entice area of Southeast Alberta. Through a lease agreement with Encana Corporation, the company gained access to 96,000 acres of land spread across nine townships. “We have the rights from the base of the Belly River to the base of the Devonian,” Mr. Geremia shares. The team has already successfully drilled and cased a total of four vertical wells and one horizontal well in the area in order to test multiple hydrocarbon bearing formations. Each one of the vertical wells has encountered multiple pay zones, proving that there is multi-zone potential across the land base.

Manitok’s holdings in the Foothills and in Entice create a winning combination. “We have two large land positions and they both have little or no competition,” Mr. Geremia points out. “At Entice, we have the freehold land tied up, so by the virtue of the contract, there is no competition that can swoop in on those lands. And in the Foothills, we just built a position where nobody else is playing right now.” This lack of competition is a rarity. “It doesn’t matter where you go, you generally have ten or fifteen competitors in most other parts of Alberta. It is unique to have very little or no competition in the lands that we are exploring and exploiting.”

In addition, the lower risk profile and higher operating netbacks of crude oil in Southeast Alberta complements the high impact growth opportunities of both oil and gas found in the Foothills. As a result, Manitok enjoys a more stable growth platform with greater resilience to the wide swings of the natural gas price cycle.

Manitok’s focus on the Foothills and Southeast Alberta has been key to the company’s success, but Mr. Geremia says that the company’s people are an equally important asset. “Without the strength of your people, you can only go so far,” he insists. “We hire good people – and good people attract more good people.” Top notch technical skills are imperative, but so is a candidate’s character and work ethic. “We want to make sure that the people we bring on are very well qualified and have the right background, but more importantly, that they are the right kind of person and the right fit for our company. We have a strategy of growth and we need people who are willing to come in and take that on. We make sure that we have good people with a high quality of character.”

The company recognizes the value of its employees – and that treating them well saves the business money in the long run. “We don’t try to run as a sweatshop,” Mr. Geremia says. “We don’t want to be the company with the highest G&A in the industry, but we also don’t want to be the group that runs a sweatshop. We think there is a comfortable medium in between, where we can hire and attract good people and pay them fairly and make sure that we can perform as a company. We don’t want to spend a lot of our money on the costs [associated with] turnover, so we’d rather hire good people and keep them.”

Taking care of the environment is also a priority, and the company manages to protect Mother Nature while still turning a tidy profit. “We all have families, we all have kids, and we all want to make sure that we leave the world a better place than when we were on it,” Mr. Geremia says. “At the same time, we realize that we have a goal of making a profit and providing a return to our shareholders. We obviously have a priority on achieving growth, but at the same time, we respect the laws and environmental regulations that are in place and even go beyond some of them in some cases. We make sure that we minimize the potential for oil spills and minimize the potential for any environmental issues, and we work closely with the local and provincial governments.”

When considering the industry as a whole, Mr. Geremia believes that it will continue to move in the direction it is currently headed. “The premise worldwide is that cheap oil is gone,” he says. “It is deeper, it is in more extreme areas, more remote areas, and it is in tighter rocks. So we are all going to have to get better at the technology that we use to extract oil. That is going to be the key to driving future growth.” Resource recovery just isn’t as straightforward as it once was. “The western Canadian Basin and U.S. Basins are very mature basins, so most of the easy stuff has been recovered. Now it is going to be about horizontal drilling, multistage fracturing, and other techniques to improve the recovery factor in order to deliver oil and gas to market at levels that provide us a rate of return. I think that is the key challenge going forward.”

With most of the industry moving in a new direction, Mr. Geremia says that Manitok will continue to exploit land formations in the Foothills and Southeast Alberta where they have been historically successful. “We just bit off a big deal here [in Entice] last October. We are just looking to prove that up here in the next 12 to 18 months.” With the goal of 20,000 BOE urging the company forward, “a third core area will make sense at some point, but we are probably a year, or a year and half, away from that.” For now, Manitok’s current holdings are keeping the team plenty busy.

September 23, 2017, 5:46 PM EDT

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