Interview: Equatorial Energy finds opportunity in crises
Tuesday, March 5 2002 - 09:40 AM WIB
?Equatorial was formed as an international exploration and production company approximately five years ago. The company has done three significant acquisitions during its five-year history. The first two are concessions in Indonesia, and the third was an asset acquisition in Canada. Now, as you will probably appreciate, the last five years have been a tumultuous time in the oil and gas industry, especially for small companies focused on Indonesia. So we count ourselves lucky as being one of the small Canadian companies that went international during this time to have not only survived, but in fact, to have thrived,? said John R.Rooney, the company?s CEO in an interview with PowerMarketers.Com on Monday.
?During that time, we experienced the Bre-X scandal, which broke in the 1996-1997 time. It really shook the Canadian equity markets and made raising capital for Indonesian projects as well as all international projects somewhat more difficult. Following that was the conversion from the dictatorial Suharto regime into a democratically elected government and the attendant public unrest associated with that in 1997. Then came the Asian economic meltdown that took place in the latter part of the 1990s, the failed government of President Wahid and $12 oil prices. So in spite of all those obstacles, Equatorial has really done a good job of establishing ourselves as a producing company with a focus on Indonesia,? he said
Rooney said the first concession the company acquired was a very low-risk concession in Indonesia.
?We went to Indonesia particularly because there were good opportunities there and capital was available in the Canadian equity markets at that time for small international ventures. So in 1996 we acquired Tanjung Lontar, an old Dutch concession which was actually owned by a precursor to Royal Dutch Shell. It was an existing reservoir so we knew we were going to find oil there.
?In 1998, we bought a second concession, Sembakung, a much larger concession located on the island of Kalimantan, just below the Malaysian border. That acquisition, despite it being during the Asian economic turmoil, got done primarily because it was vendor financed.
?The third acquisition we did was a domestic acquisition from Gulf Canada. Gulf, as I'm sure you know, is now Conoco, and is soon to be Phillips. That company continues to be approximately a 20 percent shareholder of Equatorial. So the last two major deals we've done have been vendor financed, at least in part.
Rooney said one of the reasons why the company had been successful was that it had done those deals countercyclically.
?We closed the deal for the Gulf assets in February of 1999, when the oil price was below $11 WTI. In hindsight, we were able to make a pretty shrewd acquisition. The second Indonesian acquisition was done in the midst of the Asian economic crises of 1997-98. So, again, in apparent adversity we were able to find opportunity,? he said.
According to Rooney, Equatorial would continue to adopt countercyclical strategy in the future.
?If we can find them, yes. And we may, in fact, be going into one of those opportunistic time periods now. As you know, commodity prices have softened substantially in the last six months, and gas looks like it's going to continue to soften for a while longer. So, yes, the opportunity is now, if you want to buy low and sell high.? (*)