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Www.geohelp.ab.ca Exploration Strategies in the 21st Century - the end of elephant hunting? Dave Russum, Geo-Help Inc www.geohelp.ab.ca.

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Presentation on theme: "Www.geohelp.ab.ca Exploration Strategies in the 21st Century - the end of elephant hunting? Dave Russum, Geo-Help Inc www.geohelp.ab.ca."— Presentation transcript:

1 Exploration Strategies in the 21st Century - the end of elephant hunting? Dave Russum, Geo-Help Inc

2 Exploration Planning An Exploration Project should have five phases: Project Pre-Planning Project Initiation On-going Project Assessment Capital Expenditure Project Post appraisal Successful Exploration requires both sound technical work and consideration of a variety of other factors

3 Exploration Planning Other considerations include: Project Pre-Planning Corporate expectations and strengths Analysis of historic results Assessment of potential Strategies and Implications Project Initiation Avoiding re-inventing the wheel Data gathering On-going Project Assessment Checkpoints to compare progress to expectations Economic Evaluation and Risk Assessment Risk mitigation Capital Expenditure Project Post appraisal Developing new ways to facilitate the process This paper

4 Alberta New Gas Wells + Daily Sales Gas (AEUB Data)

5 Alberta Exploratory Drilling (DOB Data)

6 Alberta Exploration Drilling and Success 2001 (DOB DATA)

7 Alberta Exploration Drilling 2000 (CAPP Data)

8 Exploration Statistics can be misleading! Not all Exploration is equal Has never been a clear definition of Exploration strategies “Elephant hunting”, “wildcat drilling” tend to be recognised terms < 5% of all exploration drilling in Canada in 2000 was NFW What do we call the rest of the activity?

9 Elephant Hunting Typical elephant hunt: Is illegal Is easy Largest animals shot Ivory plundered Carcass left to rot Young orphaned A terrible analogy for Exploration in our Industry!

10 Describing Exploration Strategies Proposing a new way to describe and classify exploration strategies that provides a clearer image of the expectations of a project or portfolio prior to drilling

11 Describing Exploration Strategies Needs: Consistent - to describe and compare Exploration activity Simple - so that expectations amongst Individuals, Teams and Companies are understood Universally applicable Preserve confidentiality of detail

12 New Description of Exploration Strategies Compare exploration strategies to different hunting techniques in Animal Kingdom (ie focus on hunter not the prey) Each strategy has a different risk and reward profile –Risk = Likelihood of an economically successful result (Includes Technical Uncertainty) –Reward = Size of the prize

13 Risk and Reward Profile Management, Investors

14 Types of Hunting Strategies –Tiger –Grizzly –Wolf –Hawk –Vulture Create an image of the basic characteristics of each strategy and how relate to our Industry. (Most Companies use more than one strategy)

15 Tiger Strategy Hunts big game over large areas Generally alone, takes time, stalks prey, strikes aggressively Eats sporadically, gorges, leaves only scraps for competitors Failure may result in demise True wildcats – Was a large company strategy in Alberta – who will fill the void?

16 Risk and Reward Profile TIGER

17 Grizzly Strategy Wide variety of eating habits, from small berries to big game May forage with others Eats whenever opportunity arises May hibernate for part of year but must eat regularly to survive Most senior companies in their core areas (Individuals can’t hunt for big game while foraging)

18 Risk and Reward Profile TIGER GRIZZLY

19 Wolf Strategy Hunts in packs Success more frequent than hunting alone Spoils have to be divided A weak or dominant member may cause problems for whole pack Difficult to introduce new members Typical Joint Venture. Must improve success rate by synergy rather than just reduce financial exposure.

20 Risk and Reward Profile TIGER BEAR,WOLF GRIZZLY, WOLF

21 Hawk Strategy Soars and glides silently over large distance Always alert for signs of movement Strikes fast when spots an opportunity Survives well eating small prey Excellent approach for smaller Companies - should focus on core areas over time (Grizzly strategy)

22 Risk and Reward Profile TIGER BEAR,WOLF GRIZZLY, WOLF HAWK

23 Vulture Strategy Uses keen eyesight to spot opportunities left by others Feeds entirely on carrion and other scraps May stay close to one place May not eat much at each meal but feeds regularly. Mature area strategy, growth limited unless combine with another strategy or acquisition

24 Risk and Reward Profile TIGER BEAR,WOLF GRIZZLY, WOLF HAWK VULTURE DINOSAUR RARE (Eureka)

25 Exploration Strategy EXPLORATION STRATEGY STAKEHOLDER EXPECTATIONS MANPOWER EXPERTISE MONEY TIMEFRAME COMPETITIVE ADVANTAGE DATA RISK TOLERANCE - No right Answer ©Geo-Help Inc. 2002

26 Corporate Strategy A Company may use different hunting strategies for different areas, teams or individuals Easily communicated –Future plans assessed by strategy –Funds can be distributed by strategy –Results readily evaluated by strategy Apply between companies for competitive comparison, investment and acquisition

27 Risk and Reward Profile (As basin matures # opportunities and players moves to bottom right) TIGER BEAR,WOLF GRIZZLY, WOLF HAWK VULTURE DINOSAUR RARE (Eureka) OPPORTUNITIES POPULATION ©Geo-Help Inc. 2002

28 Risk and Reward Profile (For a Company to grow by Exploration need to move towards top left) TIGER BEAR,WOLF GRIZZLY, WOLF HAWK VULTURE DINOSAUR RARE (Eureka) TIME, $s EXPERTISE ©Geo-Help Inc. 2002

29 Brief Description of Exploration Projects –Provides image of projects without disclosing corporate secrets. Can add detail as required. Project 1Project 2 StrategyTigerVulture Cash$6.5MM$0.4MM Timeframe2 years0.3 Years # Wells11 Expected Results

30 Alberta Exploration Drilling and Success 2001 (DOB DATA) VULTURE HAWK WOLF GRIZZLY TIGER X Y

31 Example - Spending by Exploration Strategy (Proposed or Actual)

32 The Test Can you place your current Exploration activity into these strategies? Would your Boss/Senior Management agree? Does the strategy align with the expectations of investment analysts and stakeholders? No? - Need to reassess Strategic Plan and Expectations?

33 Additional Benefits In mature basins, strategy can accurately predict: –Manpower needs, expertise –Timeframe for results –Implications for balance sheet –Impact on reserves and production Risk mitigation can be applied early

34 Exploration Planning Other considerations include: Project Pre-Planning Corporate expectations and strengths Analysis of Historic results Assessment of potential Strategies and Implications Project Initiation Avoiding re-inventing the wheel Data gathering On-going Project Assessment Checkpoints to compare progress to expectations Economic Evaluation and Risk Assessment Risk mitigation Capital Expenditure Project Post appraisal Developing new ways to facilitate the process

35 Conclusion “Elephant hunting” is banned Describing exploration using analogy to the predators not the prey emphasizes the known (method) rather than the speculative (result) - helps clarify expectations for both the Industry professional and the layman Approach can be applied to Exploration and Research projects universally Feedback encouraged

36 Risk and Reward Profile TIGER BEAR,WOLF GRIZZLY, WOLF HAWK VULTURE DINOSAUR RARE (Eureka)

37 Acknowledgements Cathy Gaviller at Calgary Zoo My son who downloaded the pictures Various individuals in the exploration and investment community who have provided constructive input Your feedback is encouraged Thank you!


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