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On Thursday, publicly traded ShaMaran Petroleum announced that a new well drilled into the Atrush exploration block in the Kurdish region of Iraq was tested at a flowrate of more than 42,000 barrels of oil per day.
This is a colossal well, the likes of which hasn’t been seen onshore in the United States in decades. By comparison, most new wells drilled in the Bakken play of North Dakota are lucky to do 1,000 bpd for the first few weeks before quickly falling off.
So who’s celebrating — aside from the Iraqi Kurds, of course, who are set to receive hefty royalties on every barrel recovered?
Well, shares of ShaMaran (TSX Venture:SNM or OMX:SNM) are up 30% today, adding about $100 million to the market cap of the Toronto-listed pipsqueak. But ShaMaran is not the biggest stakeholder in the Atrush finds.
The license for the Atrush block is 80% held by General Exploration Partners (GEP), and 20% by Houston-based Marathon Oil.
GEP is a joint venture, 33.5% owned by ShaMaran Petroleum and 66.5% by Aspect Energy International. That makes Aspect the biggest beneficiary of this find, with a 53% stake in the Atrush block.
Aspect Energy International is a subsidary of Aspect Holdings, which has offices in Austin, Tex. and Denver, Colo. and is controlled by Alex Cranberg.
Cranberg, 57, is best known for being a member of the University of Texas board of regents. He has been in the oil business for at least 20 years now. But there’s not a lot of public information on him. His companies produce oil and gas on the U.S. Gulf Coast as well as in Belize and Hungary. He is said to have a massive library of 3-d seismic data covering 14,000 square miles of the Gulf coast. In 2006 he helped raise $1 billion with Quantum Resources for a fund to invest in producing oil and gas fields. Based on SEC filings, his shares in QR Energy LP appear to be worth more than $300 million. One of Quantum’s portfolio investments, a JV with the Ute Indian tribe of Utah called Ute Energy, has filed to go public. In 2008, a joint venture with private equity giant First Reserve, called Aspect Abundant Shale, sold its holdings in the Barnett shale for $170 million.
But this Kurdish field is in a different realm altogether.
Yet this new well, called Atrush-2, is just one in a string of gushers found in northern Iraq in recent years, and it follows on the success of Atrush-1, about a mile and a half away. That discovery well was tested at 6,400 bpd and indicated “pay zones” of more than 300 feet thick.
In an email response to questions from Forbes, Cranberg wrote that he was not surprised by the success of the new Atrush well, and he believes the two wells communicate, that is, they are tapping the same reservoirs. Cranberg declined to give any estimates of the size of this prize, but the presumption by ShaMaran is that they’re looking at hundreds of millions of barrels.
How fast can Atrush be brought online? “We expect to be a material part of the 1 million barrels/day output capacity that Minister Ashti has targeted for the end of 2014,” wrote Cranberg to Forbes. “We hope to begin longer term production testing over the next 6 months.”
Considering that ShaMaran’s market cap gained $100 million on the Atrush news, Cranberg is looking at a hefty windfall. But that’s not the word he would use: “Probably ‘windfall’ is not an appropriate term for the result of a large, long term investment in a risky endeavour like a wildcat well; the partners in the project have over $130 million invested to date,” Cranberg wrote.
Cranberg wouldn’t say anything about plans to sell off a part of his Atrush investment. But even if he were to do so, he says he’s in Iraq for the long haul. ”I am a big believer in the Kurdish Region and its long term prospects for prosperity. I intend always to be an investor in Kurdistan one way or another. I invest in places that I believe in; the aspirations of the Kurdish people for prosperity and freedom are compelling to me. I hope that eventually central governments around the world come to realize that stability and prosperity is better obtained by allowing regions to have autonomy like the states of the United States have, and that excessive power in central governments (including our own) is dangerous and counterproductive.”
Here’s some more insights from Cranberg on Iraq, world oil supplies, and the Obama administration’s energy policy:
FORBES: Is there any where else in the world where oil companies have the potential to make discoveries as big as in northern Iraq?
Cranberg: The world is filled with opportunity as most oil is still either undiscovered or discovered and not yet producible economically. That said, there is perhaps no other place in the world onshore where the development has been so retarded by hostile regimes that such vast resources have been allowed to go unlooked for until now.
FORBES: How long before Baghdad realizes that the Kurds have the right model and rewrite contracts in the south?
Cranberg: There is no “right” model for every place. In fact that is the whole point of the value of regional autonomy. Kurdistan’s success is proof of appropriateness of its policies for its own needs. Other regions will experiment with different models until hopefully each finds the right formula for their own needs and type of investment requirement. Opportunities in Southern Iraq for example are more about field exploitation, while Kurdistan has been an exploration frontier with no producing fields and very few wells drilled at all.
FORBES: What do you envision the Kurdish oil industry will look like in 10 years?
Cranberg: It is and will continue to be one of the world’s most dynamic, positive and high growth petroleum provinces. It will provide a material part of the energy security picture for Turkey, Europe and therefore the world.
FORBES: Which U.S. plays do you find particularly interesting now?
Cranberg: The oil shale plays are amazing resource plays that compare to anything in the Middle East. The vitality and capacity for innovation of the U.S. oil industry is second to none. As a result, the United States enjoys a $300 billion stimulus package every year from the low gas prices it pays, compared to Europe.
FORBES: What do you think about the likelihood of the United States becoming independent of the rest of the world for oil supplies?
Cranberg: The oil market is a global market. As such, even if the United States produced enough oil for its own needs, the price for its oil would always reflect global supply and demand factors. But we can insure against physical supply cutoffs and generate enormous job and economic opportunity from local development. North America, including Canada can certainly produce enough oil to serve the continent’s needs if oil production from public lands grow as rapidly as oil production from private lands. Right now unfortunately production is only growing from private lands, while excessive and unnecessary regulation and delay from the Obama administration continues to stifle production and jobs growth from public lands.
With his success in Iraq so far, Cranberg joins a rarefied group of private U.S. oil operators with big stakes in Iraq. Ross Perot Jr.’s Hillwood International controls a license in the Sarsang block, where the Swara Tika-1 discovery last year tested at a flow rate of 7,000 bpd. And Ray Lee Hunt’s Hunt Oil has a 60% stake in the Ain Sifni concession, where they have found reservoirs with an estimated 900 million recoverable barrels.
If Atrush turns out as good as it looks, Cranberg could soon be joining Hunt and Perot in the billionaire ranks. In a note Thursday, oil industry analysts Tudor, Pickering & Holt figure that ShaMaran’s stake in the Atrush block could be as much as $500 million, making the company a solid takeover candidate. That would value Aspect/Cranberg’s stake at $1 billion.
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This is a colossal well, the likes of which hasn’t been seen onshore in the United States in decades. By comparison, most new wells drilled in the Bakken play of North Dakota are lucky to do 1,000 bpd for the first few weeks before quickly falling off.
So who’s celebrating — aside from the Iraqi Kurds, of course, who are set to receive hefty royalties on every barrel recovered?
Well, shares of ShaMaran (TSX Venture:SNM or OMX:SNM) are up 30% today, adding about $100 million to the market cap of the Toronto-listed pipsqueak. But ShaMaran is not the biggest stakeholder in the Atrush finds.
The license for the Atrush block is 80% held by General Exploration Partners (GEP), and 20% by Houston-based Marathon Oil.
GEP is a joint venture, 33.5% owned by ShaMaran Petroleum and 66.5% by Aspect Energy International. That makes Aspect the biggest beneficiary of this find, with a 53% stake in the Atrush block.
Aspect Energy International is a subsidary of Aspect Holdings, which has offices in Austin, Tex. and Denver, Colo. and is controlled by Alex Cranberg.
Cranberg, 57, is best known for being a member of the University of Texas board of regents. He has been in the oil business for at least 20 years now. But there’s not a lot of public information on him. His companies produce oil and gas on the U.S. Gulf Coast as well as in Belize and Hungary. He is said to have a massive library of 3-d seismic data covering 14,000 square miles of the Gulf coast. In 2006 he helped raise $1 billion with Quantum Resources for a fund to invest in producing oil and gas fields. Based on SEC filings, his shares in QR Energy LP appear to be worth more than $300 million. One of Quantum’s portfolio investments, a JV with the Ute Indian tribe of Utah called Ute Energy, has filed to go public. In 2008, a joint venture with private equity giant First Reserve, called Aspect Abundant Shale, sold its holdings in the Barnett shale for $170 million.
But this Kurdish field is in a different realm altogether.
Yet this new well, called Atrush-2, is just one in a string of gushers found in northern Iraq in recent years, and it follows on the success of Atrush-1, about a mile and a half away. That discovery well was tested at 6,400 bpd and indicated “pay zones” of more than 300 feet thick.
In an email response to questions from Forbes, Cranberg wrote that he was not surprised by the success of the new Atrush well, and he believes the two wells communicate, that is, they are tapping the same reservoirs. Cranberg declined to give any estimates of the size of this prize, but the presumption by ShaMaran is that they’re looking at hundreds of millions of barrels.
How fast can Atrush be brought online? “We expect to be a material part of the 1 million barrels/day output capacity that Minister Ashti has targeted for the end of 2014,” wrote Cranberg to Forbes. “We hope to begin longer term production testing over the next 6 months.”
Considering that ShaMaran’s market cap gained $100 million on the Atrush news, Cranberg is looking at a hefty windfall. But that’s not the word he would use: “Probably ‘windfall’ is not an appropriate term for the result of a large, long term investment in a risky endeavour like a wildcat well; the partners in the project have over $130 million invested to date,” Cranberg wrote.
Cranberg wouldn’t say anything about plans to sell off a part of his Atrush investment. But even if he were to do so, he says he’s in Iraq for the long haul. ”I am a big believer in the Kurdish Region and its long term prospects for prosperity. I intend always to be an investor in Kurdistan one way or another. I invest in places that I believe in; the aspirations of the Kurdish people for prosperity and freedom are compelling to me. I hope that eventually central governments around the world come to realize that stability and prosperity is better obtained by allowing regions to have autonomy like the states of the United States have, and that excessive power in central governments (including our own) is dangerous and counterproductive.”
Here’s some more insights from Cranberg on Iraq, world oil supplies, and the Obama administration’s energy policy:
FORBES: Is there any where else in the world where oil companies have the potential to make discoveries as big as in northern Iraq?
Cranberg: The world is filled with opportunity as most oil is still either undiscovered or discovered and not yet producible economically. That said, there is perhaps no other place in the world onshore where the development has been so retarded by hostile regimes that such vast resources have been allowed to go unlooked for until now.
FORBES: How long before Baghdad realizes that the Kurds have the right model and rewrite contracts in the south?
Cranberg: There is no “right” model for every place. In fact that is the whole point of the value of regional autonomy. Kurdistan’s success is proof of appropriateness of its policies for its own needs. Other regions will experiment with different models until hopefully each finds the right formula for their own needs and type of investment requirement. Opportunities in Southern Iraq for example are more about field exploitation, while Kurdistan has been an exploration frontier with no producing fields and very few wells drilled at all.
FORBES: What do you envision the Kurdish oil industry will look like in 10 years?
Cranberg: It is and will continue to be one of the world’s most dynamic, positive and high growth petroleum provinces. It will provide a material part of the energy security picture for Turkey, Europe and therefore the world.
FORBES: Which U.S. plays do you find particularly interesting now?
Cranberg: The oil shale plays are amazing resource plays that compare to anything in the Middle East. The vitality and capacity for innovation of the U.S. oil industry is second to none. As a result, the United States enjoys a $300 billion stimulus package every year from the low gas prices it pays, compared to Europe.
FORBES: What do you think about the likelihood of the United States becoming independent of the rest of the world for oil supplies?
Cranberg: The oil market is a global market. As such, even if the United States produced enough oil for its own needs, the price for its oil would always reflect global supply and demand factors. But we can insure against physical supply cutoffs and generate enormous job and economic opportunity from local development. North America, including Canada can certainly produce enough oil to serve the continent’s needs if oil production from public lands grow as rapidly as oil production from private lands. Right now unfortunately production is only growing from private lands, while excessive and unnecessary regulation and delay from the Obama administration continues to stifle production and jobs growth from public lands.
With his success in Iraq so far, Cranberg joins a rarefied group of private U.S. oil operators with big stakes in Iraq. Ross Perot Jr.’s Hillwood International controls a license in the Sarsang block, where the Swara Tika-1 discovery last year tested at a flow rate of 7,000 bpd. And Ray Lee Hunt’s Hunt Oil has a 60% stake in the Ain Sifni concession, where they have found reservoirs with an estimated 900 million recoverable barrels.
If Atrush turns out as good as it looks, Cranberg could soon be joining Hunt and Perot in the billionaire ranks. In a note Thursday, oil industry analysts Tudor, Pickering & Holt figure that ShaMaran’s stake in the Atrush block could be as much as $500 million, making the company a solid takeover candidate. That would value Aspect/Cranberg’s stake at $1 billion.
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