It’s been a strange couple of years for the petroleum industry. After decades of robust oil markets, global economics, and regional politics, an evolving energy landscape has led to a collapse of major oil markets. For some of the major old guard players in the field, the shift has proven devastating...but for smaller energy startups, the volatile atmosphere could provide a substantial growth opportunity.
International Western Petroleum (INWP) is one such company that has been making notable strides in a rapidly changing market. The Irving, Texas-based E&P company focuses on acquisition, development, and exploration of crude oil and natural gas properties in Texas, but with an eye toward expanding far beyond the state’s borders.
Recently, Equities.com Broadcast Contributor Silvia Davi had the chance to sit down and speak with IWP Chairman Dr. Benjamin Tran about the business model for International Western Petroleum, their focus on technology, and the future growth prospects for the OTC-listed company.
Tran explains that IWP’s business model “is to look for properties with high reserve. We come in and do the exploration and apply the new technology to improve the production to get the most out of it and continue to improve and develop the reserves, so we can increase the assets of the company.”
“The other part of our small business model is to identify mature production,” says Tran. “We come in and apply the latest technology, enhanced oil recovery technology, to significantly improve the production so we can increase the revenue and we can share the revenue with the landowner."
“Another part of it is to look for some good conventional play assets with high proven reserves. We come in and look for a decent production play that we can acquire using some cash and stock combination. And then we apply engineering and continue to develop reserves and increase the production, so we can continue getting cash flow into the company.”
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According to Tran, one of the company’s most prominent current acquisitions is their Bend Arch Lion project, which is “a 10-well program in which we hit ten-for-ten, and we currently produce in oil and gas.” However, that’s just one of many projects IWP is looking to acquire. “The two properties I’m looking into right now are based around Houston, and currently they’re producing about half a million in EBITDA a month.” These represent strategic acquisition opportunities for International Western Petroleum - which is a model they intend to follow moving forward.
“We’re going to inject a significant amount of capital to acquire four more additional properties,” says Tran, “and once the acquisition is completed, we’ll have a total of roughly 1.2 billion in 3P reserves - 3P meaning Proven, Probable and Potential. That will generate roughly $1.9 or $2 million dollars in net income per month.”
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Of course, any startup company in the oil industry faces an uphill battle as they face many massive names that have been in the field for decades. Tran believes International Western Petroleum has one key advantage, though - their focused implementation of state-of-the-art technology. “We are very actively looking for the best technology available out there,” says Tran, “so we can analyze it, apply using it, and constantly improve it.”
To make sure technology is implemented as effectively as possible, IWP seeks to employ the best possible people, and often that means employing the people who are already intimately familiar with the property. As Tran explains, “to improve the production is not easy, because you need to have the best geologists in the region. Your geologists and engineers need to know the oil field intimately. If you don’t know the oil field intimately, it’s very difficult for you to generate a lot of production revenue, because you want to make sure that when you drill, you have a hit - there’s no excuse for missing a drilling. That’s why, when I acquire an asset, I usually take control, or bring over the operation team that is already experienced in their own oil field, and I retain them for a number of years to make sure they continue to help me help the company to grow, moving forward.”
To hear Tran tell it, the strategy seems to be working very well for IWP thus far. While the biggest names in the oil sector seem primed to contract, as their name implies, International Western Petroleum sees globalized expansion in the near future. “The special thing about International Western Petroleum is that we have a strong connection with the Asian money,” says Tran. “We’ve been pretty much international in terms of connection with capital. Our goal is to look for international capital besides domestic capital."
“We look for bigger capital funding, so we can do bigger things,” says Tran. “We want to become the ears, the eyes and the arm acquisition for international oil and gas player. Right now, we might be small, but I think we’re very aggressive in our direction of acquisition. And I’m not scared to go out and raise some money, once I know that the assets I’m acquiring our the best of the best assets with very high proven reserves, with high cash flow and very low operating budgets.”
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So how could similarly ambitious entrepreneurs in the energy and tech space emulate IWP’s success? In Tran’s view, it’s to start thinking about going public sooner rather than later.
“For a small OTC company, it’s very prudent to start looking in the Nasdaq direction,” says Tran.
Tran urges startup company leaders to “find the best strategy to grow their business,” and part of that is to “upgrade themselves to a national market where they’ll see more liquidity. Once they have more liquidity and visibility, they can raise capital much easier. With capital infusion into their company, they can do wonders, and expand faster.”
Tran advises startup entrepreneurs to “not be intimidated about Nasdaq listing, because the requirement might be easier than they thought it might be.” Says Tran, “If you know the structure, you know the requirement, and you set your goal very clearly and you keep on achieving your milestone to go in that direction, I think very soon a small unknown OTC company will become a very large company in no time.”
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