EnerJex Resources Inc.
EnerJex Resources Inc. is a domestic onshore oil company that is on its way up. As part of a merger in 2010, it acquired Black Sable Energy LLC, changed its top management and moved its headquarters to Black Sable’s home base of San Antonio. Robert Watson Jr. was a co-founder of Black Sable and became CEO of EnerJex after the merger.
“Our strategy at Black Sable was to try and find fields that have been discovered in the past but have never been fully developed,” Watson says. “We looked for assets that fit our philosophy of building a long-lived oil portfolio, and found some at EnerJex.”
For 2011, EnerJex focused on turning around its performance. This included acquiring oil assets and converting subordinated debentures into common stock at a price of $0.80 per share. It also renewed a $50 million credit facility, which it can use to prudently develop reserves.
The company raised $8.5 million through common equity PIPEs in 2011, using the majority of those funds to get projects going, increase cash flow and repurchase shares. It also sold some of its non-core assets in Kansas, which allowed EnerJex to repay debt and positively adjust its operating cost structure.
Positive Prospects
Right now, the company has three producing projects. The Rantoul Project in Miami and Franklin counties in Eastern Kansas are part of the Paola Rantoul Field. EnerJex has a working interest of 81 percent in 1,700 acres, having drilled and completed 75 new wells in the Rantoul Project in 2011.
Late last year, the company announced formation of the Rantoul Partners general partnership to develop the Rantoul Project. EnerJex contributed its Rantoul assets to the partnership at a value of $15 million, and two investors chipped in another $5 million in cash. The partnership has provided EnerJex with the financing to drill approximately 150 new wells and double production to more than 200 barrels of oil per day.
The company’s Mississippian Project is in Woodson and Greenwood counties in southeast Kansas. EnerJex has a 90 percent working interest on 3,000 acres and an agreement in place to acquire 90 percent working interest in another adjacent 1,300 acres. The company drilled and completed 13 new wells in the Mississippian Project last year. Earlier this year, it kicked off a new Mississippian drilling program on recently acquired acreage.
Finally, the company’s El Toro Project is in Atascosa and Frio counties in Texas. EnerJex has a 46 percent working interest in 5,600 acres, and it drilled and completed three new wells in the project in 2011.
Managing Risk
In the short term, EnerJex plans to focus on drilling proven locations within its current asset portfolio, which will provide the company with significantly increased cash flow. But adding to its portfolio is an important consideration.
Watson knows there is always risk in the oil business. Commodity prices fluctuate, but EnerJex has hedged its production to account for the risk as best it can. Another decision the company is currently evaluating is how to finance its expected growth. Watson says EnerJex is focused on determining just how fast the company should develop its assets.
“A lot of the structural risk that was inherent in the company when we took over has been addressed,” Watson says. “Because we’ve adequately addressed a lot of the major issues over the last year, we can focus on drilling our proven undeveloped locations to drive near-term growth. My partners and myself see our shareholders as investment partners, and the decisions we make always focus on maximizing shareholder value.” EMI