Synergy Resource Corp.

Issue FallWint12


President and CEO Ed Holloway says Synergy Resource Corp. isn’t on too many radar screens at the moment, but that’s going to change. A small, independent oil and gas exploration, development and production firm, Synergy Resource has been growing steadily since its inception, and Holloway says the company has no reason to expect anything else in the months to come. Thanks to the strength of its employees, its experience base and the quality of its assets, Synergy Resource will be a name the industry becomes more familiar with in the near future.

The company was formed by a group of Denver-based investors who hired Holloway and Vice President William Scaff to manage the firm. Within a year, the company had absorbed another oil and gas company and took on the structure that Synergy Resource has today. However, this was around the same time that the global recession began impacting the oil and gas market, and the company had to put its immediate plans on hold.

But, as Holloway explains, the slowdown in the industry actually provided Synergy Resource with the chance to establish itself.

“It gave us the opportunity to pick up leases that other people let expire and really gave us a good foundation for the company going forward,” Holloway says.

Full Experience
A major component of that foundation is the company’s holdings in the Greater Wattenberg Field of the Denver-Julesburg Basin in northeast Colorado. According to the company, its estimated net proved oil and gas reserves as of August 2011 includes 2.07 million barrels of oil and 14.3 billion cubic feet of natural gas. The company operates more than 125 wells and has ownership interest in more than 125 more.

Holloway says the fact that Synergy Resource has concentrated its attention on the Greater Wattenberg Field stems from the fact that the company’s management team has an average of more than 30 years of experience in the play, and collectively have drilled more than 350 wells in the area. “It’s an area that I’ve been actively drilling since the early ’80s, I know it like the back of my hand and it’s a field that has a very strong serendipity play,” Holloway says.

Due in part to this experience, the company says, Synergy Resource has been able to extend the lives of wells its principals have drilled in the basin. “We have experience with and knowledge of Denver-Julesburg Basin that have been recompleted up to three times since initial drilling,” the company explains. “This provides us with numerous high-return recompletion investment opportunities on our current and future wells and the ability to manage the production through the life of a well.”

Along with the strength of its assets and the experience its management has in utilizing them, Synergy Resource’s other advantage is its people, Holloway says. Although the recession has made for slow going in this regard, Holloway says the company has done an excellent job of building up its staff one person at a time. Among the people who have brought their experience and expertise to Synergy Resource is Vice President of Operations and Production Craig Rasmuson, who has been with the company since practically the beginning. Rasmuson has been working in the Denver-Julesburg Basin since 2006, the company says.

The Right Time
Even with the company’s many advantages, however, there remain challenges that Synergy Resource has to grapple with on a regular basis. First and foremost are those challenges that come with operating in a commodity-driven business like oil and gas, Holloway says. Trying to anticipate where prices will be in the near future without taking too big of a gamble in any direction is difficult, but Holloway says the background he and Scaff have in finance allows the company to prepare for downturns and bolster its assets when prices are low.

Too many competitors try to leverage their balance sheets when commodity prices are high and wind up taking on more debt than they will be able to handle when prices inevitably come back down. However, Synergy Resource knows when to purchase assets and when to focus on bolstering its balance sheet. “We’ve used the same philosophy for over 30 years and it’s been very successful for us,” Holloway says.

Holloway predicts continued success for Synergy Resource in the next 12 months, which will be helped by the company’s low overhead. With more than $5.8 million in cash flow, the company is prepared for strong margins going forward. Holloway says it may take a year or two for the company’s true value to become known in the industry, but he expects that it’s only a matter of time. “We’re very undervalued,” he says. “We’re basically only valued for our Wattenberg assets, and even on that basis we’re undervalued.” EMI


Synergy Resource Corp.